Brightcom Group: A Bluechip Stock in Making OR?



Opening
Recently Brightcom Group was in the news and all over Twitter. Obviously, if a company jumps from just INR 4.18 to INR 107.49 in the 2021 calendar year, then drops straight to INR 32.90 in the next 6 months, it is bound to attract eyeballs. So let's take it from the top, the when, how, and why it happened.

The Story
In 1994, Two US-based techies Suresh Reddy and Vijay Kancharla teamed up to start a company that deals in online greeting cards. This might sound ridiculous, but remember these were the internet's early days. They got off to a good start and decided to make it full-time in 1996. But soon the dot com bubble bursts and their business needed something new.

They decided to rebrand themselves as Ybrant Technologies and forayed into internet advertising. It was a well-thought move since businesses will resort to the internet to reach their customer. But soon growth became stagnant and they needed something big, which led them to buy out Lycos Internet in 2010.

Now Lycos Internet is one of the oldest names in search engines but when google came in, Lycos lost its fame. It still has a brand name in many parts of the world because of which Ybrant once again rebranded and launched Lycos Life branded smart wristbands and rings in 2015 to track fitness and sleep.

Analysts tracking the company wasn't happy with the way it operated. Especially the claims made by Lycos around the Internet of things. The market thought that the company had no idea where do they want to go and with claims around IoT, which was a long shot for that time.

Naturally, the stock plummeted 90% over the next 5 years. And in case you are wondering from where the name 'Brightcom Group' came, yes, they rebranded again in 2018 since the claims revolving around Lycos weren't exactly good for PR.

The Present.
Currently, Brightcom Group is mainly in digital advertising. Truth be told the recent facts are what have turned the winds in the company's favor. It claims to serve Airtel, Qatar Airways, Vodafone, Samsung, and Unilever.

Sales ballooned 3x from INR 654 crores to INR 2,021 crores. All this happened in just 6 months between June and December 2021! The profits told a similar story as well and jumped from INR 106 crores to INR 371 crores.

When Retail investors heard about the new multi-bagger in town, they gave their money by truckloads.  From owning 12% of the company in July 2021 to owning 18.50% in March 2022.

The Problem.
Just when everything was going smooth, the company announced that it had received a notice from the market regulator SEBI. They commissioned a forensic audit for the period between FY15 and FY20. They wanted to investigate a few discrepancies in their financial statements and they said they had “reasonable grounds” to do so.

That's not even the whole issue. This notice was released to the public on 28th February, when actually the company had received it six months prior.

Now it is not really sure why they didn't disclose but Brightcom says that it had written to SEBI trying to explain why an audit was not necessary. And since there was a possibility that the audit could be called off, they decided against immediate disclosure. But as soon as the regulator responded in February saying that the audit would in fact go on, Brightcom disclosed it.

And then the company's promoter's holding dropped to 2.16% from 19.74% over 2 months time frame. When in fact what happened is that Suresh Reddy became a partner in 4 separate entities — Aradhana Commosales, Kalpana Commosales, Sarita Commosales, and Shalini Sales who in turn held significant ownership in Brightcom.

So if you look at the exchange filings on March 30, it shows that the promoters still held 18.47% of the shares, which is technically true.

The only logical explanation for this could be that promoters, by selling their shares at a higher price made big bucks and then bought it at a lower price elsewhere, which kept their overall ownership intact but they were obligated to disclose it, which they didn't.

Closing
Phew..!!! what a bumpy ride.
So after comprehending everything that we displayed regarding the Brightcom group, which side are you on - People who love it or People who love to hate it?

Do let us know your thoughts on the above topic in the comment section and let a healthy conversation begin.

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Disclaimer

The above information is to spread financial literacy. We are not SEBI registered financial advisors, kindly consult your financial advisor before making any investment decision.


Sources

Weekly Wrapup: The curious case of Brightcom Group (finshots.in)

Is Brightcom a shooting star? - The Morning Context\

Brightcom Group Ltd financial results and price chart - Screener

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