The Competition Commission of India (CCI) yesterday approved the proposed acquisition of 58.60% stake in CG Power and Industrial Solutions by Tube Investments of India (TIIL), a part of the Murugappa group.
TIIL, in August had put forth a proposal to invest Rs.700 crore in CG power for the over 50% stake, following a Swiss challenge bidding process, which was initiated by the lenders to CG Power.
CG Power is currently in financial dire straits and it needs infusion of funds desperately to continue operations.
In our ‘Little Gems’ column, we had said, “CG Power will see its fortunes changing in the next 18 months, with company now a Murugappa Group, in which Tube Investment will hold 58.60% stake. Paid up equity of CG will rise from Rs. 125.20 cr to Rs. 302.50 cr. after conversion of 17.52 cr Warrants in 17.52 cr. shares, by March 2021. As at 30-9-2020, its paid up equity will be at Rs.267.50 crore, with 133.72 crore shares of Rs. 2 each, with Murugappa having stake of 53.20%.
We further said, “lenders of CG have settled Debt of close to Rs. 2,200 crore to Rs. 850 crore, of which, Rs. 650 cr to be paid in cash in the next 90 days, while issue of NCD of Rs. 200 cr, with tenure of 5 years to be issued. CG House, at Worli Mumbai, will be sold in the next 5 years, while proceeds will go to lenders. This will not have any fiscal burden on the new Promoter. Murugappa Group paid Rs. 650 cr. to subscribe 71.12 crore shares, while this amount will be used to repay lenders. Murugappa Group has also paid Rs. 37.50 crore, being 25% , to subscribe 17.52 crore warrant, which will be converted in 17.52 crore shares at Rs. 8.56 per share in the next 18 months. This money of Rs. 150 crores will be used for working capital margin. Infact, CG had an interest liability of Rs. 300 crores in FY 20, which can get reduced to Rs. 50 crores, just on working capital finance to be availed.
Tube Investment had indicated then that CG Power will post an income of Rs. 5,000 crores and PBT of Rs. 500 crores, in the next 4-5 years, from Domestic Business. CG Power posted an income of Rs.5,600 crores from Domestic Business in FY 2018-19.
The stock price, which had closed yesterday at Rs.23.50, opened over 4% higher at Rs.24.45, just a tad away from its 5% UC of the day at Rs.24.65. The overall mood of the market has impacted the price.