Gautam Thapar-led CG Power rocked by suspect transactions

By: |
Updated: August 21, 2019 7:11:49 AM

The filing to the exchanges saw CGPIS shares slumping to a six month low at Rs 14.75 on Tuesday hitting the lower circuit Yes Bank, which holds 12.77% in CG Power, fell 7.11% at Rs 71.25 a piece following the development.

Gautam Thapar, CG Power, transaction, industry news, Vistra ITCL India, HDFC Trustee Company, Aditya Birla Sunlife Trustee Pvt ltd, Bharti (SBM) Holding Pvt Ltd, Franklin Templeton Mutual Fund, Life Insurance Corporation, Reliance Capital Trustee Co ltd, IDFC Sterling Value Fund Gautam Thapar

Gautam Thapar-led CG Power and Industrial Solutions on Tuesday made a series of startling revelations about some unauthorised transactions carried out by certain employees of the company, which led to potential understatement of not only the firm’s liabilities, but also advances to related and unrelated parties of the company and the group. The company said that this was going on for over two years now.

The disclosures were made to the exchanges on Tuesday morning after the company’s board had 13 hours of discussions beginning Monday evening with the company’s risk and audit committee. The board came to the conclusion about the fraudulent transactions at 4 am on Tuesday morning.

The filing to the exchanges saw CGPIS shares slumping to a six month low at Rs 14.75 on Tuesday hitting the lower circuit Yes Bank, which holds 12.77% in CG Power, fell 7.11% at Rs 71.25 a piece following the development.

CG Power informed the stock exchanges that the liabilities and advances to related and unrelated parties have been understated for financial years 2017 and 2018. While assets were provided as collateral without any authority and the company was made a co-borrower/guarantor to enable third parties to secure loan, the money so obtained was immediately routed out of the company.

“These were carried out by identified company personnel, both current and past, including certain non-executive directors. These transactions appear to be undertaken in a seemingly fraudulent manner and, hence warrant further detailed investigation,” the company said without naming any official.

The company noted its managing director KN Neelkant stayed away from day-to-day management during the period of investigation. While Sudhir Mathur, who was earlier an independent director of the company and a member of operations committee, was re-designated as a whole-time executive director of the company with effect from May 10 to be more involved in the day-to-day management of the company. The chief financial officer, VR Venkatesh, who resigned on March 8 this year, was asked to continue till the finalisation of financial results for the current financial year.

Read| Direct Tax Code: Corporate tax cuts can cost Rs 1.2 lakh core; sops cost as much 

As a of March 31, 2018, total liabilities of the company and the group were potentially understated by around Rs 1,053.54 crore and Rs 1,608.17 crore, respectively. For April 1, 2017 it was understated by Rs 601.83 crore and Rs 401.83 crore respectively, the company said. The company’s statement to exchanges stated, “The total liabilities of the company and the group may have been potentially understated by approximately Rs 1053.54 crore and Rs 1,608.17 crore, respectively, as at March 31, 2018; and by Rs 601.83 crore and Rs 401.83 crore respectively as at April1, 2017”.

The advances to both related and unrelated parties of the company and the group were also understated by Rs 1,990.36 crore and Rs 2,806.63 crore respectively for FY18; and by Rs 1,479.34 crore and Rs 1,331.47 crore respectively for FY17. “Recoverability of this amount along with any interest from related and unrelated parties will be evaluated with appropriate legal inputs, after which necessary actions will be instituted,” the company said.

Some of the related party and unrelated party transactions at the group level happened with Avantha Holdings, Avantha International Assets BV, Avantha Realty, Avantha Power and Infrastructure, Ballarpur Industries, and Blue Garden Estate, among others.

Read| Banks now have greater flexibility to resolve stressed assets, says RBI deputy governor NS Vishwanathan 

According to the management compiled financial information for FY19 and restated information for FY18 submitted by the company, CG Power reported a loss of Rs 486 crore in FY19 against a restated loss of Rs 728 crore in FY18 at the consolidated level. As per earlier disclosure, in FY18, the company reported a full year loss of Rs 1,165 crore. However, the numbers are likely to change going ahead based on further investigations.

As of March 31, 2018 the company’s net debt was Rs 1,996 crore, while cash and cash equivalent position was Rs 692.45 crore. As per Capitaline, majority stakeholders in the company are Vistra ITCL India, HDFC Trustee Company, Aditya Birla Sunlife Trustee Pvt ltd, Bharti (SBM) Holding Pvt Ltd, Franklin Templeton Mutual Fund, Life Insurance Corporation, Reliance Capital Trustee Co ltd, IDFC Sterling Value Fund among others holding between 24%-1% in CG Power and Industrial Solutions.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.