Soon after the fraud came to light, PE firm KKR – through non-banking finance arm KKR India Financial Services and its debt fund – acquired a 10.01 per cent direct stake in CG Power by invoking pledged shares.

Sources say that the business performance of CG Power has adversely been affected due to a severe crunch in working capital and bringing in an investor like Murugappa Group would help tide over that. Capital restructuring of the business is critical as the working capital gap is wide and while the businesses are intrinsically strong, this starvation has led to lower revenue, even as the company has a robust order book of Rs3,000 crore.

In a separate filing with the stock exchanges, TIIL has said that the acquisition is likely to provide synergy for both the companies as they are engaged in engineering businesses. TIIL’s operational, financial and governance capabilities will also help remove the difficulties that CG Power has been facing.

Established in 1937, CG Power makes transformers, switchgear, circuit breakers, network protection and control gear, and power automation products.The company ventured outside India through both organic and inorganic routes since 2005 and now has manufacturing bases in Belgium, Hungary, Indonesia, Ireland, France, the UK and the US. The electrical equipment maker has more than 20 factories in India.

CG Power’s total income has declined to Rs3,169.48 crore in the year through March 2020 from Rs5,355 crore the previous year. TIIL’s turnover fell 19 per cent to Rs4,053 crore in the last fiscal year, which it attributed to the slowdown in the auto industry.

TIIL, the flagship company of the Rs36,900-crore Murugappa Group is one of the country’s leading manufacturers of a wide range of products for major industries such as automotive, railway, construction, mining and agriculture. It operates three business divisions: engineering, bicycles and metal-formed products. The bicycle division is called TI Cycles of India, and sells brands like BSA, Hercules, Mach City and Montra.

TIIL has also entered into thermo-mechanically treated steel bars and truck body building business and is exploring opportunities in optic lens and other vision systems for the auto bars. On the other hand, Chennai-based Murugappa group holds diversified interests in abrasives, engineering, farm inputs, sugar, confectionery, plantations, bio-products, chemicals, nutraceuticals, insurance,and financial services. ♦