[kmr003]

My personal take away from last CC

1. I sense SKR avoided questions this time,
evey question was pointing towards delayed actions by Mgmt on ongoing progress of updates

2. I personally feel, SKR is going to take his own time, be it share pledge release / DII analyst meet / Org restructuring / legal issues

We have seen this in axis loan closure also.

3. My personal view to resolve all existing items it may take 1.5-2 years ( as per history of his timelines) Do not know what new issues come by that time. Better not to follow daily price. Leave for long term, as did in 2015-2018, (rewards are 10X from that point)

4. My personal view – better he should hire few reputed experts and follow their advice.
We know they are hard working and have put heart and souls for BCG growth.

[Logan]

What I felt is that the management wanted everyone (including current investors/the market/analysts/potential investors) to understand the company’s business and operations better and I guess that’s the reason Mr.Acharya talked so long about the business. For various reasons (including management’s fault), BCG has been misunderstood all these years and the situation still continues and I think the management wanted that to change. The stock has always been valued based on events more than the business. When Lycos case happened it brought so much uncertainty that people thought the parent company went bankrupt (when it was actually a subsidiary that was holding Lycos declared bankruptcy to buy time) and all the negativity started since then.

Even the last 1.5-2 years we can see how events have influenced more than the actual growth in the business (and improved cash flows). The stock started moving up when Axis case was closed and when BCG announced plans to issue bonus shares and then it stayed in a range till we got to know that Mr.Shankar Sharma was investing in the company and then it went up after Mediamint deal was announced and then it crashed because of the FA news and rallied again based on other event which was Mr.Sharma paying the remaining amount and converting his warrants to shares during the peak of the FA crash and crashed when the second bonus was delayed which brought huge negative press and when it was issued the stock crashed again because of more supply.

The company is growing with good growth rates and improving it’s cash flows (paid total dividend of 60crs which is more than what many companies make in a year), but still the stock is not performing well. These are operational performances and not events. For the better future of the company and for investors to sleep peacefully at night, the stock should always be valued based on business parameters and less on events and the management should focus on doing that. This will happen when the management talks more with analysts and focus more on the valuation side of things. What I can see or sense is that now their focus is more on growth and capturing market share and less on valuation. Some investors may not like it and others might be okay with it.

Also important point to note is that all the investors (including us) have made it clear that we are not happy with the stock’s performance and it should motivate the management to take smart decisions benefitting all the stakeholders. The CEO talked about stages and how each stage takes it’s own time and I understand it but if they take care of things that they have control of then the next stage/s will happen sooner than expected. Starting a separate line for investors (which we have asked since ages) is a good example of executing things that are in your control.

The next stage will happen when they get back Lycos and complete the audio ad deal. I don’t know what happens with the forensic audit, I’m guessing that Deloitte has completed the audit and submitted their report to SEBI and then SEBI called the company’s CEO and CFO to discuss few points (as the CEO mentioned in the call). Like I said in one of my previous posts when FA was initiated, there’ll be different rules and regulations in different countries and since BCG has different subsidiaries in many countries there’ll be many confusions. SEBI may not like few things which are different to our rules, regulations, policies, practices etc and it may be okay with few things. Tech companies have to follow different rules in different countries and Google was fined more than $5 billion dollars in Europe and our country imposed a fine of over $250 million as recently as in October (I think close to or over 2000crs). For a company like Google this is peanuts and it doesn’t hurt it’s stock but for smaller companies like BCG, any negative comment will have a big impact on it’s share prices. The business will be impacted if they are committing any fraud but I don’t want to comment on that because I don’t think they have committed a fraud. If they did commit a fraud then I’ll be the first person criticizing the company and take necessary actions. What I feel is that it’s better to wait for SEBI’s report and make comments based on that. Some will take small negative comments very seriously and others may take it differently and again it all depends on individuals. I can’t and won’t force my views on others and likewise I won’t get influenced by others. I have invested my hard earned money and I’ll take decisions based on what may happen with the company in the future. If I have any complaints first I’ll try to talk with the management and if they don’t respond then I’ll approach authorities like SEBI.

