Murugappa Group led Tube Investments of India, Limited will take up the control of CG Power and Industrial Solutions. Murugappa Group agreed to invest Rs.700 crore in the fraud hit company, according to a regulatory file. CG Power was established in 1937, they make transformers, switchgear, circuit, breakers, network protection and control gear, and power automation products.
The total income of CG Power’s declined from Rs.5,355.6 crore in the year 2019 to Rs.3,169 crore in the year through March 2020. Tube Investments’ turnover fell to Rs. 4,053 crore in 2019 which is due to slowdown in the auto industry.
Over 64.25 billion equity shares of the face value of Rs.2 each at a price of Rs.8.56/- per equity share aggregating to Rs.550 crore will be under the control of Tube Investments of India Limited and the securities subscription agreement(SSA) an agreement that gives control to Murugappa Company has been reached by the two companies. Thus giving the Tube Investments control over 50.62% of CG Power after allotment of equity shares.
The Tube Investments will also get 17.52 billion warrants, were each warrant carries a right exercisable by the warrant holder. The holder can subscribe to one equity share per warrant within 18 months from the date of allotment. The equity shares aggregating up to Rs.150 crore upon exercising the warrants. Upon conversion of the warrants, the stake of Tube Investments in CG will grow to 56.61%.
This control over CG power gives Tube Investments so many rights in hand. They have the right to appoint a majority of the directors on board, first right to subscription of shares in case of issuance of shares and right to restrict any change in the capital structure.
It was in August 2019 the big financial fraud at CG Power of Rs.3000 crore was detected. The fraud was done by employees of the company that led to the firing of chairman Gautam Thapar, for misappropriation of funds. From the investigations, it was found that the company’s assets were pledged by some employees without permission, understated advances by Rs.4,796 crore and liabilities by Rs.2,661 crore.
