Murugappa Group takes over CG Power
Chennai-based Murugappa Group on Thursday took over scam-hit CG Power and Industrial Solutions, infusing Rs 700 crore into the company and appointing directors on its board. CG Power in a stock exchange filing said the company board at its meeting on Thursday issued 64.25 crore shares of Rs 2 at a price of Rs 8.56 (including premium) per share aggregating to Rs 550 crore to Tube Investments of India Ltd (TII).
Also, TII, a Murugappa Group firm, have been issued 1.52 crore warrants, each carrying a right exercisable within 18 months, for aggregate consideration of Rs 150 crore.
"Post the allotment of securities, TII has acquired a controlling interest in the company and holds 50.62 per cent of the paid-up equity share capital of the company," it said.
TII paid Rs 5.87 crore towards subscription of equity shares and 25 per cent upfront consideration for warrants.
TII will eventually hold a 56.61 per cent stake once all warrants are converted into equity.
In a separate filing, TII said, "with effect from today i.e. November 26, 2020, the company, viz. Tube Investments of India Limited has been classified as the 'promoter' of the CG Power and the board of directors of CG Power has been reconstituted."
CG Power said its entire board including non-executive chairman Ashish Guha and whole-time executive director Sudhir Mathur have resigned.
Murugappa Group has appointed six members on the CG Power board, with Vellayan Subbiah, who currently is the Managing Director of TII, as its chairman. Natarajan Srinivasan, a director on Murugappa corporate board, has also been appointed as the new Managing Director.
M A M Arunachalam, a fourth general member of the Murugappa family, will also be on the board of CG Power.
Three independent directors - Shailendra Narain Roy, Sasikala Varadachari and P S Jayakumar- have also been appointed on the company board, it said.
Others who resigned from the CG Power board included Jitender Balakrishnan, Narayan K Seshadri, Ramni Nirula, Pradeep Mathur, Aditi Raja and Rathin Roy.
The takeover follows lenders to CG Power agreeing to a one-time loan restructuring.
CG Power had total debt of Rs 2,161 crore, out of which a consortium of 14 banks have taken a haircut of Rs 1,100 crore and restructured the remaining.
Last week, CG Power and TII had stated that lenders have accepted one-time settlement and restructuring of debt.
Under the settlement, lenders will be paid an upfront amount of Rs 650 crore. Also, Rs 200 crore of debt would be converted into non-convertible debentures having a five-year tenure.
Besides, lenders would be paid "out of the proceeds from the sale of CG House property on best efforts and as is where is basis, within a period of five years," the two firms had said in stock exchange filings.
The sale of the property would wipe another Rs 150 crore of debt from CG Power books. This is irrespective of the value the sale of the property realises.
"If the property sells for Rs 100 crore, all of it goes to the lenders but Rs 150 crore would be wiped out from CG Power books. Similarly, even if the property goes for Rs 200 crore, only Rs 150 crore goes off CG Power books," a source familiar with the pact said.
TII had recently received the Competition Commission of India's (CCI) nod to acquire CG Power. In five years CG Power will be debt-free.
In August last year, CG Power said its board discovered "significant accounting irregularities", including suspect transactions that have led to an understatement of the company's liabilities and advances to related and unrelated parties by hundreds of crores of rupees.
It had said that advances to related and unrelated parties and the Avantha Group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively. Following these allegations, its chairman Gautam Thapar was sacked.
Parallelly, TII in a separate filing said, its board at its meeting on Thursday approved the issue of equity shares on preferential allotment/private placement basis to Azim Premji Trust and SBI Mutual Funds for an aggregate of Rs 350 crore.
It did not say if the share issue had got anything to do with CG Power acquisition.
Azim Premji Trust would be issued 27.33 lakh shares for Rs 199.99 crore, while SBI Mutual Fund would be issued over 20 lakh shares for Rs 149.99 crore.
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