Brightcom Group’s Valuation

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    Brightcom Group’s Valuation

    Hi everyone, in this article I will discuss about the past, present and to an extent future valuation of Brightcom Group. I won’t predict the stock price of BCG and won’t be giving out targets for the stock price.

    No one can predict the future, if they did then they would be the richest persons in the world, but that is not the case, the richest persons in the world are hard and smart workers. So, my advice is to look at the company’s business and analyze it’s strengths and weaknesses instead of predicting it’s price movements (“we can’t predict the future but we can prepare for it”).

    (If anyone finds it difficult to understand some of the topics discussed here, they can refer other threads like Brief History of BCG, Market Sentiment, Suresh Reddy Underrated? The Reasons for the fall in Stock Price of BCG, Brightcom’s Growth etc)

    BCG’s current valuation is Rs.550 crores (as on 12 June,2020). Back in 2010 before BCG was a public company, it was valued at $ 300 million (around Rs.2250 cr). When BCG came to the stock market in 2012, its price was Rs.95 and had a market cap of Rs.4500 cr.

    In 2012 BCG was making Rs.190 crs profit and market cap was Rs.4500 cr but now when BCG is making Rs.450 cr profit, it’s market cap is only RS.550 cr. BCG’s market cap and of course the stock price has fluctuated a lot since coming to the stock market but the company is growing it’s profits every year.

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    Is Brightcom Group undervalued?

    The current stock price nowhere reflects the true value of BCG. The company, in my opinion, deserves a valuation that is many more times higher than the current valuation the market is giving.

    Many startups that have huge losses are valued more than BCG. Let’s look at some of the companies that are valued more than BCG but don’t deserve that valuation.


    Recently Zomato was valued at $ 3.25 billion (close to Rs.25,000 cr). In FY 2018, revenue was Rs.485 cr and losses were Rs.106 cr. In FY 2019, revenue was Rs.1397 cr and losses were Rs.1001 cr.


    Recently Swiggy was valued around $ 3.5 billion (Rs.26,500 cr). In FY 2018, revenue was Rs.442 cr and losses were Rs.397 cr. In FY 2019, revenue was Rs.1593 cr and losses were Rs.2363 cr.

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    Coming to BCG’s competitors

    The Trade Desk (TTD)

    TTD’s market value is $ 16.5 billion (Rs.1.25 lakh crore). In FY 2019, revenue was $ 661 million (Rs.5000 cr) profit was $ 108 million (Rs.820 cr). EPS was $ 2.43 so P/E is 145 (P/E is considered for last year EPS, if you Google, it shows P/E as 140)


    AFFLE’s market value is Rs.3732 cr. In FY 2019, revenue was Rs.250 cr and profit was Rs.48.8 cr and EPS was Rs.20.1. In FY 2020, revenue was Rs.339.8 cr (35% increase) and profit was Rs.65.5 cr (34% increase). EPS was Rs.26.13 so P/E is 56.


    InMobi’s valuation is more than a billion dollars (Rs.7,500 cr). It is India’s first unicorn (startups that get more than $ 1 billion valuation are called unicorns). In FY 2019, revenue was Rs.384 cr and losses were Rs.54 cr. InMobi has raised over $ 320 million till now (over Rs.2400 cr).

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    Looking at all these data, it is very clear that all these companies are massively overvalued. Swiggy, Zomato and InMobi are private companies and their valuation depends on what Venture Capital and Private Equity firms give them. Usually these VC and PE firms look at various metrics and they never care much about profits. They see revenue growth, EBITDA, market share etc to value these companies.

    It is not easy to start companies like Swiggy and Zomato from scratch and that’s the reason they are valued so high. Even UBER Eats couldn’t compete with them and their Indian business was sold to Zomato. But that doesn’t have to mean they have to be valued at astronomical figures.

    These VC and PE firms will be looking for other investors who would give more for the shares and they’ll exit the company. We can see many startups getting astronomical valuation and then suddenly they lose that valuation. WeWork is an example.

