[Logan]

Check out the new investor presentation by BCG that was shared late night. (Not able to share because of the file size)

Don’t know if this presentation is for getting LOC or subsidiary dilution (last year also they shared similar ones) but one interesting thing to note is the Lycos acquisition payable in the balance sheet. All these years it used to be $16M but for 2021 it is just $7M. Does that mean BCG is paying less than half of $16M? Looks like a good deal to me.

[Logan]

Top Supply Side Ad Platforms Startups

Brightcom offers video supply side platform for publishers to monetize their digital ad inventory and advertisers to reach their target audience across display, mobile, and video. Brightcom’s proprietary technology platform, Compass enables publishers to maximize yield by monetizing their media across all their devices utilizing solutions like real-time bidding, tag integration, header bidding and other hybrid solutions.

Nice words mentioned about Brightcom and in the introduction they have mentioned “Globally there are 179 Supply Side Ad Platforms companies, and here is the list of the 10 most interesting ones”

I don’t know much about Tracxn but looks like they track everything related to technology, and startups which will be useful for venture capitalists, private equity investors, large corporations etc.

This is what is mentioned in their website :

Tracking Innovative companies across 350+ Technology Sectors, 1000+ Emerging Themes, and Dedicated Coverage on 30+ Countries

Designed with precision for

Private Market Investors – VC, PE, IB, Incubators, Angel Networks, Family Offices

Large Corporates – M&A, Innovation and Digital Transformation Teams

Government Agencies, Industry Bodies, Universities

[Logan]

Google advertising revenue rises 69% from last year

[Logan]

@bhalothia9, the investment that BCG has made is the initial investment made to acquire/start those companies and not investments made every year. I don’t know much about LIL projects. It’s better to ask the CEO or the CFO in the conference call. I can understand loans recieved from OMS or other companies but about LIL it’s very difficult to guess.

[Logan]

@odysee, in my opinion, both are challenging.

Regarding the business, as you know, at the consolidated level it looks like one company is spending 400crs+ for capex but since BCG has many subsidiaries, they all need investments of their own. 400crs is spent by different subsidiaries and the amount will be different for different subs. It’ll be difficult to understand many things for someone who is not following the company regularly. Analysts can contact the company and get all the information easily but it’ll be difficult for potential investors to understand properly right away.

If analysts don’t contact the management then even they’ll find it difficult to understand few things. As per SEBI rules, the company will put many items as “other” or as loans and advances etc. But there’s no proper details of few items in the annual reports. Compared to the last many years, last year’s annual report was way better (regarding business related details) but regarding numbers/financial related they haven’t given proper details. People won’t understand what are other assets or what are loans and advances. We have requested many times but they haven’t taken us seriously. It’ll be easier for everyone if they give proper details in the notes section of the annual report. If people understand that the advances are given to publishers to buy their media then they’ll not be sceptical on the numbers. It’ll take just 2-3 pages to give proper details. They should make the annual report as informative as possible.

While comparing with peers, in the adtech industry, it’ll be challenging because we don’t get a proper Apple to Apple comparison. For example, TTD and Magnite are in the same industry but their business models are completely different. One is at A and the other is at Z. One thing that is common is the receivables problem in the industry. Companies get paid after 3-4 months. TTD and Magnite have higher payables too which is actually beneficial to them as they’ll have more cash on hand. BCG’s case is different, it pays within a month which is a good thing but it puts pressure on the cash flows. I don’t know whether analysts will consider all these before coming to any conclusion. For them it’s just a call away but for us, we have to spend more time to understand properly.

[Logan]

@imposiblznuthin, in India we have only 2 that are listed – Affle and Vertoz.

Outside India there are many companies (mostly in the US). Google, Facebook, Amazon, AOL (part of Verizon), The Trade Desk, Magnite Inc, Pubmatic, Perion Network, Criteo, Marin Software, Liveramp, Tremor International, Viant Technology, Acuity Ads.

[Logan]

@ramganesh1982, sorry for the late reply. Regarding your queries

1) I don’t know much about that. In the last year’s annual report they’ve mentioned it is as interest income.

2) The financial cost is maybe the interest paid to Axis (other than the settlement amount). The 150crs write off they did, it carried higher interest rates (maybe 10-14%) and thankfully they are done now.

3) Few years back even I didn’t understand it properly but in one conference call (I don’t remember which one), they said that those are borrowings from BCG’s subsidiaries. It’s not an issue. Many companies do that. If they receive money from subs, they’ll have to pay taxes so instead of that many companies borrow from their subsidiary and pay interest.