From what I have seen recently with most of the reports of forensic audit is that SEBI will impose a fine on the management and promoters if they have any complaints. I haven’t seen companies shutting down their business because of negative reports. Even the famous Bombay Dyeing company got a negative report from SEBI recently and its stock crashed the next day after it was announced and now it’s trading normally.

Regarding conference call, all our queries were answered but some I was not satisfied with their reply and some I was okay with. To reveal the name of the audio ad company is taking too much time and they shouldn’t have announced the signing of the LOI. It’d have been better if they announced when they signed the definitive agreement. It’s better to surprise than make people wait and feel frustrated. Other topics, like Lycos, I think both the companies, BCG and DAUM (owned by Kakao), have to take shareholders’ approval for the deal to happen since both are listed companies. Then it’s good to know that BCG owns 51% in companies like Onomagic and Boldwin (both look futuristic businesses). I didn’t like the CEO’s answer to query related to LLPs selling. He told us that those shares will not come to the market but still it happened. I didn’t ask about promoters’ SHP because I knew that he wouldn’t give us a proper answer. It’d have been a waste of time.

After so many years I got some clarity as to why they aren’t focusing more on the standalone business. With the standalone company, they’ll build products that other subsidiaries will use and focus more on those type of things. Adtech market here is dominated by big players like Google, Facebook etc and even companies like InMobi aren’t concentrating more on our markets. But Mr.Peshwa Acharya did give a hint that when they start focusing more on our markets, we can expect good growth rates. Let’s hope that it happens as early as possible.

Finally, some people just because they bought shares will say positive things and influence others and other people talk negative and influence others in a different way if the stock doesn’t perform as per their wish. Whatever decision anyone takes should be based on their own research and analysis. If they have any complaints then they should talk to the management and if they don’t respond then they have to approach SEBI.

[sac6310]

My sense saying the audio deal is not off the track and for face saving, they are looking for another audio deal as since june, we are at same update that DD completed and final negotiation taking place. Mr. chetti is not giving any update in concall, only skr doing now since last 2 quarter..so last audio deal may be now off the track.

[akkithegrt]

High-growth stocks, such as BCG, whose stock price has risen from 5 to 200 in a year, will experience consolidation for 1 to 1.5 years.
Next fiscal year (2023-2024) will be critical, and I believe BCG’s will continue to grow, with revenue of 10000-11000 crore and PAT of2000- 2200 crore, and revenue of 13000-15000 crore by 2024-2025.
Now, BCG is in the process of consolidating, and its valuation ranges between 6500 and 7500 crore on a revenue of 7000 crore (by march 2023).
Also, Mr Peshwa believes it should be traded at 30-40 PE, similar to other adtech companies.
Imagine what valuation BCG will have when it has 13000-15000 crores in revenue; yes, many issues will be resolved until then, such as FA and CG.
Lets hope for Best!

[Logan]

High P/E ratio (excluding cyclicals) doesn’t depend only on high growth but also on how much trust, certainty and expectations the market has on a company. Private banks have higher PE ratios than PSBs and a company like Affle has a very high PE ratio because of the Microsoft factor (and Economic Times too).

TTD has a better PE than most of the other adtech companies because of its past performance which makes people think, compared to the others, uncertainty in TTD is less. Criteo was once valued more than all the other adtech companies combined but it couldn’t live up to the expectations so it crashed and could not replicate it’s past performance. Magnite was trading above $60 last year but it fell below $6 this because of uncertainty.

Both these companies have high potential but are not having premium valuation because they also carry uncertainty.

If the managements of companies don’t clear the past issues then the market will not forget the past so easily and if the managements clear all the issues and brings more certainty and more importantly if the trust factor improves then the market will not hesitate to give a premium valuation.