    All these VC and PE firms will dump their shares to retail investors when startups go public. UBER and Lyft are some examples. Their IPO price was higher and many of the VC and PE firms wanted to exit at higher prices by selling their shares to retail investors but people were smart and didn’t buy the shares and that’s why UBER and Lyft both had lackluster IPOs. Now both UBER and Lyft are trading way lower than their IPO price.

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    Like many startups, BCG is also in the new age technology business, it’s not easy to start a digital marketing company from scratch. It’s not easy to get clients to come to your new company. It’s not easy to become a global player.
    Many VC and PE firms saw this and they invested in BCG when BCG was a smaller company. They saw the company’s strengths. They knew that digital marketing has great future.

    And the main point we have to observe is most of the startups don’t have profits and are always in losses and even after they come to the stock market they won’t have profits for many years.

    But BCG always had profits. Even when it was a private company, BCG had profits

    Not just profits but BCG’s other metrics are also great. In FY 2019, It’s operating margin was 30%, Net Profit margin was 17%, Return on Equity (ROE) was 15%, Return on capital employed (ROCE) was 26.5%. Yes, they have cash flow issues but comparing to many of the startups, BCG is far better. I don’t understand even after doing so well why BCG is valued so low.

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    These startups wouldn’t survive if they don’t get funding frequently, all the time we can see these startups raising funds for their business. People don’t react to that in a negative way but when BCG wants to raise funds for business they’ll start complaining and make baseless allegations. Many people still don’t know the difference between profits and cash flow.

    BCG is using all their profits for growth and they are growing without taking loans which is great. But startups burn all the cash provided by the VC and PE firms and still they require additional funds for survival.

    Unfortunately, these startups are getting more valuation but BCG is not getting the valuation they deserve. These startups can easily raise funds by issuing more shares because they are overvalued but BCG can’t afford to do that. People should understand this.

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    Comparing BCG with TTD and AFFLE.

    In FY 2018, BCG’s revenue was more than TTD’s (BCG’s revenue was higher for many years) but starting from FY 2019 TTD’s revenue went up mainly because they entered China and did well there. Like I have mentioned many times before in other articles, TTD’s growth is high because their share price is higher (of course they are overvalued), they can easily get funds to grow by selling their shares. And also its easy to raise money in the US where people understand the business, here in India most of them don’t understand the business and also its very difficult to raise funds.

    TTD’s market value is 227 times more than BCG’s which is not fair. BCG doesn’t deserve this low valuation.(for more details on BCG vs TTD, please refer other threads like BCG vs TTD accounts payable and BCG accounts receivable).

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    Comparing with AFFLE, BCG’s profit is more than AFFLE’s revenue, BCG’s revenue is almost 8 times more than AFFLE’s revenue. BCG’s profit is 6.75 times more than AFFLE’s profit. But the funny thing is AFFLE’s market value (Rs.3732 cr) is almost 7 times more than BCG’s (Rs.550cr).

    I don’t understand why market would value AFFLE so high. Yes AFFLE is growing but that doesn’t mean it deserves a high P/E ratio of 56. AFFLE is not a global player like BCG, yet it is getting more attention.

    Mr.Reddy, the CEO of BCG, has rightly said that AFFLE is not their competitor. When people say AFFLE is better than BCG we should be laughing at them and their ignorance. People buying AFFLE at 56 PE are missing out on a great opportunity to invest in a global player like BCG which is available at just 1 PE.

    If BCG traded in western markets where people understand the business properly, its valuation would’ve been way higher than what it is now. Here in India people only see price and dividends but don’t do the bare minimum research of the industry. Their thinking is only about dividends, they don’t care about growing the business. If BCG trades higher and garners more market share then they’ll pay handsome dividends, we have to have patience.

    We are lucky to have a new age tech company trading in our markets and that too when it is available at dirt cheap prices.

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    If BCG is so undervalued then why isn’t the market recognizing it?

