Why Brightcom Group Share Price is Falling

Penny stocks were among the most affected in the recent stock market meltdown.

While some of them have clawed back losses, many are still struggling to stage a rebound.

One such penny stock that has fallen extensively in 2024 is Brightcom Group or BCG.

Share price of Brightcom Group is down around 25% in 2024 so far.

Let's find out why this IT penny stock is struggling to stage a rebound and whether the situation will turn worse before it gets better.

Why BCG Share Price is Falling

#1 SEBI's Confirmatory Order

The fall in BCG shares comes after the Indian market regulator issued confirmatory orders against Brightcom Group, restraining its promoter and MD Suresh Kumar Reddy from holding any directorial positions until further notice.

That apart, the company is also barred from dealing with the securities market until further orders.

In August 2023, the regulator had passed a second interim order against Reddy, and other individuals for their alleged involvement in round-tripping of the company's funds to falsely portray receipt of proceeds through preferential allotment of shares.

To put things into context, this is going back since October 2022 when the regulator initially received complaints pertaining to the funds raised by Brightcom Group through a preferential issue.

The regulator found mismatches in the entries in the statements provided by the banks and those given by the company.

#2 Recent Resignations

Adding to the negative sentiment, the company last week saw one of its directors resign.

While the director mentioned reasons such as prior commitments and unavoidable circumstances, big rejigs at managerial positions are not taken very lightly by investors.

Before this on 5 March 2024, Brightcom Group's company secretary Rajesh Vankadara had also resigned.

What Next?

Earlier this month, to ensure full transparency, the company released an update for investor concerns as its new statutory auditors are still getting up to speed.

For the September 2023 quarter, the company posted a revenue of Rs 18.1 bn, up 7.9% YoY while net profit climbed to Rs 3.5 bn, a growth of 9.8% year-over-year.

For the first half of FY24, the company has so far managed to grow its profit by 12.7% to Rs 6.7 bn.

In recent years, the company has posted good growth in topline and bottomline.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	25,802	26,923	28,558	50,196	73,970
Growth (%)	7%	4%	6%	76%	47%
Operating Profit	7,568	8,030	8,862	15,047	21,730
OPM (%)	29%	30%	31%	30%	29%
Net Profit	1,786	-1,773	4,830	9,122	13,710
Net Margin (%)	7%	-7%	17%	18%	19%
ROE (%)	15.2	15.1	15.9	21.3	19.6
ROCE (%)	20.8	21	21.6	29.4	27.2
Dividend (Rs)	0	0.1	0.1	0.3	0
Debt to Equity (x)	0	0	0	0	0

Data Source: Ace Equity

One look at the above table and you'll see that the company is doing great financials wise, but the recent headwinds have taken a toll on its share price.

Due to uncertainty of events regarding its promoter, shareholders have lost faith it seems, irrespective of the improvement in its revenue and profit.

The current management of the company is under pressure, and they've already delayed putting out the latest quarterly results.

It remains to be seen how the situation unfolds in the coming days.

Stay tuned to this space for more!

How Brightcom Group Share Price has Performed Recently

In the past 5 trading sessions, Brightcom Group shares have fallen around 4%.

Thanks to today's 6% rally in line with the overall market sentiment, the company managed to close the week with minimal loss.

In 2024 so far though, shares of Brightcom Group are down 25%.

Brightcom Group has a 52-week high of Rs 36.8 touched on 22 June 2023 and a 52-week low of Rs 9.3 touched on 28 April 2024.

In the past one year, shares of the company have fallen 13%.

Here's a table comparing Brightcom Group with its peers -

Comparative Analysis

Company	Brightcom Group	Cyient	OFSS	RPSG Ventures	Sonata Software
ROE (%)	19.6	15.8	25.4	-2.4	37.9
ROCE (%)	27.2	19.9	35.5	14.2	42.1
Latest EPS (Rs)	7.1	59.2	246.7	-19.9	11.1
TTM PE (x)	1.9	32.8	35.7	-	66.8
TTM Price to book (x)	0.4	5.1	10.5	0.7	14.8
Dividend yield (%)	0.7	1.3	2.6	0	2.1
Industry PE	30.3
Industry PB	7.9

Data Source: Ace Equity

About Brightcom Group

Brightcom Group (Formerly known as Lycos Internet) is a leading global provider of comprehensive online or digital marketing services to direct marketers, brand advertisers, and marketing agencies.

The company offers digital marketing solutions to businesses, agencies, and online publishers worldwide.

It has a global presence with offices in over 24 countries.

The company is also a global information technology implementation and outsourcing services provider with an exceptional track record of providing high quality on-budget, and on-time solutions to demanding clients.

For more details, see the Brightcom Group company fact sheet and quarterly results.

For a sector overview, read our IT sector report.

You can also compare Brightcom with its peers.

Brightcom vs Tech Mahindra

Brightcom vs Happiest Minds Technologies

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...