In talks with lenders to restructure ₹ 22,000 mn debt: CG Power

In talks with lenders to restructure ₹ 22,000 mn debt: CG Power

Update on the Indian Equity Market:

Wednesday’s optimism in the market was short-lived as Nifty continued the downward journey closing 94 points lower at 12,035. This follows the weak global markets following the rising death toll from a virus spreading from China. The weekly and monthly F&O expiry added volatility in the markets. All the sectoral indices closed the day in red with Pharma (-2.3%), FMCG (-1.8%) and METAL (-1.6%) being the highest losers. Among the stocks, BAJAJ AUTO (1.6%), POWERGRID (0.8%) and ICICIBANK (0.8%) were few of the gainers while YESBANK (-5.2%), BAJAJFINSV (-2.8%) and RELIANCE (-2.7%) were the top losers.

Excerpts from an interview with Mr Sudhir Mathur, Executive Director– CG Power. The interview aired on CNBC-TV18 on 29th January 2020.

  • The company has taken impairment worth ₹ 12,500 mn on both Belgium group of companies and the rest of the international business to reflect the true realizable value. The company has also made provisions worth ₹ 2,650 mn. In pursuit of recoveries, the Company is sending out recovery notices to the non-paying accounts. The provision is made on the people whom the company could not trace or the letter came back undelivered. The provision does not include Avantha Group.
  • The strategic review of international business was started earlier on. As the Indian market is in the growth phase, the company wants to be in India. According to him, the opportunity in India is very large. The company has also got strong relationships right through the value chain, from the supplier partners to customers.
  • In the case of international business, if the company gets a good offer, it will sell the business. The India business has been EBITDA positive business. The company has ₹ 22,000 mn of debt on the books on account of just India operations. The company is working with the banks to create a debt structure that can be surfaced out of the company’s cash flows. The company also plans to monetize all the non-core assets like the transformer business in Kanjurmarg, CG House if required.
  • The company is also looking at equity raise as well. The company is looking to raise around ₹ 7,000 mn through equity. When he was told that the current market cap of the company is around ₹ 7,000 mn to which he said that the company is working closely with the existing shareholders and they have taken a huge hit.
  • There are options for raising money through rights, preferential as well as qualified institutional placement (QIP) in which the existing shareholders can participate. In the next 60 days till March-end, a lot of consultative work would need to happen on raising this equity.

Consensus Estimate:

The closing price of CG Power is ₹ 10/- as of 30-January-2020.  Consensus estimates for the company are not available on the market screener and investing. CG Power reported a net loss of ₹ 8.03/- per share in FY19.

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