[vgsatwork]

First Apologies as I am still active in this group. I am continuing in this forum since I did not exit BCG fully and still continue to hold a sizeable number of BCG shares with the hopes of change in management would change the fortunes of the company since the underlying business is good.

I saw the letter that is circulating in Telegram group (addressed to investor cell). This still does not explain the missing 18 Crore shares from the promotors group. I have went as far back as Mar 2019 and the pledged shares at that point was 10 Crore shares. On 25th Jan 2022, total pledged shares by promotors is 2.3 crore shares. On 31st Mar 2021, pledged shares were 5.95 crore shares. No matter which one of these SHP you assumed to be true, it still does not explain 18 crore missing shares from promotors.

I feel those pledged shares have been sold (either by promoter or by the institution to which it was pledged to) and over the course Q1 FY23, promoters are buying them back from market through proxies just in time to have this in order by the time SHP for Q1 FY23 is due. Otherwise this explanation could have been given on 21st April when the SHP came out and the price destruction in the BCG share price could have been significantly reduced.

I have filed a scores complaint against the management for possible insider trading between Jan to Mar of 2022 with them holding a price sensitive information (regarding FA order from Sebi from Sep 2021), that the market was not aware until 28th Feb 2022. It is quite possible that management has not done it intentionally, but we the shareholders are paying the price and someone must be held accountable

[vgsatwork]

SHP between 25th Jan & 31st mar shows the reduction in the number of shareholders by these people who are part of the promoter group
1. SKR – Holding reduced by 8.37 crore shares. He had separately bought 4 LLP’s, but they are listed in the LLP name itself and hence the stake buy in LLP is included and 8.37 crore of his original share holding is gone
2. Vijay Kumar Kancharla – 5.82 Crore shares reduced
3. Redmond Investments – 3.09 Crore shares reduced.

There should have been 3 update/notice respectively from SKR, VKK and Redmond investments w.r.t to their share sale as per the insider trading & SAST regulations, but we haven’t seen any. So, we do not know the date/mode of sale and also the consideration for which it was sold.

This is my last post in this forum and I am signing off from this. Good luck to you all with your investments

[vgsatwork]

Yes. I will stay away from this forum once I liquidate my position

[vgsatwork]

It could have been an off market transaction which would never get reported as sale in exchanges

[vgsatwork]

Follow up to my earlier post #13816

As I had mentioned, the increase in total number of shares held by promoters by only about 3.9 lakh shares despite the 4 llp’s now being listed as promoters.

Latest share holding pattern raises more questions than providing the required clarity.

1. I do not see Vijay Kumar Kancharla’s share holding being classified as non promoter or public. In that case, what happened to his shareholding? Has he sold them in open market? If that is the case, where is the update to the exchange with respect to the sale of shares by promoter group? This would be an unforgivable lapse in terms of corporate governance. This could potentially damage all the good will that the company has earned in the last 1 year or so. The shortfall is not a small number. It is some 18 crore shares and given that the market price of the share was around 100 rupees or so. That’s 1800 crore – give or take few hundred crores. Sale of such magnitude not getting reported to the exchange would put the promoters in deep soup with the regulators.
2. An explanatory update should have been included by the company highlighting the changes and the background for the same. Absence of which makes this entire transaction a shady one.
3. Also, there is no indication as to when the purported sale of 18 crore shares took place as there have been a price sensitive update w.r.t forensic audit was announced to the exchanges by late February by the company and the last published SHP of the company was on 25th Jan before this update. So, purported sale is potentially an insider trading activity while there is a price sensitive information (forensic audit) was not updated to the shareholders, but was known to the management.

This very serious lapse from the company and I am changing my long term stand on this stock and going to liquidate my holding first thing Monday morning

[vgsatwork]

It has been 7 days since I had sent an email to Investor relations team of Brightcom group on non receipt of bonus share and no update from the company even after the due date as indicated by the company in it’s notice to the exchanges dated 25th Jan 2022 (BCG had indicated that the bonus shares would get credited by 24th march 2022). Today I have sent a follow up email and have asked them to register this as a formal investor complaint over non receipt of bonus share and non responsiveness from the investors relation team of brightcom group. I have also indicated that if I do not hear back on this email within a reasonable time, I have no other choice other than to register a complaint with SEBI. Let me wait and see if this email evokes a response from them

[vgsatwork]

I had sent an email to investor relations email id about the bonus share 3 days back. No response to my email…

[vgsatwork]

Big Picture news from the latest update is a very BIG POSITIVE that Promotors have increased their stake by about 14% + from their initial value of 19.14% as of 25th Jan. So, as of date, promotor stake is 33%+, which is sizeable.