When it comes to BCG, right now the trust factor is low. Maybe it’s because of FA or because of the SHP or other things (like Lycos). For Sun Pharma the news of FA and fines given to their management/promoters didn’t matter as that is a large company. I think no one remembers about that now but for smaller companies something like FA will be the main highlight.

BCG has high growth but there’s a deficit in other areas like trust, certainty and to an extent expectations. What I sense is that BCG’s management is focusing more on growth and less on other areas.

Building trust is like maintaining your health, there’s no shortcut, you have to exercise, do yoga, eat balanced diet, be more active etc. BCG’s health was not normal to begin with, it had two big incidents in the past (loans and Lycos) and one is done and dusted but just when the other issue was about to be closed there came another issue which is the FA.

It’s like a player who plays really well but gets injured often. You don’t pay high for that player because you can’t count on him all the time and that’s exactly how the market feels about BCG.

[Logan]

It’s good that BCG’s management finally understood the importance of explaining their business and future plans to everyone. Like this they should also try to give complete details of a few items in the balance sheet. BCG’s management doesn’t understand how important that is.

I think most of you must have read this, earlier this year there was an article in et prime in which they discussed a few topics related to BCG. Main focus was on receivables, and loans and advances. The lady that wrote the article didn’t properly know about what constitutes loans and advances of BCG so she assumed it generally and wrote that they are the general loans and advances which are given to people so that you earn an interest. It’s nowhere close to what BCG does but it’s also not completely her fault because the company hasn’t provided a detailed explanation of those items. But she should’ve done some research at least and should’ve checked what those loans and advances were (she looks like a newbie who wanted to write an article for the sake of it)

Here’s what she wrote in that article

This metric falls under non-current assets in the balance sheet. As the name suggests, it is the loans or advances given to receive them in the future with interest. This number stands at INR720 crore for Brightcom for FY21, which is almost 20% of its total assets.”

And then she wrote about receivables of different industries like Pharma, IT etc but never mentioned the adtech industry where some companies have receivables more than their revenues. This is the problem when you let newbies write important articles.

BCG and its subsidiaries don’t give loans or advances to get an interest but they do to buy media space or to invest in a product etc. BCG is not some financial company but is a tech company.

The CFO, and the CEO have explained these in a few conference calls and they’ve also explained them in the impairment notification but that’s it, they haven’t mentioned the same in any of the annual reports. Even after asking for it repeatedly in almost every conference call they have ignored our request.

How many current investors/potential investors/analysts will wait for the conference call to know about this information? Will anyone search each and every notification by the company to get that one document? If any person wants to know more about the company then that person will always look for information in the annual reports. So if all the details are given in the annual report then et prime or other websites won’t write something based on their assumptions which would bring less speculation.

These details can be filled in just one sheet under the notes section but the management is too lazy, I’m sorry, too ignorant or careless to provide those details.

In the balance sheet there are many items like other assets, other receivables, other liabilities etc etc which when people see won’t have a clue as to what they are. If you don’t attend conference calls then you’ll find it very hard to get that information.

I request each and every investor to write mails to the company asking them to give detailed explanation of the balance sheet items in the annual reports. Let us flood their inbox with these messages and make them understand how important this is. I’ve asked about this in almost all the conference calls but they kept ignoring it. I’ve stopped asking because every time I look like an idiot asking the same question again and again.

You won’t get a decent PE unless you put in the effort. Companies with uncertain futures, bigger problems and lesser profits are trading at higher valuations than BCG.

[nitin_asce]

@Logan I do understand importance of disclosures but somehow I feel management will become more transparent only when they want it to be.

I got a sense that they have a plan and they will execute the plan. Nobody knows in that plan when company really wants company marketcap to appreciate. When they really want appreciation automatically more transparency will come.

My hunch is it will happen once shareholding issue is resolved or promoter consolidates/increases their shareholdings.

