CG Power and Industrial Solutions, an engineering firm that is part of the Murugappa Group, has proposed to acquire a 55 per cent stake in G G Tronics Pvt Ltd, a Bengaluru-based company specialising in the design, manufacture, supply and installation of electronic safety embedded signalling systems for the railway transportation segment. This all-cash deal is valued at ₹319.38 crore.

G G Tronics reported a turnover of ₹105.43 crore and a profit before tax of ₹10.84 crore for the fiscal ending March 31, 2024. The company’s net worth stood at ₹55.04 crore.

According to a stock exchange filing, CG Power has entered into definitive agreements to acquire the 55 per cent stake in G G Tronics through a combination of purchasing equity shares from the promoters and subscribing to compulsorily-convertible preference shares. Specifically, the deal involves purchasing 1,45,622 equity shares from GGT’s founders, representing 40 per cent of the share capital, for ₹173 crore, and subscribing to 1,46,37,704 compulsorily-convertible preference shares issued by GGT for ₹146.38 crore.

KAVACH system

This acquisition aligns with CG Power’s strategic objective to expand its railway product portfolio by entering closely related or adjacent areas with growth potential. The deal is expected to create synergies between the companies, it added.

G G Tronics is a development vendor for the train collision avoidance system (TCAS), also known as automatic train protection systems (IRATPS) or ‘KAVACH.’ The company is in the advanced stages of obtaining approval for the latest version (4.0) with LTE compatibility from RDSO, Indian Railways.

The collaboration will combine CG Power’s manufacturing, engineering and project management expertise with GGT’s specialised knowledge in railway transport safety and embedded systems, particularly in the ‘KAVACH’ train collision avoidance system. This partnership will enable CG Power to actively pursue ‘KAVACH’ and other rail safety projects in the electronic signalling sector.

The acquisition is expected to be completed by August 23, after which G G Tronics will become a subsidiary of CG Power.

Q1 results

CG Power announced June 2024 quarter results on Wednesday, and the company posted net profit of ₹232 crore as against ₹192 crore in June 2023. Its sales stood at ₹2,106 crore (₹1766 crore).