CG Power shares slump after ‘suspect’ transactions found

Mumbai: Shares of the Gautam Thapar-promoted CG Power and Industrial Solutions Ltd crashed almost 20% on Tuesday after its board cited major governance and financial lapses.

The stock is down 67.6% to Rs14.75 per share since the start of the year.

On Tuesday, the company's board said in an exchange filing that pursuant to an investigation conducted by the board it found that the company's and the group's liabilities were potentially understated by hundreds of crores of rupees. The board also said that advances to related and unrelated parties, too, were potentially understated significantly.

"The total liabilities of the Company and the Group may have been potentially understated by approximately ₹1,053.54 crore and ₹1,608.17 crore, respectively, as at 31 March 2018," the exchange filing said.

The company added that advances to related and unrelated parties of the company and the group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore, respectively, as on March 31, 2018.

"Recoverability of such amounts along with any interest and other related amounts from related and other unrelated parties will be evaluated with appropriate legal inputs, after which necessary actions will be instituted," the company said.

The board also noted that certain assets of the company were purportedly provided as collateral without due authority and that the company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorisation.

"These (transactions) were purportedly carried out by identified company personnel (both current and past) including certain non-executive directors, certain KMPs and other identified employees in breach of the Rules of Procedure of the Company. These transactions appear to have been carried out by various means including inappropriate netting off, using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliate companies and other connected parties," the board said.

Lenders earlier this year invoked shares of CG Power's promoter entities. On 30 June, the promoters held zero stake in the company, as their entire pledged holding was invoked by various lenders.

In May, private sector lender Yes Bank invoked certain pledges and holds a 12.79% stake in CG Power as of 30 June. Other major shareholders include HDFC Mutual Fund, Aditya Birla Sunlife, Franklin Templeton and Life Insurance Corp of India.

For FY19, CG Power reported a revenue of ₹5,355 crore, as against a revenue of ₹5,106 crore in the previous financial year. The company reported a loss of ₹1,403 crore in FY19, as compared to a profit of ₹19.24 crore in the previous financial year.