CG Power and Industrial Solutions has posted Q2 FY21 numbers, wherein major cleaning of books has happened, barring adjustments to be carried out post statutory and judicial orders, viz. from SFIO, Income tax, NCLT, Courts, Land Sale, etc.
Tube Investments (Tube), the new Promoter, having acquired the company vide Securities Subscription Agreement (SSA) the preferential allotment is subject to the fulfillment of all the conditions precedent set out under the SSA, including Tube receiving approval of the Competition Commission of India. In this regard, Tube received the approval of Competition Commission of India, vide their letter dated October 13, 2020.
Hence, CG Power will issue 71.12 cr. shares and 17.52 cr. warrants to Tube, for a total consideration of Rs. 800 cr., maybe in the next couple of weeks. Tube will eventually be having a stake of 58.58% stake, post warrant conversion. Present issued shares of CG Power, being 62.68 cr. shares of Rs. 2 each, will rise to 133.80 cr. shares, and 151.32 cr. shares post warrant conversion. Once that happens, CG Power will make an upfront payment of Rs. 650 cr. to the lenders and shall issue NCD of Rs. 200 cr. with tenure of 5 years.
Change in fortunes will start from here for the company. Rs. 2,934 cr., being due to lenders, has already been shown as Other Financial Liabilities, in Current Liabilities, in Balance Sheet as at 30-9-2020. This will get largely discharged by Rs. 850 cr., as mentioned, thus giving an exceptional gain of about Rs. 2,118 cr., on account of write off. This expectional gain is subject to CG House sale at Prabhadevi, Mumbai. It may be also be seen that Working Capital dues availed by CG is shown separately at Rs. 863 cr. in Balance Sheet, which is not termed as LT Debt.
CG Power consolidated negative net worth of Rs. 307 cr., as at 30-9-2020 (not referring standalone net worth, which is already positive at Rs. 157 cr.) will turn into positive net worth of about Rs. 2,611 cr, on an equity base of Rs. 302.64 cr. Claim of company, shown as Loans to Others, of Rs. 2,968 cr, (as given in notes of Rs. 1,416 cr and Rs. 1,709 cr, claims to be recovered from the old promoter) are extra cushion. Even Industrial System segment has shown good traction, with EBIT of Rs. 66 cr on an income of Rs. 480 cr.
Hence, CG Power now having come on the launching pad, ready for or take off, under the new Promoter Tube. Also, no need to analyse the H1FY21 Consolidated Profit & Loss Account, as Balance Sheet change ahead, is more important to focus and look into.