Tube Investments to pump in additional Rs 100 crore into CG Power for takeover

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.

Further sweetening the deal, the board of directors of Tube Investments of India (TII) has 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 proposed investment is 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, said a disclosure to the stock exchanges by the Chennai-based Murugappa Group company.

The additional investment of about Rs 100 crore will be in the form of cash consideration by way of investment through subscription to CG Power equity shares, said the company. TII said it had entered an amendment agreement to the securities subscription agreement of August 7 with CG Power, to provide the additional investment.
The investment, and issue and allotment of equity shares on a preferential basis are subject to approval from the shareholders of CG Power and the Competition Commission of India, said the company.

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. Lenders of the CG Power had proposed to conduct the sale via the Swiss Challenge method — an open bid process favouring the highest offer.

TII had offered to pick up a controlling stake in the asset-stressed CG Power and Industrial Solutions for a consideration of Rs 700 crore. CG Power, engaged in the industrial and power sectors, is under financial stress and its lenders have initiated the resolution process of stressed assets in terms of prudential framework.

As a first step towards the commencement of the bidding process, TII and CG Power entered a securities subscription agreement on August 7 for an investment of around Rs 700 crore in the latter to acquire a 51% stake through a combination of investment of around Rs 550 crore for primary subscription of the equity shares and around Rs 150 crore for primary subscription to warrants.

Mumbai-based CG Power, a public limited company, was 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.