CG Power consolidated loss widens to nearly Rs 1,600 cr in Sept quarter

CG Power and Industrial Solutions on Wednesday reported widening of its consolidated net loss to Rs 1,595.21 crore in quarter ended in September 2019, from Rs 101.83 crore loss year ago, mainly due to lower income.

Total income of the company fell to Rs 1,548.50 crore in the second quarter of this fiscal from Rs 2,115.27 crore year ago, according to a BSE filing.

The company's consolidated net loss also widened to Rs 1,668.81 in April-September this fiscal from Rs 212.09 crore loss in same period year ago, it said.

The company had reported a consolidated net loss of Rs 507.13 crore in 2018-19.

Total income of the company in the first half of this fiscal declined to Rs 3,330.87 crore from Rs 3,958.87 crore year ago.

The company had earlier informed the bourse about the delay in submission of the financial results of first and second quarter of this fiscal.

"During the quarter and six months ended September 30, 2019, the group has carried out the process for recovery of outstanding advances by issuing recovery notices to various third parties," the company said.

In the process, the company informed that a few notices were returned undelivered and few notices could not be sent for want of requisite details, it added.

"In view of the same, based on prudence, the group has made a provision for such outstanding amount due from third parties/ unrelated parities aggregating to Rs 963.91 crore in the unaudited consolidated financial results for the quarter ended September 30, 2019," it said.

However, the group will continue with the recovery process for the said receivables, it added.

Fraud-hit CG Power appoints former CJI T S Thakur to head investigation

Fraud-hit CG Power and Industrial Solutions Ltd on Friday said it has appointed former Chief Justice of India T S Thakur as head of investigation to monitor the ongoing forensic investigation.

"The proposal of the Company to appoint Hon'ble Justice T S Thakur (Retd) as Head of Investigation to monitor the ongoing forensic investigation commenced by the company was accepted by Justice Thakur (Retd)," the company said in a regulatory filing.

Justice Thakur was the Chief Justice of India from December 3, 2015 to January 4, 2017.

"The forensic investigation will be greatly benefited from the oversight, guidance and opinion of a legal illuminary like Justice Thakur," the filing said.

The company had in August said that an investigation instituted by its board had found major governance and financial lapses, including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors".

Gautam Thapar, who was non-executive chairman of the company, was removed by its board on August 29.

CG Group incurred a net loss of Rs 652.38 crore during the year ended March 31, 2019. Its current liability exceeds its current assets by Rs 2,115.98 crore.

Fraud-hit CG Power shareholders to raise Rs 5,000 cr debt to meet biz needs

Fraud-hit CG Power and Industrial Solutions has got shareholders' nod to borrow up to Rs 5,000 crore to meet working capital and other business needs as it looks to spring back from the worst crisis in its history.

As many as 99.99 per cent of shareholders, at the company's annual general meeting in Mumbai on December 14, voted in favour of a resolution moved for raising borrowing limit, CG Power said in a regulatory filing on Tuesday.

They also approved appointment of Sudhir Mathur as whole time executive director of the company with an overwhelming 99.99 per cent voting in favour of the resolution.

Mathur, who along with non-executive chairman Ashish Kumar Guha has been overseeing the clean up of the company after the alleged fraud of over Rs 3,000 crore came to light, was first appointed as independent director on CG Power board on October 1, 2018 and moved into an executive role from May 10, 2019.

Shareholders approved both his appointments, the filing showed.

They also approved appointment of Narayan K Seshadri as independent director on the board of the company.

In the shareholder notice, the firm had stated that its current borrowing as of March 31, 2019 was Rs 2,455.39 crore (fund based including short term loans) and Rs 1,380.00 crore (non fund based).

"Keeping in view the existing borrowing and additional fund requirements and given the current financial condition of the company, the company is in urgent need of both long-term capital and working capital and towards this, the management of the company is in the process of identifying potential sources of capital," it had said.

The company is also seeking external advice on mode and sources of fund raising.

"Hence, approval of the members (or shareholders) is sought for availing borrowings up to an amount of Rs 5,000 crore for meeting the immediate funding requirements of the company," it had said.

The company had in August said that an investigation instituted by its board had found major governance and financial lapses, including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors".

Gautam Thapar, who was non-executive chairman of the company, was removed by its board on August 29.

CG Group incurred a net loss of Rs 652.38 crore during the year ended March 31, 2019. Its current liability exceeds its current assets by Rs 2,115.98 crore.

The firm's annual report said its Board of Directors are in active discussions with lenders for restructuring its borrowing and fresh capital infusion.

