Why Yes Bank, CG Power stocks crashed today

Our Bureau Mumbai | Updated on August 20, 2019 Published on August 20, 2019

Share price of Gautam Thapar-promoted CG Power and Industrial Solutions Ltd was down 20 per cent on Tuesday afternoon after the company disclosed certain suspect transactions. Shares of Yes Bank also dipped by over 6 per cent due to the bank’s exposure in the company. Yes Bank owns nearly 13 per cent stake in CG Power.

The company, in a statement to the stock exchanges said, “The total liabilities of the Company and the Group may have been potentially understated by approximately Rs 1053.54 crore and Rs 1,608.17 crore respectively as at 31 March 2018; and by Rs 601.83 crore and Rs 401.83 crore respectively as at 1 April 2017. “

CG Power said that certain assets of the company that were purportedly provided as collateral without due authority; and the company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorisation. “The moneys so obtained were immediately and without due authorisation routed out of the Company, either by itself or from its subsidiaries or ostensibly unrelated parties to certain related parties,” CG Power disclosed.

“The net worth of the Company was potentially understated due to unauthorised and inappropriate write offs and charges debited to the Profit & Loss statement of the Company during the year ended March 31, 2018 and April 1, 2017. While these unauthorised write offs are restored in the Management Compiled Financial Information, given the challenges of recovering these and other amounts, appropriate provisions may have to be recognised by the Company, which have not been considered in the Management Compiled Financial Information. Nevertheless, all efforts, including legal and other measures, to recover such amounts will be made,”it added.

“These subject transactions are prima facie prejudicial to the interests of the Company. These were purportedly carried out by identified company personnel (both current and past) including certain non-executive directors, certain KMPs and others identified employees ("CIP") in breach of the Rules of Procedure of the Company ("ROP"), and/or without proper information to or authorization of either the RAC or the Board, and/or in breach of the Companies Act 2013, applicable SEBI regulations and other applicable laws. These transactions appear to have been carried out by various means including inappropriate netting off, using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliate companies and other connected parties. These may have potentially resulted in misstatement of past financial statements,”CG Power said.

The company Board has ordered a forensic audit to investigate the nature of these transactions.

Share acquisition

In May, Private sector lender YES Bank has acquired 12.8 per cent stake in CG Power and Industrial Solutions on invocation of pledged shares of its promoter.

Shares were acquired on invocation of pledge due to default of loan terms by Oyster Buildwell, which is a group company of Gautam Thapar-led Avantha Group. 

CG Power and Industrial Solutions is one of the largest players in the country in the electrical equipment and engineering industry. 

 In an earlier filing in March this year, it had informed the stock exchanges that Vistra ITCL on behalf of debenture holders, including KKR India Financial Services, had invoked 6.76 crore pledged equity shares amounting to 10.8 per cent of its share capital, held by one of its promoters Avantha Holdings.

As of March 31, promoter groups, including Avantha Holdings, Varun Prakashan and Avantha Reality, held 12.79 per stake in CG Power. Vistra ITCL holds 21.63 per cent equity in the company.

A report by domestic brokerage Kotak Institutional Equities had  said that 100 per cent of the promoter shareholding in CG Power was pledged as of March 31 this year.


Published on August 20, 2019
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