4) I don’t think sales and income have dropped and in fact they have gone up this quarter. I guess you have checked the standalone results. I’m not interested in standalone business actually. All the strengths of BCG are in it’s online advertising business so you should always give more importance to it.

[Logan]

@Admin, these are my queries. Please review them once and mail them to the IR department.

To the CFO

1) What constitutes other income of Rs.18.92crs for this quarter?

2) What are other receivables mentioned in the balance sheet? Are these receivables different from account receivables? For FY20 the amount was Rs.150crs and for FY19 it was Rs.530crs.

3) In the non-current assets – loans are 97crs, other financial assets are 14.5crs. In the current assets – loans are 728crs, other current assets are 170crs. Under current liabilities – other current liabilities are 227crs. There’s no proper information on these items in the balance sheet of the annual report also. In the notes section you have just mentioned these items as “Other”. It would help everyone if you could provide proper details of these items in the notes section.

We have requested the company several times to provide complete details of these items in the annual report but you haven’t taken our request seriously. It is very difficult for new investors to understand what these items are. We would really appreciate if you could provide proper details in this year’s annual report.

To the CEO

1) Congratulations on a great quarter. Can this growth rate be maintained in the coming quarters?

2) What is the update on LOC? Is it put on hold?

3) Privacy concerns related to Online Advertising is a hot topic these days. How does it impact BCG’s business going forward?

4) What is the impact of Apple changing its privacy policy (on BCG’s business)?

5) Google has announced that it would phase out third-party cookies on Chrome in the coming years. How does it affect BCG and how reliant is BCG on third-party cookies?

6) How big is BCG’s CTV business? Are there plans to grow the CTV business big or are you taking a conservative approach? Recently Magnite Inc bought SpotX to grow the CTV business. Do you have similar plans?

7) How will you utilize the PW and PO funds?

8) When are you planning to start the audio ad business?

9) We appreciate the issuance of bonus shares but we have a concern too. Because of the bonus shares (and PW shares), the free float will increase and more importantly, the EPS will come down (below 5). What are your thoughts on this?

10) Are there plans to revive the parent company’s business (standalone)? And when will you start scaling up the adtech business in India and other Asian countries?

11) Because of the PW issuance, the holding of the promoters will reduce by almost half of what it is now. Are all promoters okay with that reduction?

12) Many shareholders still haven’t received their dividends yet. What’s the reason for this?

13) Still there’s no improvement in communication with investors (wrt investor relations). You said it’d be improved by now but that has not happened. Why is it taking so much time?

14) Update on Lycos-DAUM issue.

[Logan]

@ramganesh1982, yes I know about that. They have mentioned “assuming” warrants are converted to shares. I don’t want them to convert it before issuing bonus shares.

[Logan]

@hw_tw, please check yesterday’s press release for conference call schedule. It’s this Saturday at 3pm. This time the duration should be for 1 hour at least. There’s so much to ask and 45 minutes won’t be enough. We all should send mails to them asking them to increase the duration of the call.

I’m preparing the questions list and will share it with everyone before Thursday EOD.

[Logan]

@kris, the results are great this quarter. I’m really surprised because usually Q4 results won’t be that good compared to Q3 but this quarter the company made more profit in Q4 than it made in Q3. Profit has increased 30% Y-o-Y which is more than what many other companies in the industry made. For the full year, profit has increased 9.7% but if we check EPS it shows growth of only about 3% because of increase in shares (PO).

If we consider only the Online/Digital Advertising business then revenue has increased both for the full year (11%) and also for the quarter (22% Y-o-Y). Margins may have improved because of signing more publishers (direct accounts). Only thing that has not improved is the free cash flow.

(I always give more importance to the online advertising business and won’t give much attention to the software business)

Regarding bonus, as I’ve said before, if I consider only the issuance of bonus shares then I’m not okay with it but if I consider everything else then it looks not so bad because it has made the stock wake up from the coma it was in for many years. But I don’t want the company to give bonus shares to the PW allottees.

Regarding dividends, it is really a small amount, I thought they’d pay more but after the bonus shares news I figured it won’t be big. I’m not a dividend guy and I always prefer buybacks to dividends. This time they should not screw up like they did the last time.

Regarding fund raising, in the report they have mentioned it is for inorganic growth (acquisition) and I don’t think LoC is off. In the last conference call the CEO said LOC will be for organic growth and other fund raising will be for inorganic. He did mention in the last call that they’ll do more fund raising in the future so no surprise on this really.