    As I’ve said many times before, people aren’t understanding BCG’s business, they still think it’s an IT company. They always ask if BCG is making so much profits then how come it is trading so low. They don’t find out why it is trading low. They want simple answers to complex problems.

    As I’ve mentioned in many other articles, it is not so easy to run a global company like BCG. People want all the problems to go away and want solutions in short period of time. They don’t see stocks as pieces of business, if they did then they would’ve understood BCG’s problems (for more details refer The Reasons for the fall in stock price of BCG, Market Sentiment etc)

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    BCG’s future value.

    It is very difficult to know what the future will be for any company, but for companies like BCG, future holds good. They may see some changes in advertisers behavior for a while because of COVID-19 pandemic (Airlines will reduce spending on ads and other industries may spend more).

    As the world embraces technology, most of the things become digital. More people will watch movies, TV series, sport events on their devices. And this year they have the US Presidential election, since BCG does more business in the US, they’ll get more revenue because more people will watch news on their devices (they’ll stream more) and advertisers will spend heavily during that period (there are other benefits for BCG but I won’t go deep into it).

    BCG is also clearing all their debts, settling Lycos case with DAUM, getting an LOC from a US bank to improve their cash flow and solve their receivable problems.

    Yes, there were some issues that brought down the stock price of BCG but those issues didn’t change BCG’s business that much. Those issues only changed market perception about the company and its stock.

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    Stock prices and market perception can change anytime but if a company’s business gets into trouble then it is next to impossible to bring it back on track. Though BCG’s troubles were very small, market reacted to them in a big way.

    We should really applaud Mr.Suresh Reddy for handling the business well, yes he did stumble many times and took too long to resolve some of the issues but he made sure that the company’s business was not hurt. The company still continues to grow and looks in good shape for the future.

    I’m eagerly waiting for the line of credit (LOC) that BCG wants, if they use that money wisely (I’m quite sure they will) then they can grow their business. All these years BCG has grown without any additional funds and it will be very interesting how much they can grow after getting that LOC.
    (Remember, BCG’s eps was 4.64 in 2014 and now it is 9.32 and they did this using their profits alone and till now they haven’t raised any additional fund)

    (All these are my views and they should not be taken for buy or sell calls)

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    Thank you Saul.This is masterpiece. Slowly, market is recognising bcg business. In due course, it will attain due valuation. I am invested in bcg since 6 years & won’t sell any for next 6 years. I am convinced more than ever our gem will shine bright beyond imagination. Thank you for enforcing that belief.

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    Thank you very much for your wonderful presentation.

    Ian Biden
    Registered Boarder

    Saul, you are too good with your words and phrases, if I wasn’t wiser I’d think you are Suresh as a matter of fact since your knowledge of the industry is vast really vast. My thanks to you for enlightening us and making our belief even more stronger,
    My apologies to Suresh for doubting him and criticizing him earlier as he knew what he was doing was not a bandaid remedy but a full blown surgery to repair BCG.

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    Mr.Saul Goodman,do you have any powers of incarnation? You discussed many things more deeply like CEO of BCG.Thank you very much for educating us.

    Registered Boarder

    Thanks Saul, for this detailed analysis of the company. It has,certainly, cleared a lot of “cobwebs”.

    Now, we have to wait, patiently, for the biggies to “discover” the correct valuation so that it can reflect in the stock price.

    Thank you, once again.

    Registered Boarder

    A very big and important milestone has been reached/achieved by BCG as it has crossed the 1 lakh accounts mark in its global business.

    Its a great moment for all the BCGians they should be happy & proud and also congratulations to the management and entire global personnel/staff of the BCG for this humongous achievement, sooner or later even the stock market investors will also take note of this feat and value the company at the levels it rightly deserves.

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    If the “needy remains greedy” even after the approval of the PW’s then it will be the most foolish act because he/she will be the biggest loser, by constantly keeping the prices at a penny level just to garner few more percentage of stakes in fact they are inviting trouble for themselves as there is always the possibility of a “hostile takeover threat” because the company has several prized assets which will be gobbled almost for free of cost by the yardstick of the current valuations.

