New Delhi, July 6 : The relaxation by SEBI in pricing methodology for listed companies having stressed assets has brightened the prospects of early resolution of CG Power.
SEBI has decided to relax the pricing methodology for preferential issues by listed companies having stressed assets and exempt allottees of preferential issues from open offer obligations in such cases.
CG Power, a large engineering company having its operations worldwide and having a consolidated turnover of more than Rs 6,200 crore and an EBIDITA of Rs 500 crore in 2018 and which is asset rich ran into financial problems amidst a controversy between erstwhile promoter Gautam Thapar and its lenders KKR and L&T Finance who had lent money against pledge of the promoter”s holding.
Gautam Thapar was removed on an allegation that funds were diverted in a convoluted manner to lenders of other group companies.
In view of the controversy, bankers refused to support requests for working capital. Due to shortage of working capital, the profitability was severally affected in spite of pending profitable orders.
Lead banker SBI has mandated SBI Capital Markets to carry out a resolution process and it is expected that invitations for EOI will be announced very soon.
Lenders have shown willingness to restructure the debt and monetise valuable non-core assets like Crompton House at Worli and valuable land at Kanjurmarg. As part of the restructuring exercise, CG Power sold its holding in CG Power Ireland.
It is learnt from reliable sources that many industrial groups like Sunil Mittal of Bharati Telecom, Muruggapa group, Aeon Capital and many PE funds are actively considering a buyout. Sunil Mittal through Bharati SBM Holding had shown interest and bought 8.30 per cent equity from the market between March 2019 and May, 2019.
There are complaints pending in SEBI against KKR for violation of the Takeover Code and SEBI is investigating the violation.
SEBI has stated this in its order dated March 11, 2020 that there has been a specific allegation against KKR, a private equity firm, which holds 8.10 per cent of the shares in the Company, through KKR India Financial Services Private Limited, with respect to market manipulation, insider trading and change in control of the company.
They also note that certain allegations have been made against Narayan Seshadri, an Independent Director on the board, with respect to his firm Tranzmute”s partnership with KKR. SEBI is independently looking into these complaints. In case the investigation finds any violation it can result in an open offer around at Rs 45.