Brightcom Group turns multibagger in just one month, soars 102%

Despite concerns around accounting practices, Brightcom Group stock has doubled investors' wealth in just one month, with the shares surging by a massive 102%.

In the last five days, the shares have gained nearly 21%. The stock was locked at the 5% upper circuit on Friday at Rs 20.55.

Following a Sebi show-cause notice over alleged fraud in the company's financial statements, the shares plunged to a 52-week low of Rs 9.35 in April.

Since then, the stock scripted a dramatic turnaround on the Street, brushing aside all concerns surrounding the company.

Based out of Hyderabad, Brightcom is in the business of ad-tech, new media and digital advertising, and has subsidiaries and operations in various geographies, including the US, Israel, Latin America, Western Europe and Asia Pacific regions.

The company is majority owned by public shareholders with a 81% stake, with ace investor Shankar Sharma being one of them. Promoters have a partly 18.47% stake in the company.

The limelight on the digital marketing solutions company is not new. Earlier, SEBI had ordered a forensic audit into the financial statements of Brightcom for the period between FY15 and FY20 after it received complaints of financial irregularities.

The regulator had found a number of deficiencies in the books of accounts and other information pertaining to the company’s foreign subsidiaries. The same mainly pertained to assets impaired in FY20 to the tune of Rs 868.30 crore.

On the basis of the investigations, SEBI found that the accounting policy followed by Brightcom Group led to overcapitalization of the intangible assets, which resulted in inflation of profits.

Further findings revealed that the scale of fraud is “indeed” large. The company and its directors allegedly attempted to camouflage accounting entries in excess of Rs 1,280 crore during FY19 and FY20 to give a distorted picture of the company’s financial position.