"The Group has a robust unexecuted business order book of over Rs 7,000 crores as on March 31, 2019," it said.

It is "evaluating divestments of non-core assets, including but not limited to the sale of Kanjurmarg land without hampering the capability to serve customers".

The company is also planning to initiate recovery of receivables from promoter affiliate companies and connected parties based on consultation with independent legal counsel, the annual report said, adding that the board will review the international business with a view to making it a coherent part of business and drive synergies.

CG Power fraud: Thapar cites board approvals, denies fund misuse charges

Citing regular board approvals for various inter-corporate loans, former CG Power Industrial Solutions' non-executive chairman Gautam Thapar has refuted allegations of fund misuse amid alleged governance lapses coming under the regulatory scanner, according to documents submitted by him to the government.

In a 36-page submission to the corporate affairs ministry early November, Thapar, who was sacked in a boardroom coup in the wee hours of August 30, has provided documents on various issues, including inter-corporate loans, minutes of board meetings and loans from lenders like Standard Chartered Singapore and Yes Bank.

CG Power board sacked Thapar after an audit report by Vaish Associates, which itself is based on as many as 23 disclaimers, claimed that Thapar swindled Rs 3,000 crore from CG Power.

Markets regulator Sebi banned Thapar and entities associated with him for three years, following which he moved the Securities Appellate Tribunal, which has asked the company to provide relevant documents to him.

The Serious Fraud Investigation Office (SFIO) has also started a probe against CG Power and 15 group entities. The ministry has moved NCLT Mumbai seeking to restate the books of accounts of CG Power from FY16. An order is expected on Monday.

The documents, seen by PTI, show how Standard Chartered Singapore extended a $44-million lifeline to CG Singapore in February 14, 2018. The entire money was then paid to CG International Netherlands through another group entity AIA and Avantha. The same amount was fully transferred back to CG International Netherlands on the very same day.

Later, the company in turn paid back the entire amount to StanC Singapore, thus making the account standard, show the documents.

While a major allegation revolves around funds moving in and out of CG Power and group entities, Thapar has claimed that such a route was taken following suggestions from lenders since CG Power was facing liquidity issues.

Similarly, Aditya Birla Finance and Yes Bank allowed CG Power to get funds between 2016 and 2019 in a similar manner as StanC did in 2018, showed the documents.

"All the above transactions were done according to the structure provided by StanC and other respective lenders and every time the entire money was paid back to the respective lender. That not a single penny of such funds remained in Avantha books clearly shows that there is no siphoning of funds," Thapar has claimed.

Going by the documents, the company's risk and audit committee at its meeting held on May 26, 2017 gave an "omnibus approval for entering into transactions with related parties for throughout FY18". Similar omnibus approvals were sought for and were granted for FY19 as well.

Further, Thapar has submitted that the board approved a proposal from CG India on September 28, 2018 for a fixed deposit of Rs 229 crore as part of a credit line from IndusInd Bank. This deposit was a surety for part payments owed to Avantha towards brand royalty which the board approved, according to the documents.

"This clearly shows that Rs 229 crore was not an additional advance to Avantha but a refund of a conditional deposit made by Avantha to CG which had to be refunded in the event of conditions not being met," the document said.

On the allegations that CG Power made out-of-turn advances to group entity Mirabelle Trading since 2013 when CG Power was entering Southeast Asia, Thapar has said the board approved an advance payment of $20.15 million to Mirabelle towards service charges.

Currently, Thapar owns just 8,574 shares in CG Power. Some of its large non-promoter shareholders are HDFC Mutual Fund and Aditya Birla Mutual Fund.

Private equity giant KKR India led by Sanjay Nayar owns nearly 10 per cent, as does L&T Finance. The family office of Sunil Bharati Mittal of Bharti Airtel has since September picked up 8.3 per cent in CG Power.

The CG Power board began to feel the tremors this March, when an operations committee was formed under chairmanship Narayan Seshadri following the insistence of Nayar.

Incidentally, the documents also showed that Seshadri was not even present at the board meeting that appointed him as chairman of operations committee. Seshadri is also an independent director of CG Power.

Significantly, Seshadri's Tranzmute Capital is 50 per cent owned by Nayar but this was never disclosed to CG Power when he came onto the board, as per the the documents.

They are also directors in Epimoney and EPI Venture Partners as investors. Also, a non-disclosure agreement was signed between Tranzmute Capital & Management and CG Power in August 2018.

Going by the documents, Seshadri had a business relationship with Nayar and CG Power before he became a non-executive director on CG Power board.

