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Tube Investments to pick controlling stake in CG Power

Murugappa Group-owned Tube Investments is all set to acquire controlling interest in the CG Power and Industrial Solutions Limited under RBI’s Stressed Assets framework. 

In a regulatory filing, Tube Investments said, “The Board of Directors of the Company at the meeting held today approved the proposal for making a binding bid for acquiring controlling interest in M/s. CG Power and Industrial Solutions Limited (“CG Power”) undertaken in terms of the circular dated June 7, 2019 of the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019”

Gautam Thapar-promoted CG Power was enmeshed in financial fraud worth thousands of crores last August carried out by identified company personnel including certain non-executive directors.  In December, the Serious Fraud Investigation Office (SFIO) initiated a probe into 16 group entities including CG Power. The CG Power board said the irregularities uncovered included suspect transactions that led to understatement of the company’s liabilities and advances.

The Securities and Exchange Board of India, the Reserve Bank of India and the board have ordered three independent audits to understand the extent of fraud.

The board also removed promoter and chairman Thapar and has since been taking efforts to reduce debt, sell non-core assets and restart and optimise operations. 

“As a first step to the commencement of the bidding process, Tube Investments and CG Power entered into a Securities Subscription Agreement today (7th August 2020) for an investment of around Rs.705 crore in CG Power for acquiring a controlling stake in that company through a combination of (i) investment of Rs. 504 crore  for primary subscription to the equity shares, and (ii) investment of around Rs. 151 crore for primary subscription to warrants,” Tube Investments said in the filing. 

The Warrants referred will be convertible into equivalent number of equity shares at the option of Tube Investments within 18 months from the allotment. 

“The investment and issue and allotment of Equity Shares and Share Warrants on Preferential basis are subject to Tube Investments being declared as successful bidder under the Swiss Challenge Process under Stressed Asset Directions, approval of Competition Commission of India and satisfactory fulfillment of Conditions Precedents contained in the said Securities Subscription Agreement,” the company added. 

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