TVS Group and a bunch of special situation investors, including AION Capital, India Resurgence Fund (a consortium of Bain Capital and Pirmal Group) and SSG Capital Management are in preliminary talks with CG Power and Industrial Solutions to put Rs 500 crore fresh equity into the company.
The company has mandated SBI Capital Markets and Arpwood Capital to run a formal process for fund infusion in the company. If successful, the transaction will also be followed by an additional infusion of working capital credit from the lenders and may help put the fraud-hit company back on its feet, multiple sources with knowledge of the matter said.
“We have started initial negotiations. There are some strategic buyers as well as financial investors, who have shown interest,” said one of the sources mentioned above.
CG Power, Aion Capital and India Resurgence Fund declined to comment. Mails sent to TVS and SSG remained unanswered till press time.
The board of CG Power and Industrial Solutions removed its founder chairman Gautam Thapar last August amid pressure from investors and lenders after a probe revealed financial and governance irregularities in the company.
Once part of Avantha Group, CG Power’s product portfolio ranges from transformers, switchgear, circuit breakers, network protection & control gear, project engineering, HT and LT motors, drives and power automation products. Established in 1937, CG Power also provides turnkey solutions in all these areas.
The firm had a debt of Rs 2,455.39 crore (fund-based, including short-term loans) and ₹1,380.00 crore (non-fund based) as on March 31, 2019. On Friday, the company’s chairman Ashish Guha told ET that the lenders consortium along with the company is working to infuse equity capital and work out a debt resolution plan.
The corporate affairs ministry’s Serious Fraud Investigation Office (SFIO) has initiated a probe into 16 entities of the Avantha Group, including CG Power, which finally resulted in the removal of its promoter Gautam Thapar from the company’s board.
The company is currently managed by an independent board, constituted by its investors including KKR, L&T Finance, and consortium of lenders led by State Bank of India, ICICI Bank, Yes Bank and Axis Bank.
Currently, Yes Bank holds 12.79% stake in the firm, KKR has 10.01%, L&T Finance Ltd holds 10% while billionaire Sunil Bharti Mittal-owned Bharti (SBM) Holdings has 8.3%. Life Insurance Corp has 2.25% as well, according to exchange filings as on December 31, 2019.
CG Power has reported a consolidated net loss of Rs 210 crore for the October-December quarter of 2019 from Rs 106 crore during the same period a year ago. Its total income declined to Rs 1,190.5 crore from Rs 2,084 crore during the period.
For TVS, the entry into industrial power will be an add-on vertical to its existing flagship automotive business. The deal, if successful, will mark TVS’ entry into industrial electrical equipments.
Financial investors such as AION, IRF and SSG have been very active in distressed situations in the country, with substantial exposure into many of the NCLT cases.
Shares in CG Power fell 4.96% to close at Rs 5.56 on the BSE on Monday. The stock had a touched a 52-week high of Rs 46.25 on March 22, 2019. The BSE Sensex lost 13.15% or 3,934.72 points on Monday.
Source: Economic Times