CG Power stock plunges over 30% on provisions, write-offs

ET Intelligence Group: Shares of CG Power & Industrial Solutions shed about a third of their value on Wednesday after its promoters adjusted loans against royalty dues and wrote off significant receivables at the manufacturer of power generation and distribution equipment.

The combined impact of a provision against receivables and write-offs resulted in the company posting a net loss of Rs 150 crore in the December quarter. The inability to sell loss-making operations in Hungary further roiled investors, sending the stock to its biggest single-day decline.

The stock has fallen 61 per cent in the past six months.

Separately, the quantum of loan-repayments from the promoter group was much lower than earlier guided, and advances worth Rs 41 crore given to a subsidiary look unrecoverable.CG Power received Rs 80 crore in the December quarter from the promoter group, compared with envisaged payments of Rs 200 crore. CG Power has outstanding loans given to a wholly -owned subsidiary amounting to Rs 877 crore.

Besides this, the company adjusted outstanding loans from promoters against royalty. Total outstanding receivables from promoter group entities were Rs 761 crore and after the adjustment against lower royalty payment, the amounts would come down to Rs 261 crore.

Royalty payment to promoters reduced to 0.5 per cent of consolidated net revenues from 1 per cent earlier. As a result, a sum of Rs 411 crore has been reduced from the outstanding loans from the promoter group. The new royalty payment formula will be effective from October 2018. The promoters hold a 34 per cent stake in the company and 100 per cent of the holding is pledged.

The remaining outstanding loans with the promoter group will be settled by May 2019, the company told stock exchanges. The company said in the postearnings call that lower royalty payment to promoters could lead to incremental EBITDA of Rs 45 crore.