CCI approves CG Power acquisition by Tube Investments

Fair trade watchdog Competition Commission of India (CCI) has approved the proposed acquisition of shares in troubled CG Power and Industrial Solutions by Chennai-based Tube Investments India (TII), a subsidiary company of Rs 38,000-crore Murugappa Group.

TII and CG Power had entered into a securities subscription agreement on August 7, 2020 for acquiring a controlling stake in the latter through a combination of investment of around Rs 550 crore for primary subscription to the equity shares and investment of around Rs 150 crore for primary subscription of warrants.

Following this pact, the lenders of the CG Power had proposed to conduct the sale via the Swiss Challenge method — an open bid process favouring the highest offer.

With no new suitors coming forward under the Swiss Challenge method till the deadline set for making the counter bid, TII remained the sole bidder.

Later, sweetening the deal, the board of directors of TII had on September 3, 2020 approved an additional investment of up to Rs 100 crore into the troubled CG Power and Industrial Solutions, as part of the process to acquire a controlling stake in the company. The planned fresh fund infusion was in addition to Rs 700 crore for the equity shares and share warrants of CG Power, approved by TII’s board of directors on August 7.

As per the agreement, the warrants are convertible into equivalent number of equity shares at the option of TII within 18 months from the allotment and the securities are to be issued on a preferential issue basis. Out of the total investment for the warrants, close to 25% was required to be paid upfront at the time of subscription of the warrants. TII will acquire close to 50.62% of the issued and subscribed share capital of CG Power . After the conversion of the warrants into equity shares, the shareholding of TII will be close to 56.61%of the issued and subscribed share capital of CG Power.

CG Power, engaged in the industrial and power sectors, has been under financial stress and its lenders have initiated the resolution process of stressed assets in terms of prudential framework. Incorporated in 1937, it has 13 manufacturing facilities and employs over 3,000 people directly and 8,000 indirectly. The company had an income of Rs 3,169.48 crore in FY20. It hit the headlines when a board-instituted investigation revealed a slew of governance and financial lapses, including siphoning off money last year.

The scam-hit company then sacked its founder Gautam Thapar as chairman and set up a new board to fix the issues. The business of CG Power had been affected due to a severe crunch in working capital coupled with the debt burden to a slew of lenders to the tune of Rs 3,000 crore.