Having said that, the disclosure is raising more questions in terms of who is holding how much shares as most of declaration in terms of # of shares held by Promoter and promoter group are incorrect and is not consistent with 25th Jan SHP or cumulative acquired stakes from Aradhana,Sarita,Shalini & Kalpana Commo Sale’s notification.

Looking at the last share holding pattern published on 25th Jan 2022, Promoter and Promoter group had about 23,32,84,604 shares. Of these 23 crore shares, Suresh Kumar Reddy had about 9,41,05,816 shares. As of 25th jan, Promotors and promotor group together had about 19.74% shares and Suresh Kumar Reddy had about 7.96% and Vijay Kumar Kancharla had about 6.56% stakes.

Update from Aradhana commo sales indicates, promotor holding prior to acquisition has been mentioned as 4,24,31,791. This is far lesser than (Only about 45% of Suresh kumar Reddy’s Personal holding as of 25th jan 2022 SHP) what we know as Suresh Kumar Reddy’s holding from 25th Jan 2022. Looking at the disclosures, the acquisition seems to have happened in this sequence Aradhana commo sales–>Shalini Sales–>Kalpana Commo Sales–>Sarita Commo Sales. Post the inclusion of these 4 entities in Promoter group, the promotor shareholding is being mentioned as 22,36,81,791.

Compare this to TOTAL promoter shareholding as of 25th Jan 2022 of 22,32,84,604 shares, the increase is ONLY 3,97,187. This is absurd. The numbers simply isn’t adding up.

The questions to get clarity on are
1. Why promoter & promoter group shares have been indicated as 4,24,31,791 shares in Aradhana Commo Sales’ update on the acquisition (Other numbers are incremental update on this number), whereas the Promoter shareholding as of 25th Jan SHP is 23,32,84,604. Even if we assume that these documents are not referring to promoter group as a whole and only represents Suresh kumar reddy’s personal holding in BCG, still it is not right as the declared number is only about 45% of his shareholding per the 25th Jan SHP. What happened to his remaining shareholding?
2. What happened to Vijay Kumar Kancharla’s Shareholding?
3. Between SKR, VKK, they were holding 14.52% out of the total promoter holding of 19.74%.
4. Why the company has not issued new SHP given that between 25th Jan 2022 and the bonus record date of 16th March, they had issued shares to FPI and Shankar Sharma.
5. Given that the Ex date has long past for bonus, an SHP was to be published before publishing any change in SHP of the promoters. Why the ex bonus SHP has not yet been published?
6. Whether all other promoters have ceded their share holding or reclassified as non promotors?

Need more details from the company to clear all this..

[vgsatwork]

Incidentally the Board meeting outcome update of 16th Sep 2021 wherein the preferential allotment to FPI’s were decided at 37.7 was signed by Manohar Mollama. This forensic audit letter from SEBI dated 16th Sep was addressed to Manohar Mollama. So, there is no way the company would have gone ahead and issued the preferential shares/warrants, if they had anything to be worried/feared about from the perspective of forensic audit outcome. Because any negligence on their part would invite pure wrath from these FPI’s in the form of legal actions…

[vgsatwork]

The timing of this disclosure is puzzling to say the least, Given that currently the institutional holding is 11.56% (based on SHP of 25th Jan 2022), which includes the FPI’s who got preferential allotment @37.7 rupees along with Mr Shankar Sharma who has got preferential warrants. These FPI’s had paid up their preferential allotment money and got their shares recently and would not take any lapse in corporate governance lightly (as it used to happen before 2020 when only retail investors were there).

Having said this, this update about Forensic audit order by SEBI from 16th Sep 2021. It is the same date when BCG had a board meeting in which the preferential allotment to the FPI’s & Preferential warrant issue to Shankar Sharma were approved.

Connecting these two points, I would tend to think that this move is a calculated maneuver to edge out the retail investors in panic and let the institutional investors jump in bulk (Recent developments w.r.t inclusion of BCG in the indexes tracked by FII’s and Nifty indexes is a clear indication of enabling Institutional purchase in this counter) over the next few months with the bonus price adjustment of 40% drop is also due in another 2 weeks.

So, my reading is that this may not be a concerning update, but a calculated move to nudge the retail investors to move away from this counter. Otherwise, the FPI’s who paid 500 odd crore to purchase 11.56% shares would take the management and the board to task.

