‘Corporate feud in CG Power spooks share value’

Venkatesh Ganesh Mumbai | Updated on February 13, 2020

CG Power & Industrial Solutions logo

The corporate battle between CG Power and Industrial Solutions and its ousted chairman Gautam Thapar has led to value destruction for minority shareholders, according to corporate governance advisory firm InGovern. In its recent report, InGovern has questioned the roles of various stakeholders — the board, key management personnel, internal auditors, bankers to the company, lenders to the holding company, statutory auditors, promoters and other group companies.

Since March last year, share price of CG Power has fallen to ₹9 from ₹43

The investigative authorities are looking into allegations surrounding the usage of funds and land assets from the company by promoter-connected entities, borrowings against the assets of the company for the benefit of other group companies, and vendor transactions with promoter-connected entities.

shares pledged by its promoter — Avantha Holdings — was revoked by Vistra ITCL (India) on March 8. This, coupled with a similar transaction on March 20, 2019, has resulted in Vistra acquiring 21.6 per cent of equity stake in CG Power. This has come under the lens of investor activist firms.

Vistra holds the shares on behalf of KKR India. Subsequent to acquiring the stake, Narayan K Seshadri has been appointed as an Independent Director. Seshadri has close business interests with KKR India and Sanjay Nayar, head of KKR India, noted InGovern.

The board had removed Thapar as chairman when CG Power disclosed that the advances to related and unrelated parties have been ‘potentially’ understated by ₹1,990.36 crore and ₹2,6.63 crore, respectively, as on March 31, 2018. Following the removal of Thapar, its CEO KN Neelkant and CFO VR Venkatesh, along with some board members too resigned from the company.

Question over info to SEBI

How these transactions could have happened without board approvals and without the knowledge of key management personnel and auditors, asked Shriram Subramanian, MD, InGovern.

Were these board approvals shared with SEBI in their investigations? What role did promoters, executive directors, managing director & CEO and independent directors play in this, he asked further.

The Mumbai bench of NCLT recently threw out the findings made by law firm Vaish Associates on former CG Power Chairman Gautam Thapar, citing them as ‘bogus’. Two-judge bench of Rajesh Sharma and BP Mohan ruled that the tribunal will not rely upon any report, but only an independent audit.

‘All in the loop?’

InGovern also pointed out that banks and NBFCs seem to have been fully aware of the situation in the company and other group companies and yet continued to fund and increase group company exposures against guarantees of the listed company. Would the banks have curtailed the limits of CG Power as other group companies were in stress, he asked.

Subramanian also raised concerns around KKR’s role in the issue. Did the default of loan to holding company trigger these series of events that led to control of management, the boardroom and eventually the company by KKR? Why didn’t the board look into the conflict of interest of Seshadri who was appointed as an independent director, he asked.

Emails sent to these parties did not elicit a response.



All elements of corporate governance seem to have failed minority shareholders — key management personnel, independent directors, statutory auditors, internal auditors, banks, NBFC lenders, whistleblowers etc.

SEBI and other regulators need to investigate this matter holistically on the role played by all stakeholders, said Subramanian.


Published on February 13, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor