Brightcom Group shares continue to climb after turning multibagger, up 156% from one-year low; here's why

Shares of Brightcom Group Ltd on Friday extended their winning run for the fourth straight session. The stock jumped 5 per cent to close at the upper circuit of Rs 23.77 over its previous close of Rs 22.64. The scrip reclaimed the multibagger tag in the last trading session of May this year. At today's closing price, Brightcom has rebounded 156.42 per cent from its one-year low of Rs 9.27, a level seen on April 28, 2023, when it turned into a penny stock. In June, the counter has settled higher in six out of seven sessions so far. That said, Brightcom has gained 82.57 per cent in the past one month. Yet, it has declined 56.66 per cent in a year and 18.46 per cent on a year-to-date (YTD) basis.

This month's fresh upward move in the share price came after the company issued a lengthy clarification on its accounting procedures, reporting, corporate governance, and other issues. For the unversed, Brightcom is under the scanner of market regulator SEBI over concerns of irregular and incorrect filing of shareholding pattern.

In an exchange filing, the company said, "The books of accounts of significant subsidiaries have been audited by reputable audit firms like EY. The audited financial statements of the subsidiaries are now available on our website."

On asset impairment, Brightcom said, "The total impairment impact of Rs 868.30 crore was recognised across 10 subsidiaries as per the local laws in their respective countries/jurisdictions. It was not expected to impact the parent company's profit and loss account directly. Our accounting treatment aligns with all local laws and Ind AS 36, and the impairment losses are recognized as per the accounting standards."

The company also threw some light on the issue of payment defaults to Axis Bank and tax dues despite being cash-rich. "The loan recall issue stemmed from the third-party collateral owners, who withdrew their support, leading us to close the loans. We closed these loans by March 2021. We are proud to share that we have been a debt-free company since then. Our priority has always been to continue investing and maintain momentum. This approach has allowed us to seize opportunities in the market, resulting in a substantial increase of approximately 76 per cent in revenues for the FY ending March 31, 2022, amounting to Rs 5,019 crore," Brightcom stated.

We are actively refining our reporting to ensure greater clarity and granularity to the accounting principles, it further said.

Aamar Deo Singh, Head Advisory at Angel One, said, "Brightcom Group has witnessed a roller-coaster ride over the past year, with the stock at a point of time, losing almost 90 per cent of its value, to currently trade around Rs 23 levels, which is a 100 per cent plus pullback from its lows in April 2023. Certain concerns with regard to financial reporting and accounting led to this massive decline in share price. But after the company clarified that it was taking remedial measures to better its financial disclosures, there has been a respite. Investors are well advised to tread cautiously, given the overall performance of the stock in recent times."

Bourses BSE and NSE have put the securities of Brightcom Group under the long-term ASM (Additional Surveillance Measure) framework. The parameters for shortlisting securities under ASM include high-low variation, client concentration, close-to-close price variation, average daily volume in a month and price-to-earnings (P/E) ratio. Exchanges put stocks in short-term or long-term ASM frameworks to caution investors about high volatility in share prices.

The scrip, which is backed by seasoned investor Shankar Sharma, has zoomed 1,065.20 per cent in the past five years. As of March 2023, Sharma owns a 1.24 per cent stake in the company.

On the technical front, support on the counter could be seen at Rs 20.50.

Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher, said, "The stock pattern looks erratic. It is mostly one of the operator-driven type stock. The 200-daily moving average is at around Rs 27.80 levels while the 50-EMA (Exponential Moving Average) level is at Rs 15.30 which one can note for important levels."

Ravi Singh, Vice-President and Head of Research at Share India, said, "The company delivered strong Q4 (March 2023 quarter) results. EBITDA margins also increased. The stock can hit the target of Rs 25."

AR Ramachandran from Tips2trades said, "Brightcom Group stock price is bullish but also overbought and has resistance now at Rs 25.50 on the daily charts. Investors should book profits at current levels as a daily close below the support of Rs 20.50 could lead to a target of Rs 14.5 in the near term."

Meanwhile, Indian equity benchmarks today extended their fall for the second straight session. The domestic indices were dragged by consumer, technology, metal, state-owned lenders, automobile and energy stocks.

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