Avantha group will not exit Crompton Greaves

Says share sale is one off transaction to reduce debt

In a block deal on Thursday, Avantha Holdings sold 52 million shares (about eight per cent of its stake) in Crompton Greaves to institutional investors Goldman Sachs and Merrill Lynch Capital Markets at Rs 193 a share. The sale fetched Rs 1,000 crore and cut promoter stake to 34.7 per cent.

Avantha Holdings plans to raise about Rs 3,000 crore from asset sales. The proceeds will be used to cut the group’s debt. Avantha Holdings will also cut stake in the Crompton Greaves consumer product business, which is being hived off as a separate subsidiary.

Though Avantha Group would exit the power generation business, there were no plans to further reduce stake in Crompton Greaves, either through financial or strategic stake sale, said group director (finance) B Hariharan. “There will be no more bulk share sale. This (Thursday’s deal) is a one-off transaction,” he added. He declined to divulge the group’s debt.  In intra-day trade, the Crompton Greaves stock fell 5.5 per cent to Rs 193.2.

Avantha Group has been under pressure to cut debt raised through private equity firms and banks for its power business. Earlier this week, it had announced the sale of a 600-Mw power plant in Chhattisgarh to Adani Power for Rs 4,200 crore.  The group plans to conclude the sale of its power plant in Madhya Pradesh, still under construction, in a month.

“Overall, the power sector has been under stress and companies have faced difficulty in securing fuel supply. Some have been unable to sign power purchase agreements. Therefore, we have decided to disinvest the power business,” Hariharan said.