Other thing I want to say is that one guy is using filthy language against some members of this forum. Doesn’t even know how auditing works and how taxes are paid but he’s trying to judge our characters. He’s pissed off about us (me and kris) because we don’t agree with him. It’s silly and very childish. Unnecessarily he’s making us his enemy because we don’t agree with him. I don’t want to have any enmity with anyone. We all are adults here and we can take our own decisions. Who asked him to follow our forum if he doesn’t like what we write here? This is a public forum and everyone can see what’s written and discussed here and we have nothing to hide. I write my opinions here and that doesn’t have to mean only my opinions matter and they are always right. I don’t bother if others make any comments but I have problems only when they try to force their opinions on me. If people don’t disturb me when I write something then I don’t care what they write. Different opinions are always good and people can take whichever they like.

More importantly no one stopped him (or anyone actually) from giving any complaint against the CEO/company/promoters. I had disagreements with many members here but that didn’t stop me or others from showing respect to each other. There’s no need for “we” vs “them”. Talking about nonsense things and holding grudges is a waste of time for everyone.

[Logan]

@conservative_indian, I agree with you on bonus shares not being a free lunch (they’ll have to re-adjust the equity and reserves which impacts the balance sheet and more importantly the EPS). If I think only about the bonus shares then I’m really not okay with it but if I consider all the other things (the past, present and the future) then it looks “net” positive. It’s more like a necessary evil and a good example of a catch-22 situation. If he doesn’t take drastic action(s) then the price may not go up and the price not going up doesn’t benefit anyone and we’ll be in the same situation for many years (To get out of that you need drastic actions and taking those actions may cause some problems later).

For some reputed investors to come in, the price (and the market cap) have to be at certain levels. Also almost all investors were frustrated with the stock’s performance and to lift their spirits and to restore their faith and more importantly the trust, some action has to be taken .

The difference between BCG and other companies (like Anil Ambani’s) is that BCG is too conservative on debt and even if they have/had very big ambitions, they didn’t get carried away by their success (business-wise not valuation-wise). Other companies shot for the moon and took on bigger debts than they could handle and later struggled for many years (some are still struggling). BCG’s management (mostly the CEO) took some not so good decisions (like merging with LGS and starting Lycos LIFE) but they made sure that those things didn’t have big effects on the business. Even with having free cash flow problems, the company stayed in the business and paid all the debt. They have paid maybe more than 300crs debt from the company’s cash flows. 300crs is a big amount for a company that competes in one of the toughest industries. The negative side was the total time it took to close off all the debt – 7-8 years, which under normal circumstances would’ve been fine but the valuation (below 1PE) made everyone feel frustrated. What other companies do is, they borrow more to pay the old debt and the cycle goes on and on and they end up being bankrupt.

To get more efficient and to improve free cash flows, the revenue has to reach $450-500M. All these years I didn’t know how they could improve cash flows when the revenue reached that figure. I thought more revenue means more receivables, more expenses which results in cash flow issues but now I figured it out. The CEO talked about this in the last conference call, he said that the amount that they have to spend on technology (Capex) will remain the same even if the revenue increases. So now almost all the profits are reinvested but later after reaching that figure they need not commit all of the profits and hence there’ll be more free cash. This is a business that needs more investment in technology or they’ll go out of business. For example – both Google and Apple are changing their privacy policy, if BCG doesn’t adapt to that and say this current technology is sufficient then after few years (maybe even months) they have to pack their bags and go home.

[Logan]

@Rishi_life, I don’t know whether PW allottees will get bonus shares or not. It’s better if we ask the CEO about this in the conference call.

India’s market is growing and that’s why these days some big and small players are trying to grow their business here. BCG started online advertising business here many years back but had to stop because it was not profitable. That time things were different but now they have changed a lot (especially because of JIO’s impact almost everyone is getting internet at low prices). People are spending more time online (shopping, browsing etc) and they are streaming more content also so there’s a good opportunity here. As mentioned in one of the articles (THE HINDU), the company may start something like B-LOCAL in our markets next year.

Regarding other companies starting adtech business, Amazon’s is not new and it has been in the industry since many years and it is one of the top dogs of the industry (others are Google, Facebook and AOL). These big players have 70-80% of the market share. Even though the competition is cut-throat, the good thing about the adtech industry is that it’s growing and there are many opportunities like in CTV, audio streaming, Gaming etc etc. In CTV, mostly smaller players are dominating which is a good thing.

As for Flipkart, BCG is concentrating more on the western markets and I don’t think Flipkart starting adtech business will affect that much.

