The dimming of Brightcom

Shedding light on irregularities at the Brightcom Group

- Vishal Goyal and Shubham Dilawari

Here is an enticing opportunity for you. We found a company that grew its revenue and net profit by 26 and 28 per cent per annum, respectively, over FY18-23. At the same time, it maintained an average ROCE of about 25 per cent. But here's the kicker. The stock is available at a P/E of just four times!

Sounds too good to be true, doesn't it? That's because it is.

This is the story of the Brightcom Group. Long-term readers of Wealth Insight might remember that this company has made multiple appearances on our 'Big Moves' pages over the last two-three years. And with a good reason.

As you can see in the price chart, the share price went up 52 times between March 2020 and December 2021. However, its share price has plunged 80 per cent from its peak.

What really happened? Let's look!

A recent order issued by SEBI against the company (August 22, 2023) shines a spotlight on various irregularities. Moreover, we also highlight some glaring red flags that could have been spotted from a mile.

The case

During FY20 and FY21, the Brightcom Group had undertaken four rounds of preferential allotment (i.e., it raised capital by issuing shares or warrants to a select group of investors). In total, the company claimed to raise ₹868 crore.

SEBI received multiple complaints that these amounts were raised from (and shares were issued to) entities directly or indirectly connected with the company. Moreover, these amounts were further given out as loans to its own subsidiaries.

The smokescreen