CG Power to monetize non-core assets, raise fresh equity
CG Power’s stock crashed 20%, the maximum permissible daily limit for the stock, after its board disclosed “suspect” transactions that led to significant understatement of the company’s liabilities and advances to related and unrelated parties.Updated: Aug 27, 2019 19:37 IST
The board of Gautam Thapar-promoted CG Power and Industrial Solutions Ltd on Tuesday said it was considering selling non-core assets and exploring various fund-raising avenues to deleverage the company and optimize its operations, the company said in a filing to stock exchanges.
CG Power’s stock crashed 20%, the maximum permissible daily limit for the stock, on 20 August, after its board disclosed “suspect” transactions that 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 had invoked the pledged shareholding of promoters earlier this year. As on 30 June, Thapar’s Avantha Group held a negligible stake in the company, while private sector lender Yes Bank had a 12.79% stake. Other major shareholders include HDFC Mutual Fund, Aditya Birla Sun Life, Franklin Templeton and Life Insurance Corp of India.
In an investor presentation published on Tuesday, the board said it was evaluating divestments of non-core assets, including but not limited to the sale of Kanjurmarg land and CG House, where its headquarter was located.
The board was also considering other fund-raising avenues, including a potential equity raise for bridging cash flow gaps as well as working capital requirement in order to avoid any business disruption, it added.
The company is also reviewing its international operations, spanning across Europe and South East Asia.
“Belgium: Focus existing high margin, fast growing product segments such as systems and services business, transformers for the 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 inject liquidity into the businesses to enable achievement of 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 independent director and erstwhile independent director Sudhir Mathur redesignated as a whole time executive director.
CG Power mentioned that following discovery of “suspect” transactions the FY18 consolidated liability of the company increased from Rs6,405 crore to Rs7,976 crore.
Total FY18 consolidated receivables balance from various subsidiaries, promoter affiliate companies and connected parties increased from Rs131 crore to Rs2,657 crore post 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,” the company said.