[Logan]

@kris and @nitin_asce, in the previous conference call the CEO said that they have some plans to reward the shareholders and my guess is that bonus shares are that reward. This is “net” positive for us. I use “net” positive because there are negatives too. There is too much free float and giving bonus shares will increase that. Large free float doesn’t matter when the sentiment is positive but when a negative event happens then the operators will easily manipulate the prices. BCG doesn’t have a good name in the market and even for a small rumor people will panic. Till the price is at lower levels there’ll be negativity (and some people will be way too desperate to spread negativity because they think stocks should never sell below 1PE and if it does then the company must be fraud).

The company/CEO have to take drastic actions to make the share price reach a decent level and to do that they have to show the market that they are serious about the valuation of the company, and of course about the business. All these years, they were serious about the business and neglected valuation but now they seem to have changed. So things like ESOP plans, bonus, dividends, buyback etc are necessary to show the market that they are serious about the valuation.

Regarding raising equity funds, I’m not surprised by that. This company grew because of acquisitions and for that they raised money through equity. Maybe 1 or 2 deals they made through debt but mostly all fund raising were done through equity. All shareholders and potential investors should be aware of that and they should be ready for that (sometimes even at lower valuations). Now that almost all the issues are over, the management may have plans to grow the business like they did when the company was smaller. So if they can have similar growth rates then people won’t worry too much about dilution.

[Logan]

@balajihands, my guess is that they closed down all those companies (mostly software businesses) and concentrated more on the online/digital advertising business. Back then it was 40-50% software and 50-60% digital but now it is 80-85% digital and 15-20% software.

[Logan]

@Investor_2022, I didn’t share my thoughts on ESOPs because we don’t have any information on that. I think we’ll have to wait till the conference call to get proper information. In the board meeting they’ll just approve the ESOP plan but I don’t think they’ll share complete details. Whatever opinions I share on that topic will only be speculation or guesses.

Generally investors see ESOPs as a good thing and the market has also reacted positively.

Regarding the Audio Ad news, it’s a good move by the company to update and invite everyone to the event. All these years these things used to happen at the subsidiary level and we didn’t get to know about all that. These things change the perception about the company, especially it’s stock.

[Logan]

It’s funny how some people try to make you the enemy of everyone just because you don’t agree with them (or correct them). They always need someone to blame so first they’ll start talking shit about the company/CEO/Management. When the company/CEO don’t respond to them they’ll try to look at others to blame. They go to some WhatsApp group or some forum like ours and they’ll write something stupid to seek attention. Most people will avoid/ignore them but there’ll be some stupid people like me who will try to correct or give any clarification. These genius people can’t tolerate that. When the price is not moving according to their liking, they don’t want anyone to talk anything good about the company and they just want everyone to bash the company/CEO 24/7. They think that they can write shit and no one should correct them and later they’ll start targeting people who correct them.

They know that they can’t randomly target people who correct them because people will understand their nonsense thinking so what they do is they start calling these people as paid agents or insiders or sometimes they call them the CEO. When these people stop talking to them (or ignore them) then they’ll find someone new to target.

It’ll be their decision to buy shares in any company but they won’t take responsibility for their decisions if the share doesn’t perform well. They’ll take all the credit if it performs well but if it doesn’t, they’ll blame everyone else except themselves.

These people are just attention seekers and they behave as if everything is a conspiracy. Wrt BCG, they’ll act as if it is the only company in the world and they won’t bother to check other companies before commenting something stupid. First it was audit and now it is tax related. You just need common sense to understand these things.

Tax disputes are common everywhere, and almost all the companies will have disputes with the authorities regarding taxes (including the bigger ones). It takes years to resolve these things. Wipro’s earliest is for FY1985-86 (over 30 years ago).

Let me share some information about this topic,

Top IT companies have over $2 billion in tax disputes Read more at: https://economictimes.indiatimes.com/tech/ites/top-it-companies-have-over-2-billion-in-tax-disputes/articleshow/64847253.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Tata Consultancy Services, Cognizant, Infosys and Wipro have about $2 billion in tax disputes pending in India, largely over differences in calculating incentives for export-oriented units and distribution of dividend taxes to investors.

Tata Consultancy Services, India’s largest IT services company, has over Rs 5,600 crore in disputes pending with tax authorities, a figure that has nearly doubled since the previous financial year, the company disclosed in its latest annual report.

An IT industry executive, requesting anonymity, said companies lose even if they take a dispute tp a court. “If a company wants to contest a tax notice, it will still have to deposit a part of the money claimed by the tax department before a court takes up the case,” he said.

In a recent case involving Cognizant, the Madras High Court granted an interim stay on the Income Tax department’s proceedings, subject to the company depositing 15% of the Rs 2,800 crore dividend distribution tax demanded by the department. Aformer CEO of a Bengaluru-based IT services company said such cases remain indecisive for years, and decisions have been in favour of companies on many occasions.