It is also interesting to note that Anubhav -- son of Akhil Gupta, who is the vice chairman of Bharti Enterprises and a close confidante of group Chairman Sunil Bharti Mittal -- recently married Sanjay Nayar's daughter Adwaita.

In a detailed e-mail statement to queries from PTI, KKR India denied any involvement in Seshadri being appointed a director on CG Power board. "We are a lender to Avantha Holdings and have no locus standi in any of its underlying group companies. KKR India has never been involved in the decision-making process of CG Power," it said.

The statement said that KKR is aware that SeshadrI was invited directly by Thapar himself to join the board.

"We confirm that Narayan's partnership with KKR India was fully disclosed (on March 31, 2018). Tranzmute has working relationships with other PE funds, promoters and companies, including KKR India - there has never been exclusivity between KKR and Tranzmute in this regard," it said.

On relationship with Epimoney, the company said KKR has never been an investor in it but Nayar is one of its six investors.

Any association with promoters will be prejudicial, says CG Power

The management for CG Power and Industrial Solutions (CG Power) considers any further association with its promoters as prejudicial to the company, the chairman said in a letter to shareholders. The company will hold its annual general meeting (AGM) on December 14.

In a letter to shareholders as part of the company’s AGM notice, Ashish Kumar Guha, chairman, CG Power, said, “Your company considers any further association with Gautam Thapar and the promoters as prejudicial to the interests of your company and its stakeholders.”

Guha made the above observation related to several irregular transactions that the company revealed in a findings report in August this year.

The letter added corrective action will follow in the future as necessary. “Your company has been cooperating with all agencies to expedite closure on these issues since August 2019,” the letter said.

Sudhir Mathur, wholetime executive director for the company, added, “Another task is to cleanse CG of wrongdoers. This began by the majority of the board of directors removing Thapar as the chairman of the company with effect from August 29, 2019. It was followed on August 30, 2019, by removing, with cause, V R Venkatesh, the chief financial officer of CG, who has purportedly been actively involved in siphoning out CG’s funds.” Mathur expects as the forensic investigation unfolds, others could follow.

The annual report stated Thapar ceased to be a director on the company’s board with effect from October 9, 2019, following an October 7 letter that the board received from Thapar stating his term as director ended on September 30, 2019.

Commenting on the company’s business performance, Guha added, “The business performance of your company for 2018-19 has been affected due to severe crunch in the working capital.”

Guha further informed shareholders’ capital restructuring for the business and the company will be critical. “…As the working capital gap is wide and while the businesses are intrinsically strong, this starvation has led to lower revenue.”

After Thapar, fraud-hit CG Power sacks CRO Venkatesh for alleged misconduct

After removing founder Gautam Thapar as chairman of the company, the board of fraud-hit CG Power and Industrial Solutions has sacked the firm's CFO V R Venkatesh over alleged "misconduct" and breach of trust.

The board of the company at its meeting on Friday "terminated the employment of V R Venkatesh as the Chief Financial Officer of the company, for cause, with immediate effect," CG Power said in a regulatory filing.

"The termination of the employment of Venkatesh is due to the grave nature of the misconduct and breach of trust on his part and having knowingly undertaken actions which were detrimental to the interests of the company and its stakeholders," it said.

Venkatesh could not be contacted for comments.

Company CEO and Managing Director K N Neelkant, who was sent on leave on May 10 by the board to enable proper investigation into financial irregularities, continues in his role for now.

However, some investors and lenders have questioned his continuance given that the fraud involving some assets of the firm being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors", happened under his watch.

The board-instituted investigation had also found some liabilities and advances to related and unrelated parties being understated.

The company has restated its financial results for the previous fiscal taking into account the unstated liabilities, the filing said.

"Certain unauthorized/unapproved banking transactions in the nature of loans (unauthorized transactions/ loans) taken from banks / financial institutions (lenders)/a connected party aggregating to Rs 635 crores were not disclosed in the Standalone Financial Results of prior years / periods by off-setting against certain related and unrelated party balances," the company's auditors said in the audit note furnished with the restated statement.

It said interest expenses of Rs 90.93 crore which were serviced by the company in relation to these unauthorized loans were accounted under different heads in the Standalone Statement of Profit and Loss and "were mispresented in the financial statements/ results of prior years / periods."

"The company also has loans including interest receivables and advances recoverable from related and unrelated parties, as reinstated on March 31, 2019, aggregating to Rs 2,439.94 crore for which further interest income aggregating to Rs 337.61 crore is currently not recorded as at March 31, 2019," it said.

