Brightcom shares hit lower circuit, again. What's next for this Shankar Sharma stock after 88% drop in a year?

Shares of Brightcom Group hit lower circuit for the straight 12th session in a row as the stock hit its new multiyear lows at Rs 10.26 on Wednesday. The Shankar Sharma-owned stock is on the verge of being a 'penny stock' for investors. However, it already has trapped many at higher levels.

There is no theoretical definition for penny stocks. However, stocks in single-digit prices or below Rs 10 are bracketed in this club. Brightcom Group, with a market capitalisation of little more than Rs 2,000 crore, is about to fall in the same category.

Low promoter holding, high debt, constant loss and muted financials are some typical characteristics of penny stocks. Investors could get trapped in the low-hanging fruits as they can degrade the quality of investments.

Shares of Brightcom Group (BCG) have been hitting lower circuits since April 10, 2023. The stock closed at Rs 18.59 on BSE on Thursday, April 6, 2023. The stock has been in the sub-Rs 10 range for the first time after June 2021, just before its exponential rise, which turned into a multibagger.

The scrip was locked in the seller's circuit of 5 per cent on Wednesday at Rs 10.26 on Wednesday, marking another session of selling pressure. Shares of Brightcom have dropped more than 88 per cent from its 52-week high at Rs 87 on April 26, 2022. The stock has cracked 65 per cent on the year-to-date (YTD) basis in 2023 so far.

Shares of Brightcom Group have been under pressure since markets regulator SEBI has issued a show cause notice to the ad-tech firm. It also flagged concerns and made observations about the irregular and incorrect filing of shareholding pattern of the company. SEBI said that the figures were not rightly reported which violated the norms.

The market watchdog made certain key observations, Brightcom said, which were on the impairment charges in its balance sheet for FY20 amounting to Rs 868.30 crore, shareholding pattern, compliance and reporting, among others. The company, in its response, said legal advice is sought with respect to the overall matter.

The counter was once considered a multibagger. It has surged about 3,000 per cent to Rs 118 level in December 2021 from a price of less than Rs 4 in May same year. Despite this fall, the stock still holds its multibagger status as it has delivered a return of 365 per cent in the last five years.

Even after this steep selloff, market analysts see more pain in the stock. They believe that the stock is headed for another fall of 50-70 per cent from current prices and suggest investors to keep off such falling knives.

Also Watch: High dividend-paying stocks to buy in FY24: Vedanta, IOC, and more

Brightcom share prices may remain under selling pressure to touch the levels of Rs 5-2 in the near term, said Ravi Singh, Vice President and Head of Research at Share India. "Investors are advised to exit their holdings immediately as the outlook of the stock is very uncertain and gloomy," he said.

Brightcom Group is backed by seasoned Dalal Street investor Shankar Sharma who owned 2,50,00,000 equity shares, or a 1.24 per cent stake, in the company. His stake in Brightcom Group is currently worth Rs 25.65 crore.

BCG on its quarterly charts, gave a consolidation breakout of Rs 5 levels in the June 2021 quarter & witnessed a massive move closer to 25 times in a short time span of three quarters. However, the stock soon fizzled out & saw a steep fall in the last back-to-back six quarters, said Sujit Deodhar, Head Technical Analyst at Wellworth Share & Stock Broking.

Image: Chart-BCG

"It seems the stock is likely to test the support levels of 5 as the overall structure looks weak. Technical indicator Stochastic is deeply oversold, so once the stock approaches the support zone & stabilizes, one can then look for opportunities but for now one should avoid a falling knife," he suggested.

Also read: Gujarat Industrial Power, GSFC, GMDC, GNFC: 7 Gujarat PSU shares rally up to 17% today. Here's why

Also read: AU SFB shares drop 3% post Q4 results as risk-reward looks unattractive; here're stock price targets