Tube Investments acquires CG Power; to raise Rs 350 cr from Azim Premji Trust, SBI Mutul Fund

Tube Investments of India (TII) announced on Thursday that it has completed the acquisition of a controlling interest of 50.62% in CG Power and Industrial Solutions. In a stock exchange disclosure, the Rs 38,000 crore Murugappa Group company said CG Power has become a subsidiary of the company effective November 26 and its board of directors has been reconstituted.

As per the share subscription agreement of August 7, 2020, CG Power has allotted 64.25 crore equity shares of the face value of Rs 2 at a price of Rs 8.56 to TII for an aggregate consideration of Rs 550 crore. Besides, around 17.52 crore warrants, each carrying a right exercisable by the company to subscribe to one equity share per warrant within 18 months, were allotted to TII for a subscription amount of Rs 37.50 crore, being 25% of the aggregate consideration payable for subscribing to equity shares upon exercise of the warrants.

The TII board of directors has also approved fundraising worth Rs 350 crore from the Azim Premji Trust and SBI Mutul Fund schemes. The company will allot shares to both entities on preferential allotment or private placement basis, TII said in a stock exchange filing.

Azim Premji Trust will get 27.33 lakh shares worth around Rs 200 crore, while SBI Mutual Fund’s two schemes, SBI Focused Equity Fund and SBI Magnum Midcap Fund, will get 15.03 lakh shares and 5.46 lakh shares worth Rs 110 crore and Rs 40 crore respectively. Both entities will get shares at Rs 731.70 apiece, which is inclusive of a premium of Rs 730.70 per equity share. An extraordinary general meeting will be held on December 21 to seek shareholders’ approval for the allotment.

The company had earlier informed the stock exchanges that it intends to seek shareholders’ approval for a total amount of Rs 1,760 crore to be used for giving loans, investing in securities or giving guarantee to the borrowings of CG Power and for investing in its own subsidiaries.

The TII board, at its meeting held on November 4, had approved the issue of corporate guarantees of up to Rs 1,400 crore in favour of CG Power’s lenders. This forms part of the Rs 1,760 crore proposed for shareholders’ approval.

In addition to this investment, TII was required to subscribe to or purchase further securities of CG Power to consolidate its shareholding percentage, provide loans to ease its constrained liquidity position and facilitate its smooth day-to-day operations and provide guarantees or security in respect of the borrowings availed or to be availed in the coming days.

TII, CG Power and its lenders have on November 20 executed binding agreements for one-time settlement, restructuring of funded facilities and guaranteed debt of CG Power.

The settlement, in accordance with the master implementation-cum-compromise settlement agreement against the total amount owed by CG Power to the lenders, includes compromise settlement by making an upfront payment of Rs 650 crore to lenders, conversion of Rs 200 crore into unsecured, unlisted and non-convertible debentures with a tenure of five years to be issued by CG Power to the lenders, and payment to lenders out of the proceeds from the sale of CG House property within five years from the date of agreement.

The Competition Commission of India had approved TII’s proposed acquisition of shares in CG Power on October 13. TII had signed a share purchase agreement with CG Power on August 7 to acquire around 56% stake for investment of Rs 700 crore and later announced an additional investment of Rs 100 crore. It had emerged the successful bidder following a Swiss challenge bidding process initiated by the lenders of CG Power.

CG Power is among the world’s top 10 transformer manufacturers, second in transformers and switch gears in India and first in motors manufacture in the country. It caters to over 21 industries and has more than 20 manufacturing units. It had a domestic debt of Rs 2,161 crore as of March 31, 2020.