[Logan]

We are pleased to present the Silver Sponsor for #TGS2022 – Brightcom Group, a Fortune 500 India company, with a robust global presence in AdTech & Digital Media, with offices in 25 locations including the US, Israel, Latin America ME, Western Europe & the Asia Pacific regions.

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[odysee]

@Logan, you have raised some excellent constructive points and suggestions that merit an immediate and considered response by the management in a purposeful manner. And that too sooner rather than later.
I suspect that laziness probably had nothing to do with these issues not being addressed, as the management team appears to be working 24/7. But certainly the importance and significance of such matters didn’t find immediate resonance with them.
You are absolutely right in that we all need to communicate urgently with the company and investor relations to give topmost priority to addressing these shortcomings in the Annual Report of the company, which would provide so much clarity to the investor community at large.
Thank you for raising all these important issues once again.

[vkhare789]

Here is the summary how Funds and Institutions have increased their holding in BCG since last few months . Data taken from Morningstar.in. This reflects holding for top 20 funds and only includes shares traded in open market. Does not include fixed holdings from Navigator , Citrus Global etc.

Jun End-
Funds – 56.33 million
Institutions – 60.86 million

Oct end –
Funds – 64.02 million
Institutions – 72.6 million

Nov End- (50 lakh shares bought in just last one month)
Funds – 66.05 million
Institutions – 75.43 million

[vsk]

This is really frustrating with this eternal waiting on closing long pending deals. Dont see any light and there is no end to this tunnel.

Becoming more and more obvious that BCG management is not at all investor friendly and behaves like a private company fully controlled by a single person.

Recently just before the conference call they have come up with a investor relations contact number and it is still of no use for us.
I received a forward from my contacts regarding a simple question “Daum closure” which is dragged for ages which is totally in the hands of the BCG to close the deal and no reply at all.

Are we employees or share holders of BCG dont we have any rights ?
What can we do?

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[Rathi_b]

My apologies to all the members, I chose not to write since our last meet with the management because it was understood that our grievances would taken seriously by the management and addressed. In that extent the initiative to start a separate phone line for investors and management decisions to initiate completion of daum and audio acquisition payments were done. But now we are again in the predicament of never ending timelines. I understand that FA is not in the hands of the management but other initiatives are certainly in their ambit. The shareholding pattern has and will always elicit a diplomatic answer from Suresh garu, there is nothing much we can help with that question, but I guess it is now time to speak to the management and put pressure to make relevant and necessary disclosures and not present a glossy piece of information who as investors we are already in the know how of. We are planning for an immediate meeting with the management by this weekend as we expect Suresh garu to be in the city for the conference. We will ask questions that have been raised by @Logan, Mr. Praveen and others here and the telegram channel to the management and try putting some pressure from the investors end. We have already sent a mail requesting for a meeting to the relevant people in BCG. I know and I completely understand with many of your concerns, frustration and anger with the diplomatic nature of the updates I write after meeting the management but please understand that our goal is to initiate a conversation, put pressure on the management regarding us investors greivances and nudge them to solve and address our concerns.If any of you have any questions that needs to be raised please let us know.

[Logan]

I think (more of a guess) the audio ad deal is getting delayed because BCG’S management is negotiating the deal price. My guess was based on Mr.Shankar Sharma’s tweet. Today I saw his reply to someone about BCG’s acquisitions.

This is what he said

-As a rule,Acquisitions have to make sense from valuation angle:if everything in US is down 30-90%, should a company blindly pay price of 10 months ago? Wasting capital is easy. Earning it is extremely hard. No company should do an acquisition irrespective of market conditions.

-Many deals fall through in corporate history. It’s not unheard of phenomenon.

