CG Power board moves to remove Avantha Holdings as promoter

Mumbai: The board of CG Power & Industrial Solutions (CG) has initiated the process to remove the Gautam Thapar-led Avantha Holdings, now owning an insignificant stake, as the company’s promoter in the wake of its alleged role in financial irregularities at the power-equipment maker.

The promoter entities together hold only 8,574 shares in the loss-making CG, which may have lost Rs 3,000 crore due to alleged financial irregularities involving nine transactions.

“The board cannot de-classify a promoter. It has to be done by the regulator. The board has taken legal advice and would be soon approaching Sebi on this,” a CG spokesperson told ET.


The board has already ousted Thapar and chief financial officer VR Venkatesh for their roles in these transactions that included alleged related-party transfers and round-tripping without board approval. The company’s managing director and chief executive officer KN Neelkant resigned on Monday after being sent on leave since the alleged irregularities came to light.

“CG needs to raise equity and restructure debt to reduce the liquidity stress. A change in promoter would be helpful in taking this ahead with potential investors and existing lenders,” the company spokesperson said.

A source close to Thapar said, “We have no view into what the board of CG is planning next but hope that proper process is followed in taking the right decisions aligned to the larger interest of all shareholders. Unfortunately, what has been done with the Vaish Report has created confusion, is misleading and has eroded value and has cost the shareholders dearly.”

According to Sebi, when a promoter is reclassified as a public investor, he has to relinquish both special rights and control over the affairs of the listed firm, and will not be allowed to hold more than 10 per cent stake. The promoter would not be allowed to have any representation on the board of directors or act as a key managerial person in the listed entity. The regulator now allows such a listed entity to be considered as a ‘listed entity with no promoter’, as against the earlier-used term ‘professionally managed’.

A CG board member, on the condition of anonymity, said: “This is not the first time that a change of promoter is happening; probably, the first time it is happening under these circumstances. How can they remain promoters when their stake is so insignificant? As things stand today, CG is a board-managed company and no shareholder has intervened in its working so far.”

CG Moves to Remove Avantha as Promoter

Last month, private equity firm KKR acquired a 10 per cent stake in CG after invoking pledged shares. Institutional investors, including Yes Bank with a 12.8 per cent stake, now own more than 51 per cent in the company. CG has appointed Ashish Kumar Guha as chairman of the board of directors, and set up a Special Situation Committee (SSC) to resolve the issues faced by the company.

CG mandated law firm Vaish Associates with an investigation that revealed alleged fraudulent transfer of funds from the company. Subsequently, Sebi barred Thapar, Avantha Holdings and former directors from accessing the securities market, or being associated with any market intermediary or listed company. Thapar and the other entities had challenged this in the Securities Appellate Tribunal (SAT), but the plea was quashed on Tuesday.