CG Power may raise funds through equity route, sell non-core assets

A week after it first reported an employee-led fraud, CG Power is now looking to put its house in order. 

The revival plan includes an equity-based fund raising, seeking lender support and sale of non-core assets.

The new plan has been put in place after the company’s disclosure last week which said its liabilities, advances and net worth are under-stated. “Key initiatives will include considering other fund-raising avenues, including a potential equity raising for bridging the cash flow gaps as well as working capital requirement to avoid any business disruption,” CG Power said in an analysts’ presentation.

The company will hold an investor call on Wednesday to discuss its future road map. In its presentation, the company added it will seek lender support for any interim liquidity mismatch ahead of the deleveraging process.

Part of its deleveraging plan includes sale of non-core assets, including the Kanjurmarg land in Mumbai and CG House. 

Last week, the company informed India Ratings that it aims to complete the Kanjurmarg land sale by January next year and CG House by the first half of FY21. In the offing is also a change in strategy for its international operations. CG Power said it would refocus on previously discontinued international operations to improve profitability, cash flows and drive synergies. 

For Indonesia, for instance, the company plans to expand into new markets like Vietnam and the Philippines, the presentation said. In FY19, the Indonesia business reported earnings before interest and taxation (EBIT) of Rs 94 crore.

On its ongoing investigation on the fraud, CG Power said a forensic investigation has been initiated. The FY18 consolidated liability of the company increased from Rs 6,405 crore to Rs 7,976 crore after taking into account the impact of doubtful transactions reported last week. 

Moreover, total consolidated receivables from various subsidiaries, promoter affiliate companies and connected parties increased manifold from Rs 131 crore to Rs 2,657 crore. Its consolidated net worth also increased marginally by Rs 198 crore to Rs 2,912 crore during the year.

As part of its key initiatives, CG Power also looks to make appointments to key top management positions such as group chief financial officer, chief operating officer, human resources head and other crucial positions. CG Power has also put royalty payments to Avantha Holdings in abeyance. The company pays a royalty to group company Avantha Holdings for the use of the Avantha brand. One of the dubious transactions reported also involved royalty payables.

Earlier this year, lenders invoked the shares of Gautam Thapar. This led to Avantha Group’s shareholding in the company coming down to less than a per cent. The presentation listed private equity firm KKR, YES Bank, HDFC, Aditya Birla Group and Sunil Mittal’s Bharti Holding as the top five shareholders of CG Power.