New Delhi: Investors and lenders of power equipment maker CG Power & Industrial Solutions Ltd want tycoon Gautam Thapar to be removed as chairman of the company after an investigation unearthed a multi-crore financial scam in the firm, sources privy to the development said.
The company had in a regulatory filing on August 20 stated that an investigation instituted by its board had found major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors." Also, some liabilities and advances to related and unrelated parties had been understated.
While the board had on May 10 sent CEO and Managing Director K N Neelkant on leave pending an investigation into some "suspect, unauthorised and undisclosed" transaction, Thapar has continued as the company Chairman.
The sources said some investors, at whose behest the probe was launched, now want Thapar and Neelkant to be removed from their posts to enable a thorough cleanup of the company affairs.
An email sent to Thapar seeking his comments on the scam and move by investors remained unanswered.
While the regulatory filing had not named anyone involved in the scam, the sources said the investigation had found strong links to the present management.
Though the company with 8,000-plus employees and manufacturing units at 21 locations worldwide has an excellent track record and a strong order book, the alleged irregularities had led to it becoming over-leveraged, investors and lenders felt.
The sources also said the company board is authorised to remove the chairman and ones this happens in coming weeks, one of the independent directors may be named as non-executive chairman.
Gautam Thapar has only 8,574 shares out of 62.6 crore shares of the company. This shareholding does not provide him with a board position, they said, adding Thapar would, however, continue on the board as only shareholders have the right to remove a director.
Though a founder promoter of CG Power, he lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money.
In the regulatory filing, CG Power had stated that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.
It had stated that the company's current and past employees, including unnamed non-executive directors and certain Key Managerial Personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.
The funds so raised were routed out of the company. This, the company said, had been going on for two years now.
Advances to related and unrelated parties of the company and group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore, respectively as on March 31, 2018, and by ₹1,479.34 crore and ₹1,331.47 crore, respectively as on April 1, 2017, the filing had said.
According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.
Also, total liabilities of the company and group may have been potentially understated by ₹1,053.54 crore and ₹1,608.17 crore, respectively, as on March 31, 2018, and by ₹601.83 crore and ₹401.83 crore, respectively, as on April 1, 2017, it noted.
These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.
The company now plans to conduct a detailed forensic investigation to establish wrongdoing.Yes Bank Ltd owns 12.79% of CG Power after it had in May invoked shares pledged by Thapar's Avantha Holdings Ltd. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.
This story has been published from a wire agency feed without modifications to the text.