Murugappa Group strategizes to address CG Power legacy issues


While it will make a fair assessment of the recent erosion in value, particularly as a result of controversies, a robust risk management and corporate governance framework will be developed.

After settling debts from CG Power and Industrial Solutions creditors, the company’s new promoter, Murugappa Group, said it would adopt a two-pronged strategy to resolve the company’s legacy issues.

While it will make a fair assessment of the recent erosion in value, particularly as a result of controversies, a robust risk management and corporate governance framework will be developed.

Writing in the latest annual report, the first since the group took over the reins of CG Power last year, the company’s chairman, Vellayan Subbiah, said it was a matter of satisfaction that they could settle the arrears from employees, suppliers and other creditors as the first stage of renewal.

He said the second priority was to restore normal operations across all business divisions. The timely injection of working capital and the smooth alignment of management teams and the talent pool helped the company achieve this goal, he said.

This enabled sequential improvements in quarterly financial performance. He said there are significant opportunities for growth going forward, with steps being taken to strengthen customer engagement, supply chain, ramping up talent, new product development and marketing. exploration of new markets and segments.

“Our decision to operate CG Power as a stand-alone entity while subtly integrating the cultural ethos of the Murugappa Group will help the business scale in the short to medium term,” he said.

Murugappa Group’s Tube Investments of India (TII) had acquired CG Power through a Swiss challenge in the resolution process initiated by the lenders under the Reserve Bank of India’s Prudential Resolution Framework Directive stressed assets.

TII injected equity funds of around 687 crores for a 54% stake in the company, in addition to subscribing for some warrants. TII took control of the company on November 26, 2020, with a new board formed and a new CEO appointed the same day.

The NCLT had ordered the reopening, overhaul and re-auditing of the company’s accounts for the past five years ending with the 2018-19 financial year. All domestic entity lenders, overseas subsidiaries, collateral obligations that defaulted on loans, due from operational creditors and other stakeholders had to be settled by the Murugappa Group, according to the management comment during CG Power’s second quarter earnings call.

There have been investigations by the SFIO and SEBI. The company was a non-performing asset and the new management was tasked with finalizing all settlements in accordance with the resolution plan and having the account reclassified as standard, he said.

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