___________________________

What I understood from it is that since valuations of almost every tech company has fallen (especially in the US where tech stocks have fallen minimum 30% and in few cases more than 70-80%) it makes sense to negotiate and bring the cost down. When they made the deal and discussed the total amount, there was a bull market going on which later turned into a bear market. Same with Mediamint deal. Last year everyone was optimistic about tech companies but this year no one wants to invest in the that sector. Nasdaq index is down 30% this year. Smaller company stocks have fallen 80-90% and even the large caps like Amazon, Facebook, Netflix etc have fallen more than 50%.

If valuation is the main reason why the deal is getting delayed then it makes sense. But this doesn’t mean that the management handled the communication well. They shouldn’t have announced the deal in the first place and should’ve announced only when they signed the definitive agreement. Being in the market from so many years, they should know how to communicate with the market and the investors. Same with Lycos deal, the CEO shouldn’t have given any commitment to investors (he said in one of the calls that it would be completed in one quarter).

Mr.Sharma has also written about BCG’s price, this is what he has said

___________________________
Price isn’t here because company hasn’t acquired anything. It’s there because of FA. You need to dissect issues to understand why market is behaving in a particular manner. Let’s await outcome. Period.
___________________________

So the biggest issue according to an experienced investor/expert is the FA. Market will look at sebi’s comments and then decide. I don’t think it’ll have any impact on the business but let’s see what sebi says. Mr.Sharma on live TV had said that BCG had followed the right rules and regulations when it did the impairment.

FA negative or positive, little negative or little positive, whatever happens, BCG’s management should start building trust with the investors and shouldn’t give commitments if they can’t execute in time. They should give some details at least on the developments happening. Calling a board meeting saying we’ll discuss this and that but not telling us what this and that are should stop. Reg Lycos deal they could’ve given some info at least like timelines or deal amount etc. I don’t know when they’ll take communications with shareholders seriously.

[Rathi_b]

Suresh garu has kindly agreed to meet us next week he is unavailable to meet us this week as he is travelling. In the meantime please send us all the questions that you would like for us to ask SR and get more information on.

[buffet]

@rathi_b thanks for taking this initiative. Below are few queries from my side. Please do get clarifications on promoters’ holding.

1. As per latest SHP, pledge is 4.63%. Once pledge is released, any chance of those 18% lost/transfered shares to lenders would come back to promoters?
2. Do lenders still have those shares with them? If yes then how much ?
3. Have lenders sold those shares partially or fully? What’s the quantity/percentage? If lenders still hold those shares, why can’t we see lender’s name in SHP? Ideally, an entity holding more than 1% shall be shown in SHP.
4. As per response to one of SCORE complaints, there was an agreement in place between lender & promoters that voting rights would remain with promoters for pledged shares. Please clarify this in detail.

[buffet]

Promoters NSDL demat accounts have been frozen.

https://nsdl.co.in/nsdlnews/accounts-frozen.php

Not sure if it’s related to SHP saga.

@rathi_b please include this in ur list.

[VALUEBUYER001]

Buffet ji, it is an old issue. Please don’t create panic. It was for not inducting CS. IT is over.please ignore

[radhutheoptimist]

Let’s stop protecting the promotors unnecessarily. 4+ lakhs of retailers have invested in this scrip with certain hope. And we see this kind of message from authorities. Let’s not phoo phoo such serious issues.

[Brightspot]

Gents, freezing of promoter account is a serious one, you can not ignore , you need to discuss this without missing , there is chances scrip might get suspended if they continue it
please read it: https://www.sebi.gov.in/legal/circulars/jan-2020/non-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-and-the-standard-operating-procedure-for-suspension-and-revocation-of-trading-of-_45752.html

[Sumeshnair2005]

Hi I think so and hope so this is related delay in appointment of cs of company as it was done on 18 th nov bcg informed exchange about appointment on 28 th nov and and last data updated is showing 30 nov I dont think sebi works so prompt that it will update in 1 day of BCG notice so we have to wait for the next update of freezing data (dont know if it’s done weekly or monthly) another possibility is that promoters hv to pay fine for each days delay in appoint of cs dont know if thy paid. I think it will be clear by next week

[Author]

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