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Why CG Power Share is Falling Down?

Why CG Power Share is Falling Down? Now What to do next?

CG Power share price is falling continuously, investors have lost Rs 396.25 crore in two days.
CG Power share price was stuck in lower circuit of 20%. At present its price is just INR 8.70.
CG Power and Industrial Solutions share price tumbled after the board of Gautam Thapar-promoted firm said it would restate accounts after discovering significant accounting irregularities and governance lapses. CG Power share price was stuck in lower circuit of 20% to Rs 8.70 in early trade on BSE. CG Power share price closed 20% lower.

CG Power and Industrial Solutions share price has been falling for the last two days and lost 40% during the period. CG Power and Industrial Solutions share price opened at a loss of 20% today and was stuck in lower circuit in subsequent trade.

CG Power investors have lost Rs 396.25 crore since Tuesday. The market capitalisation of the small cap firm stood at Rs 1,153.21 crore on Monday. On Tuesday, it fell to Rs 924.45 crore. Today, the M-Cap of the small cap stock fell to Rs 756.96 crore on BSE.

CG Power share price saw only sellers and no buyers in early trade. CG Power share price has fallen 80.69% during the last one year and fallen 73.81% since the beginning of this year.

The board suspects significant understatement of the firm’s liabilities and advances to related and unrelated parties. In fact, total liabilities of the company and the group may have been potentially understated by approximately Rs 1,053.54 crore and Rs 1,608.17 crore respectively as at March 31, 2018; and by Rs 601.83 crore and Rs 401.83 crore respectively as at April 1, 2017, the firm said after a meeting of Board of Directors as well as Risk and Audit Committee held yesterday.

The firm further said advances to related and unrelated parties of the company and the group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore respectively as at March 31, 2018; and by Rs 1,479.34 crore and Rs 1,331.47 crore respectively as at April 1, 2017. The company’s net worth was potentially understated due to unauthorised and inappropriate write-offs and charges debited to the profit and loss statement during the year ended March 31, 2018 and April 1, 2017, the filing said.

Meanwhile, according to a Business Standard report, the ministry of corporate affairs has ordered a probe into the affairs of the company. The probe was ordered after auditors of the firm resigned a few months ago.

CG Power Share Fraud

Thapar has only 8,574 shares out of 62.6 crore shares of the company. This shareholding does not provide him with a board position, they said. They added that Thapar would, however, continue on the board as only shareholders have the right to remove a director.

Though a founder promoter of CG Power, he lost almost all of his shares after lenders in past years invoked pledges he had created to borrow money.

In the regulatory filing, CG Power had stated that the transactions appear to be undertaken in a “seemingly fraudulent manner” and that it would investigate them further.

It had stated that the company’s current and past employees, including unnamed non-executive directors and certain Key Managerial Personnel (KMP) provided certain assets of the company as collateral and made the firm a co-borrower or guarantor to obtain loans without due authorisation.

The funds so raised were routed out of the company. This, the company said, had been going on for two years now.

Advances to related and unrelated parties of the company and group may have been potentially understated by Rs 1,990.36 crore and Rs 2,806.63 crore, respectively as on March 31, 2018, and by Rs 1,479.34 crore and Rs 1,331.47 crore, respectively as on April 1, 2017, the filing had said.

According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Also, total liabilities of the company and group may have been potentially understated by Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on March 31, 2018, and by Rs 601.83 crore and Rs 401.83 crore, respectively, as on April 1, 2017, it noted.

These transactions, the filing said, appear to have been carried out by various means, including inappropriate netting off using ostensibly unrelated third parties, routing transactions through subsidiaries, promoter affiliated companies and other connected parties.

The company now plans to conduct a detailed forensic investigation to establish wrongdoing.

Yes Bank Ltd owns 12.79 per cent of CG Power after it had in May invoked shares pledged by Thapar’s Avantha Holdings Ltd. Mutual funds such as HDFC Asset Management Co and Aditya Birla Sun Life AMC Ltd as well as Life Insurance Corp (LIC) are shareholders of CG Power.

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