    If the price is not allowed to move “naturally” from its current range then if tomorrow someone comes with a hostile takeover plan and if they offer for example Rs.50 or Rs.100 then most of the small and retail investors who are totally frustrated and disappointed will even support those who will pay a higher and attractive prices for their shares (even though the real value of the stock is much much higher than Rs.100) but in the event of a hostile takeover situation since the promoters haven’t rewarded the retail investors in any way which will make them support or be faithful to the current management, though the management is very competent as far running the business is concerned but they have miserably failed the small and retail investors who have been waiting for almost a decade to see their investments grow and multiply, companies in the same line of business nationally and internationally with weaker fundamentals have performed much better and given massive returns to their investors.

    Even though the management/promoters may succeed in getting the PW’s sooner or later they are testing the patience of investors by not allowing the natural movement of the stock prices due to that the true value discovery of the stock is getting hampered for a prolonged period of time which is not beneficial to anyone including the promoters.


    Hi Jay69, kindly do not post same messages in multiple threads. It is inconvenience to everyone. Also please post only in general thread unless you find it useful to reopen any specific thread (this case I don’t think it was required).

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    BCG : Math driven price estimates

    (ONLY For cross learning by the forum members)

    Conservative case :
    40 billion impressions a month. i.e., 480 Billion impressions per annum.

    Aggressive case :
    60 billion impressions a month. i.e., 720 Billion impressions per annum.

    Major segment of Est.DM Revenue FY’21- ₹2600 cr

    BCG is in the Ad tech space which works on CPM basis for Display and keeps 30-40% of it and passes on the rest to online publishers.

    =============== =============== =============== ======
    Current average CPM *charge

    Four CPM rates ( Least to Best) considered are
    $0.3/$0.5/ $1/$2
    (1 CPM*= 1000 impressions)

    =============== =============== =============== ======
    Grid of possibilities

    30 bn imp/m
    360 bn imp/ annum
    360 million CPMs*

    Gross Rev @$0.3/CPM =$108 mn
    Gross Rev @$0.5/CPM =$180 mn
    Gross Rev @$1.0/CPM =$360 mn
    Gross Rev @$2.0/CPM =$720 mn

    EBIDTA @ Gross Margin of 30% on $108 mn=$ 32 mn
    EBIDTA @ Gross Margin of 30% on $180 mn=$ 54 mn
    EBIDTA @ Gross Margin of 30% on $360 mn=$108 mn
    EBIDTA @ Gross Margin of 30% on $720 mn=$216 mn
    =============== =============== =============== ======
    40 bn imp/m
    480 bn imp/ annum
    480 million CPMs*

    Gross Rev @$0.3/CPM =$144 mn
    Gross Rev @$0.5/CPM =$240 mn
    Gross Rev @$1.0/CPM =$480 mn
    Gross Rev @$2.0/CPM =$960 mn

    EBIDTA @ Gross Margin of 30% on $144 mn=$43 mn
    EBIDTA @ Gross Margin of 30% on $240 mn=$72 mn
    EBIDTA @ Gross Margin of 30% on $480 mn=$144 mn
    EBIDTA @ Gross Margin of 30% on $960 mn=$288 mn
    =============== =============== =============== ======
    60 bn imp/m
    720 bn imp/ annum
    720 million CPMs*

    Gross Rev @$ 0.3/CPM =$216 mn
    Gross Rev @$ 0.5/CPM =$360 mn
    Gross Rev @$ 1.0/CPM =$720 mn
    Gross Rev @$ 2.0/CPM=$1440 mn

    EBIDTA @ Gross Margin of 30% on $216 mn=$64 mn
    EBIDTA @ Gross Margin of 30% on $360 mn=$108 mn
    EBIDTA @ Gross Margin of 30% on $720 mn=$216 mn
    EBIDTA @ Gross Margin of 30% on $1440 mn=$432 mn
    =============== =============== =============== ======