On August 29, the board has removed Thapar as the chairman of the company through a circular resolution approved by a majority of the members. Thapar opposed the resolution, while CEO and Managing Director K N Neelkant had abstained from voting.

Thapar, who had not commented on the issue since the company disclosed financial irregularities on August 20 after a marathon board meeting on the previous day, had in a statement after his removal said: "No promoter or promoter entity has derived any undue benefit. There is simply no fraud."

The reports following the Board meeting of August 19, 2019 are disheartening. Indeed, I would say that the reports do not reflect facts.

"In the interests of all stakeholders, including banks and financial institutions, I must say that no funds lent by banks nor any funds of CG have been misappropriated. The money has been applied with due Board approval. All inter-corporate transactions have been fully authorised by the Board," he said.

The board was headed by him during that period.

Thapar would, however, continue to be a member of the board -- a position from which only shareholders can remove him.

Though a founder promoter of CG Power, Thapar lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money. He currently has only 8,574 shares out of 62.6 crore shares of the company.

CG Power sacks Gautam Thapar as its chairman with immediate effect

CG Power & Industrial Solutions on Thursday said its board has sacked Gautam Thapar as its chairman with immediate effect after an investigation that unearthed a multi-crore financial scam in the firm.

"In cognizance of the current situation being faced by the company and the recent developments, including disclosures dated August 19, 2019, made by the company, the board of directors... passed by majority consent, have resolved to remove Gautam Thapar as the chairman of the board with immediate effect," CG Power said in a regulatory filing.

CG Power said this decision has been taken in the interests of the company and its stakeholders in discharge of the fiduciary responsibilities of the board.

On August 20, the company had stated that an investigation instituted by its board had found major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors."

Also, some liabilities and advances to related and unrelated parties had been understated.

While the board had on May 10 sent CEO and Managing Director K N Neelkant on leave, pending an investigation into some "suspect, unauthorised and undisclosed" transaction, Thapar continued as the company chairman.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. Though a founder promoter of CG Power, he lost almost all of his shares after lenders, in past years, invoked pledges he had created to borrow money.

CG Power had stated that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.

It had stated that the company's current and past employees, including unnamed non-executive directors and certain key managerial personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.

The funds so raised were routed out of the company. This, the company said, had been going on for two years now.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively, as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively, as on April 1, 2017, a regulatory filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank owns 12.79 per cent of CG Power, after it had invoked shares pledged by Thapar's Avantha Holdings Ltd in May. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.

Shares of CG Power were trading 4.74 per cent higher at Rs 9.95 apiece on BSE.

CG Power investors, lenders seek tycoon Gautam Thapar's removal as chairman

Investors and lenders of power equipment maker CG Power & Industrial Solutions Ltd want tycoon Gautam Thapar to be removed as chairman of the company after an investigation unearthed a multi-crore financial scam in the firm, sources privy to the development said.

The company had in a regulatory filing on August 20 stated that an investigation instituted by its board had found major governance and financial lapses including some assets being provided as collateral and the money from the loans siphoned off by "identified company personnel, both current and past, including certain non-executive directors." Also, some liabilities and advances to related and unrelated parties had been understated.

While the board had on May 10 sent CEO and Managing Director K N Neelkant on leave pending an investigation into some "suspect, unauthorised and undisclosed" transaction, Thapar has continued as the company Chairman.

The sources said some investors, at whose behest the probe was launched, now want Thapar and Neelkant to be removed from their posts to enable a thorough cleanup of the company affairs.

An email sent to Thapar seeking his comments on the scam and move by investors remained unanswered.

While the regulatory filing had not named anyone involved in the scam, the sources said the investigation had found strong links to the present management.

Though the company with 8,000-plus employees and manufacturing units at 21 locations worldwide has an excellent track record and a strong order book, the alleged irregularities had led to it becoming over-leveraged, investors and lenders felt.

The sources also said the company board is authorised to remove the chairman and ones this happens in coming weeks, one of the independent directors may be named as non-executive chairman.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. This shareholding does not provide him with a board position, they said, adding Thapar would, however, continue on the board as only shareholders have the right to remove a director.

Though a founder promoter of CG Power, he lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money.

In the regulatory filing, CG Power had stated that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.

It had stated that the company's current and past employees, including unnamed non-executive directors and certain Key Managerial Personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.

The funds so raised were routed out of the company. This, the company said, had been going on for two years now.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively as on April 1, 2017, the filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank Ltd owns 12.79 per cent of CG Power after it had in May invoked shares pledged by Thapar's Avantha Holdings Ltd. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.