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Murugappa Group’s engineering firm Tube Investments of India is picking up a controlling stake in the scam-hit CG Power & Industrial Solutions for a consideration of ₹700 crore.
The 83-year-old CG Power is engaged in engineering solutions and the power sector.
It has 13 manufacturing facilities and employs over 3,000 people directly and 8,000 indirectly.
The company reported revenues of ₹5,008 crore in FY18, ₹5,356 crore in FY19 and ₹3,169 crore in FY20.
In a communiqué to stock-exchange on Friday, CG Power said that its board had approved a proposal to issue shares and warrants on a preferential basis totalling ₹700 crore to Tube Investments of India (TII).
“The cost of acquisition will be about ₹700,00,00,005 at ₹8.56 per equity shares of ₹2 each of CG Power and at ₹8.56 per warrant.
Out of the total cost for the warrants, 25 per cent of the amount will be paid upfront at the time of subscription of the warrants,” said TII in its filing to stock exchanges.
TII will acquire about 50.62 per cent of the issued and subscribed share capital of CG Power.
After the conversion of the warrants into equity shares, the shareholding of TII will be about 56.61 per cent of the issued and subscribed share capital of CG Power.
CG Power hit by fraud
In August 2019, CG Power had reported a financial fraud of over ₹1,000-crore.
It said an investigation by an independent law firm had found that some employees had carried out unauthorised transactions, which had led to a potential understatement of not only the liabilities of CG Power but also advances to related and unrelated parties of the company and the group.
CG Power feels TII’s operational, financial and governance capabilities and experience will help end its present difficulties and hardships and facilitate value creation for both TII and CG Power.
A TII statement said that since both the companies are in the engineering business, the acquisition is expected to provide synergy for both.
Murugappa officials could not be reached for comments on the deal.
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