    43 bn imp/m [(30+40+60)/3]
    520 bn imp/ annum [(360+480+720)/3]
    520 million CPMs*

    Ave.Gross Rev @$ 0.3/CPM =$ 156 mn
    Ave.Gross Rev @$ 0.5/CPM =$ 260 mn
    Ave.Gross Rev @$ 1.0/CPM =$ 520 mn
    Ave.Gross Rev @$ 2.0/CPM=$1040 mn

    EBIDTA @ Gross Margin of 30% on AGR $ 156 mn=$ 47 mn
    EBIDTA @ Gross Margin of 30% on AGR $ 260 mn=$ 78 mn
    EBIDTA @ Gross Margin of 30% on AGR $ 520 mn=$ 156 mn
    EBIDTA @ Gross Margin of 30% on AGR $1040mn=$ 312 mn

    Ave.EBIDTA =(47+78+156+312)/4=593/4=$ 148 mn=14.8cr*72=₹1065 cr
    =============== =============== =============== ======

    P or Q or R or S the Alternative approach

    =============== =============== =============== ======
    On the CURRENT o/s shares, the math would be as follows
    For the next min 6 months or more ( lock in period) the real o/s shares would be at 51 cr no’s., in which case the math changes to:

    Ave. EBIDTA in INR= ₹ 1065 Cr.
    Ave PAT @60%of ave.EBIDTA=₹639 cr
    No.of o/s shares=51 Cr no’s ( excl. 34 cr Pref.Warrants)#
    EPS Est= 639/51=₹12.5
    Proj. Mkt Price @ just 4 PE= ₹12.5*4=₹50
    Should it rally by 8 PE, price could hit three figs.
    =============== =============== =============== ======
    ON FULLY DILUTED ( pref warrants incl) BASIS:

    Both the numerator and the denominator would change.
    Ave. EBIDTA in INR= a 20% hike on ₹ 1065 Cr=₹1278Cr
    Ave PAT @60%of ave.EBIDTA=₹767 cr
    No. Of o/s shares: 85 cr shares
    EPS Est= 767/85=₹9
    Proj. Mkt Price @ just 4 PE= 9*4=₹36
    A PE of 8 drives the price to ₹72

    =============== =============== =============== ======
    ON Weighted Ave Equity-Factoring for now 50% growth qfrom warrant conversion [51+(34/2)]=68 cr no’s.

    Ave. EBIDTA in INR= a 20% hike on ₹ 1065 Cr=₹1278Cr
    Ave PAT@ 60%of ave.EBIDTA=₹767 cr
    No. Of o/s shares: 68 cr shares
    EPS Est= 767/68=₹11.3
    Proj. Mkt Price @ just 4 PE= 11.3*4=₹45
    A PE of 8 drives the price to ₹90
    =============== =============== =============== ======
    AN ALTERNATIVE APPROACH to Price projection:

    Applying the same GPM of 30% on FY-21 Est. DM annual Rev of ₹2600 cr, the EBIDTA =₹750 cr.
    Est. PAT 60% of ₹750cr=₹468 Cr
    Est. EPS -FY21=468/51=9.17
    Proj MP
    @ 4PE= ₹ 37
    @ 8PE =₹ 73
    =============== =============== =============== ======
    Proj. Price Summary across-P,Q,R&S basis 4PE & 8PE

    P: ₹50& ₹100
    Q: ₹36 & ₹72
    R: ₹45 & ₹90
    S: ₹37 & ₹73
    =============== =============== =============== ======
    a.CPM is more the norm for DISPLAY type of impressions. (Here we took it as the only type of unit of tariff for all formats/products/ platforms).
    b. Request the readers to pick holes (other than the above)in the math/assumptions etcetera in this doc,such that it serves the cross learning purpose.
    c. You may note that future financial estimates are not factored in the math.

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