The Great Revival: A book that captures the CG Power turnaround story

How an out-of-the-box approach helped the company come back from bankruptcy

The Great Revival

By Natarajan Srinivasan

Published by Penguin

225 pages  ₹799

 

The Insolvency and Bankruptcy Code (IBC) has been one of the defining legislation for the Indian corporate sector ever since it was enacted in 2016. Especially in sectors such as power and steel, IBC put on the block a number of companies that had been declared bankrupt. While lenders took control, choosing the suitor for the beleaguered company was the task delegated to resolution professionals under the Code. Companies in distress due to financial frauds, sectoral down-cycles or huge debt found themselves being recast and sold to new buyers. CG Power, however, followed a different route when financial problems broke out in the company. 

Natarajan Srinivasan, who was appointed managing director and chief executive officer of CG Power in 2020, has put together a chronicle of the journey of turning around the distressed company. The Great Revival tells this story with all the nuance of a corporate leader who has been involved in reviving distressed companies. 

The saga begins with the Ministry of Corporate Affairs ordering an investigation of CG Power and its subsidiaries in December 2019. It had earlier sought reopening and recasting CG Power’s financials by an independent chartered accountant firm. By March 2020, the book value per share of the company declined to a negative ₹31.21 from ₹55.2 in March 2012. There was no working capital to pay interest or repay loans. 

CG Power was put through a resolution process under the Reserve Bank of India’ Prudential Framework for Resolution of Stressed Assets and not through the IBC, which came into effect from December 2016. This resolution scheme functioned under RBI’s circular of June 7, 2019. So, the approach was different in many ways. Nonetheless, a new ownership took control after a Swiss Challenge bidding mechanism was used to sell the company. Tube Investments of India had on August 7, 2020, submitted a binding offer to acquire a 54 per cent stake in CG Power. On November 26, 2020, its parent Murugappa group issued a press release announcing the acquisition of a majority stake in CG Power. 

The new promoter infused ₹687.50 crore of net worth and CG Power mobilised a term loan of ₹600 crore from State Bank of India. Considering that all this was happening during the Covid year, it is remarkable to see how strategies were worked out even when “the Murugappa group leadership was on trial” by stakeholders for taking a “bold” diversification call after being in the business of manufacturing bicycles and auto components for more than 50 years. 

The Great Revival offers an insight into these strategies. Foremost in this was asking senior managers to work out a Dream Battle Plan instead of being given a diktat from above. As Mr Srinivasan puts it: “The holistic word was ‘regain’; regain production, regain customers, regain market share and regain corporate respect.” 

The author goes into details of strategic productivity initiatives, which prioritised two strategies: Project Mudra and Project Lean. “We were not merely playing the game for profit; we were playing for pride,” he writes. There are certainly lessons to be learnt.

One of the key challenges that the new management had to deal with and which is elaborately described in the book is the multiple investigations. While this demanded considerable effort on the part of key officials, the company invoked the principles in Section 32 of IBC, which protects the acquirer in any form of resolution whether it is through a debt recovery tribunal, or under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFESI) Act or under the RBI stressed asset mechanism. 

One of the unique features of this turnaround story is that it not only captures Mr Srinivasan’s perspective and view of CG Power’s journey from being fraud-ridden to the revival of its balance sheet, but also those of the senior management team who played a crucial role in the revival. There are, therefore, accounts from Susheel Todi, chief financial officer, Ramesh Kumar N, president of the motors and drives business, and Mukul Shrivastava, president, power systems. Besides, there are also notes from Dinesh Khara, former chairman, State Bank of India, Vellayan Subbiah, chairman, CG Power, and P S Jayakumar, independent director and chairman, Audit Committee. These versions present a holistic perspective to the overall revival story. 

For instance, Ramesh Kumar N recollects how holding a dealer convention in Hungary in November 2019 came with a dilemma since by then question marks on the company’s financials had already been raised. An out-of-the-box approach helped. A 20-minute film on Amitabh Bachchan’s ABCL and the transformation in the Bollywood actor’s fortunes with the television show Kaun Banega Crorepati was screened at the convention. “CG Power is no less than Amitabh Bachchan. If he could do it, so will we.” It seems the CG Power revival did play out like a blockbuster script where the right intentions helped regain the lost ground. 

The reviewer is a former journalist