Mumbai: A boardroom battle is brewing at CG Power and Industrials Ltd with businessman Gautam Thapar initiating efforts to wrest back control of the power equipment maker.
Thapar, who was ousted as the chairman of CG Power on 29 August, may exercise his right to buy back pledged shares of the company as per an internal agreement structured in 2017 between him and a section of CG Power’s lenders, including private equity fund KKR & Co. and L&T Finance, two people directly aware of the matter said, requesting anonymity.
Thapar, who is facing charges of financial impropriety and corporate governance lapses at CG Power, has approached the Securities and Exchange Board of India (Sebi) and ministry of corporate affairs in this regard, citing the clause to buy back shares of the company from CG Power’s lenders.
“While the pledge has been invoked by Vistra ITCL, the debenture trustee, (Thapar’s) Avantha Holdings will continue to have the right to require a re-transfer of the shares to itself upon repayment of the debt," said one of the two people cited above.
“In the event of any sale of shares by the debenture trustee, any amounts over and above the amount of the debt will be payable to Avantha," the person said.
“If invoked, the said clause in the bilateral structured credit deal signed between KKR and L&T Finance with Thapar’s Avantha Holdings could give Gautam Thapar around 10% stake in the company," said the second person.
“While KKR has bought the shares from the debenture trustee, L&T Finance is yet to do so," said the second person cited above.
“He (Thapar) is in talks with potential investors and lenders to raise the amount," the person said.
Thapar was removed from CG Power after the company told the stock exchanges on 20 August that it was in the midst of restating its earnings after discovering suspected fraudulent transactions.
Earlier this year, lenders invoked shares of CG Power’s promoter entities. The promoters did not own any stake in the company as on 30 June.
In May, Yes Bank invoked certain pledges and holds a 12.79% stake in CG Power. Other major shareholders include HDFC Mutual Fund, Aditya Birla Sunlife, Franklin Templeton and Life Insurance Corp. of India.
In March, private equity company KKR started proceedings to convert its loans into equity after the Thapar family defaulted on debt repayments.
According to a 15 March report by the Economic Times, KKR owned 10.8% in the firm post-conversion. The Thapar family held about 34.42% in CG Power till KKR’s conversion.
On 17 September, the markets regulator, Sebi, barred Thapar and three former officials of the company from the securities market, after a preliminary investigation found them guilty of various irregularities.
Sebi also asked BSE to appoint an independent auditor to conduct a forensic audit of the books of CG Power beginning 2015-16 and report in six months.
Subsequently on 1 October, the Securities Appellate Tribunal upheld Sebi’s order, but directed the CG Power board to supply documents sought by Thapar to prepare his legal defence.