[vgsatwork]

Despite the bounce back in broader market today, BCG stock continues to be under pressure. Guess market is awaiting to see the voting results for bonus issue before any decisive up move. Given that the share has fallen by almost 30% from the time of Q3 results announcement and there is a 40% impending correction due to bonus price adjustment based on the closing price of 14th March, One may have to wait patiently in this counter or take a break from watching the market/stock price for about a month or so. Just remember that the business fundamentals are very good and no other event can over shadow this in medium to long term and BCG would be valued as it’s peers in US market. Just stay put…

[vgsatwork]

Great news. Does anyone know the difference between share purchase transaction and asset purchase transaction?

Does it mean BCG is buying a portion of the business (assets/liabilities/employees,etc) for cash consideration from a US Company that is dealing with digital audio?

[vgsatwork]

BCG has shown fantastic results and have given 2:3 bonus, representing 66% rise in equity base. The signal is very clear that the company is seeing phenomenal growth ahead. Domestic and foreign institutions cannot stay away from this post these numbers. Expecting rapid PE rerating given over 165% YoY growth in bottomline and 130% topline growth on a fairly large base. Expecting PE rating to reach 40-45 range based on Trailing twelve month EPS of 8 rupees implying a share price of around 350/- pre- bonus and post bonus price of around 210 or so.

[vgsatwork]

Regarding Bonus issue – Earlier today, company notified that with today’s preferential share allotment, # of shares is currently at 116 crores. Given that last year in the run up to EGM, maximum share capital of the company has been revised and approved by share holders as 300 Crores, which would be 150 crores of shares. Given that pending Preferential share allottees and Shankar Sharma pays up on time to be eligible for Bonus share, the equity base would be 120 crore shares which would leave room for essentially only 1:4 for kind of bonus ratio, unless company decides to revise the overall share capital upwards. Such a move would require a General meeting (EGM to be precise since AGM happened hardly a month back) and change in company’s Article of Association.
Given that Company had made it clear that they may not dilute the equity any further and such dilutions have direct impact on the RoE which company said is a key metric that they would be tracking hence forth, it is very likely that the company may settle for a bonus ratio which is less than 1:4 to avoid increasing the overall share capital in excess of 300 crore, which was approved in EGM hardly 7 months back.

Despite all these, if the company announces a bonus ratio of 1:2 or 1:1, which is a direct indication about the growth momentum that they are seeing on the ground and the7ir ability to keep RoE in excess of 17-18% and that would be a very clear indicator for all the shareholders w.r.t the growth prospects.

Hoping to see 1:1 bonus announcement…

[vgsatwork]

Bonus issue is a welcome move by BCG management. Bonus announcement per se was sufficient and was quite positive one, but a separate late night clarification on the rationale for bonus is what is probably what is affecting the sentiment in the last few days.

Any generous bonus in the ratio of 1:2 or 1:1 would be seen as a very positive sign combined with stellar Q3 results. But, If the bonus ratio is 1:4 or 2:5 kind of ratio, one would tend to think that this is to pacify/compensate the FPI investors who were initially supposed to invest in at 31 rupees and get the 1:4 bonus are being compensated now (for their investment at 37.7 subsequently post bonus price) that the exchange approval for the preferential allotment has come through barely a week before the notification on the bonus. If we do end up with such bonus ratio, I would tend to think that it is more to compensate the FPI investors than to reward the retail shareholders. An interim dividend would be a better sentiment booster than 1:4 or 2:5 kind of bonus ratio.

Please do not take me as a doomsayer or someone against BCG. I have been holding sizeable number of BCG shares for over 3.5 years now and I continue to believe in the long term prospects of the business and continue to hold all my shares without selling a single one of them. But I believe these moves should be done with genuine retail shareholder interest in mind as opposed to be a pleasing move.

[vgsatwork]

The warrants issued at 7.7 has 1 year lock in period and would start coming out of lock in period sometime in Aug 2022

[vgsatwork]

Since the Q2 results, BCG shares had a good run for about two weeks and hence it is natural that it corrects and consolidates before next round of up move. Not sure as to how soon it would happen, but the price has to start reflect both the underlying value of the stock and growth prospects.

