CG Power to sell non-core assets, raise fresh equity

Mumbai: The board of Gautam Thapar-promoted CG Power and Industrial Solutions Ltd is considering selling non-core assets and exploring various fundraising avenues to deleverage the company and optimize its operations, the company said in a filing to stock exchanges on Tuesday.

CG Power’s stock crashed 20%, the maximum permissible daily limit for the stock, on 20 August after its board disclosed that it has found “suspect” transactions that have led to significant understatement of the company’s liabilities and advances to related and unrelated parties.

CG Power’s stock has crashed 80% since January to ₹9.05 apiece on Tuesday.

The company is now controlled by several lenders, who invoked the pledged shareholding of promoters earlier this year.

As on 30 June, Thapar’s Avantha Group had a negligible stake in the company, while private sector lender Yes Bank held a 12.79% stake. Other major shareholders include HDFC Mutual Fund, Aditya Birla Sun Life Asset Management, Franklin Templeton and Life Insurance Corp. of India.

In an investor presentation published on Tuesday, the board said it is evaluating divestments of non-core assets, including the sale of the Kanjurmarg land and CG House, where its headquarter is located. The board is also considering other fundraising avenues, including an equity raise for bridging cash flow gaps and meeting working capital requirements to avoid business disruption, it said.

It is also reviewing its international operations which span Europe and South-East Asia (SEA).

“Belgium: Focus existing high margin, fast growing product segments like systems and services business, transformers for solar sector. Hungary: Evaluate increase in penetration in the market by leveraging the existing unutilized capacity and entry barriers. Indonesia: Consider expansion to new SEA markets such as Vietnam and Philippines and increase revenue share from systems and services business,” the company said.

The board also plans to work on improving the company’s operating metrics and plans to inject liquidity into the businesses to achieve full utilization of its manufacturing capacity. It will also focus on bringing down overall direct and overhead costs.

The company has also made changes to its board with Narayan Seshadri appointed as an independent director and erstwhile independent director Sudhir Mathur now redesignated as a whole-time executive director.

Following the discovery of “suspect” transactions, the FY18 consolidated liability of the company has increased from ₹6,405 crore to ₹7,976 crore, CG Power said.

FY18 consolidated receivables balance from various subsidiaries, promoter affiliate companies, and connected parties has increased from ₹131 crore to ₹2,657 crore after the impact of the identified transactions, the company said.

“A detailed review will be undertaken to assess the recoverability from related parties and the resultant net worth impact. In parallel, a detailed deleveraging plan has been drawn up to avoid any disruption in the business,” it added.