“Companies take one stand and tax authorities take another stand. Then the tax authorities want it to be sent for appeal because no party decides. It goes on,” this person said, declining to be identified. These tax disputes are in stark contrast to the situation in other countries that are rolling out the red carpet to Indian IT companies to set up shop.

BT Buzz: India Inc’s tax dispute load is reducing but for how long

It is not unusual for businesses to find themselves locked in a dispute with tax authorities for years given India’s low compliance track record and slow pace on resolution. However, there seems to be some notable progress on these fronts. Corporate India has seen a substantial decline in tax litigations of late, helping the government unlock revenues.

Disputed taxes of a little over 1,000 BSE-listed companies saw a year-on-year (y-o-y) growth of 1.5 per cent in 2019/20. It had increased 5.3 per cent and 7.8 per cent in the previous two fiscals. This respite comes after taxes related to income, sales and excise locked up in such disputes rising to a massive 42 per cent by the end of 2015/16. Companies usually disclose the amount stuck in these disputes under contingent liabilities owing to their uncertainty of outcomes.

Supreme Court Set To Resolve A 20-Year Old Software Tax Dispute

The Supreme Court is set to rule on a two decade old tax dispute. The outcome will impact companies like Samsung Electronics Co. Ltd., IBM India Ltd., Hewlett Packard India, Mphasis Ltd., Sonata Software Ltd., GE India and 100 others who import software for sale in India.

As mentioned in the articles, some disputes go on for 20 years or more. Famous and big companies like TCS, Wipro, Samsung, Infosys have disputes for such a long time. Attention seekers will try to look at these things as some conspiracy theory but in reality these are very basic and just common sense is enough to understand.

People don’t have to be the CEO or paid agents to have common sense. This is a forum dedicated to talk about BCG (and it’s peers, industry etc) so whatever I discuss or give clarification will be related to BCG – it’s simple as that. Some genius people don’t understand all these and they’ll write nonsense things about us. Some people trash talk about the company/CEO when the price falls and the same people will praise them when the price rises. They blame others if they don’t make any profits. I’m not like them, if I don’t make profits in BCG, I’ll take the responsibility and I won’t blame others. This is equity market and I know the risks and rewards.

[Logan]

@aindia, I’m sorry about that, I should’ve been more specific when I said I don’t know much about the business aspects. What I meant was that I didn’t know about businesses of many companies like how a veteran would know i.e. I understand the business but don’t have the knowledge that a veteran would have. They’d have deep knowledge about different technologies, current events/trends going on in the industry etc etc. I follow the businesses of many companies also but I give more importance to things that are important for investors.

[Logan]

@aindia, I think you’ve mistaken, I didn’t seek clarification on Brightcom/OMS and I don’t have any incorrect perception on Brightcom/OMS. Many people still have confusion on this but I never had that confusion and in fact I have said many times that Brightcom and OMS are one and the same and also mentioned about it’s importance to BCG when I first started writing in the forum itself.

Topic on investments (and returns) in BCG’s subsidiaries was one of my first posts in the forum. I was the first person (in this forum) to write about the investment that BCG (back then Ybrant) made in OMS and how much revenues and profits it was making in the recent years.

Regarding adauth, I understand about ads.txt implemention part and also understand the importance of having direct accounts. (I’ve also written about the importance of having direct account many times). One of the reasons why the count is increasing is because more publishers are implementing ads.txt.

What I’ve said is data on adauth alone should not be considered to compare and value companies. SSPs have more accounts (direct and reseller) but companies like TTD, Marin software etc don’t have that many accounts. TTD’s revenues are 2-3 times more than BCG’s. Marin has only one account (on adauth) but it’s revenues are over $100M (750crs).

[Logan]

I’m not a veteran in this field, I just follow the industry closely because of BCG. I try to follow things that are important for investors but I don’t know much about the business aspects. Many years back (before Affle came public) there were no peers to compare BCG with and people compared it with random IT companies which made zero sense to me. BCG’s business is completely different from IT companies. Most people think that all software companies are IT companies and they won’t even bother checking the business properly. I wasn’t getting proper information anywhere, even financial websites compared BCG (Lycos) with random IT companies so I started following companies that were listed in the US.

Regarding Adauth data, I don’t understand that properly and I don’t think that should be considered to compare companies. Magnite Inc (Rubicon and Telaria combined) and PubMatic have 10 times the accounts that BCG has but both their revenues are less than BCG’s. TTD doesn’t have many accounts but it’s revenues are 2 or 3 times more than BCG’s, Magnite’s and PubMatic’s (not combined).

[Author]

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