On a very conservative basis, based on trailing TTM basis, market price should start reflecting the growth of BCG by giving min 30-40 PE multiple by the time Q4 results comes out and BCG meets it’s FY22 guidance numbers of 5000 Cr topline and about 9 rupee EPS. A conservative PE multiple of 30-40 times (Cos showing 40% growth YoY easily command 40 PE multiples) trailing numbers should make the market value BCG between 270-360 rupee range. This is conservative number purely from the perspective of market price reflecting BCG’s Industry leading growth. Even if the preferential warrants and Preferential issue allotment gets completed and the Equity further diluted from 104 to 120 odd crore, given the KSR’s commitment on ROE, Free cash flow generation and shareholder value creation, I am sure BCG would make the India acquisition happen in Q4 along with this equity dilution to ensure that their overall ROE looks good. Hence any number between 270 to 360 is a good target to have for BCG by end of June 22. That would be about 1-2X return from current market price.

Based on the underlying value and valuation gap that BCG has with some of the industry peers continues to be a value picking and as institutional and retail investors bargain hunt in BCG counter, expect the valuation gap to narrow down (from the current level of PE of 88 for Affle Vs 23 for BCG) significantly, if not fully. Hence expect the PE multiple to expand (Stock re-rating) to 50-60 levels to close the valuation gap with listed Indian peer. This would mean by June 2022, BCG can potentially be in the range of 450-540 range based on both the expected growth and value realization which is currently ongoing.

That would mean a return of almost 4-5X returns over the next 7 months or so. That is good return to look forward to without factoring in any of the other expected developments.

So, sit back, relax and accumulate on dips (if you can) and reap the rewards!!

[vgsatwork]

Finally the business turnaround is visible in results and the organic, industry leading growth is shown by BCG and I am quite thrilled with the numbers, especially because the company met the higher end of it’s projections. That is what separtes men from boys. Also, the intent and tone of the messaging in terms of the cash flow, Return on Equity, delivering value to the shareholders are very comforting and is a welcome one.

BCG, from now onwards in the big league and it has to match that expectation when it comes to sharing updates/communicating with the investors to show that they are now a more matured and investor friendly company.

I feel BCG still has to improve a lot on that front. I know it is hardly 2 weeks or so since Manohar Mollama had resigned, but I was expecting an announcement w.r.t new Company secretary (Since he is the face of the company to all investors), which was missing. Also, I was expecting the management to emphasize the projection numbers given in late august w.r.t Q3/Q4 anf FY 22 full year projection numbers (Either confirming the same number or giving a more revised projection). Again, there was no mention of the projection numbers for Q3/Q4, which would have done a world of good, if announced along with the results. Especially when the company indicated about the free cash flow and Return on Equity. Also, another update that would have been apt to include, but was given a complete miss is about the proposed india acquisition. Given that the company had conveyed to the market about the LOI that it had signed with the indian company back in June and now it is mid november, good 3+ months since that announcement and hence an update on the same is something that should be provided to the investors. Any kind of update around that would have been helpful. I am not sure why the company chose to keep quiet on the same. I hope that the acquisition plan is still ON.

[vgsatwork]

This is watershed moment for BCG wherein the company is expected to show industry leading growth numbers (based on what they had given as projection in Aug 2021). Given that BCG has given revenue projections for the first time and hence giving them an allowance for unforeseen developments, if they manage to meet 75-80% of projected Q2 revenue, EBITDA & PAT numbers, it would be great.

Looking at the AGM timelines, update on Acquisition is due by end of this month and exchange approval for preferential allotment (again by end of this month), that would give the company one more window before the AGM voting to go in for QIB for 1500 crore as indicated earlier. So, expecting Mid November to end of December with lot of actions around this..

[vgsatwork]

@jay69

I am not saying that the company has done something wrong. Disclosures of this nature only goes on to show how transparent the management is with the shareholders.

If I wear the hat of a critique, company’s communication says clearly that they were expecting to get into legal troubles due to initial pricing of the offer factored in bonus for FPI’S. They were not very transparent as to whether the FPI’S would be eligible for bonus issue when they had announced the preferential allotment to the exchanges. It is only in the detailed fine print of the postal ballot notice that one came to know that they are provisioning 2.99 crore more than the initially communicated amount towards bonus share issuance which roughly correlated to FPI’S getting bonus share even as the clarity was not there to the market. When the going is good, people would tend to overlook such gaps. There was nothing wrong about what they did since the postal ballot notice had all the details w.r.t provisioning for bonus. But from corporate governance and transparency perspective, those were big gaps as the common investors were in the dark as they did not know the true price that the FPI’S were going to pay for the shares since it was not crystal clear as to whether they would get the bonus or not. If indeed the FPI’S were alloted bonus shares, their effective investment price would have been lower by 20%, which the investors would not have taken lightly, though all of them(supposedly) read the fine print of the postal ballot notice and voted aye for the same

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