Murugappa Group company Tube Investments of India Ltd has announced fundraising of Rs 350 crore ($47 million) from Azim Premji Trust and SBI Mutual Fund.
The company said in a statement it is raising Rs 200 crore through an allotment of 2.7 million shares of Re 1 apiece to Azim Premji Trust and another Rs 150 crore from entities managed by SBI mutual through the issuance of 2 million shares.
The fundraising comes after VCCircle reported in August that Tube will take control of CG Power & Industrial Solutions Ltd, a fraud-hit company that counts private equity firm KKR as a minority investor.
A month later, it proposed to inject more capital worth Rs 100 crore ($13.7 million).
The additional infusion will help CG Power address its liabilities, stabilise operations and improve liquidity.
Tube's proposal for the takeover had come almost a year after CG Power plunged into turmoil when it detected a fraud by some employees, resulting in the firing of chairman Gautam Thapar. A board-led investigation found that these employees pledged the company’s assets without permission, understated advances to related and unrelated parties by Rs 4,796 crore and understated total liabilities by Rs 2,661 crore.
Notably, soon after the fraud came to light, private equity firm KKR -- through non-banking finance arm KKR India Financial Services Ltd and a debt fund -- acquired a 10.01% direct stake in CG Power by invoking pledged shares. KKR fully exited the firm with poor returns.
Established in 1937, CG Power makes transformers, switchgear, circuit breakers, network protection and control gear, and power automation products.
Tube's turnover fell 19% to Rs 4,053 crore in the last fiscal year, which it attributed to the slowdown in the auto industry in its annual report.
The flagship company of the Murugappa Group manufactures products for industries such as automotive, railway, construction, mining and agriculture. It operates three business divisions: engineering, bicycles and metal-formed products. The bicycle division called TI Cycles of India sells brands like BSA, Hercules, Mach City and Montra.
The company has also entered into the thermo-mechanically treated steel bars segment and truck bodybuilding business and is exploring opportunities in optic lens and other vision systems for auto bars, as per its annual report.
The report also said it is focusing on a set of businesses that can reduce the company’s dependence on the auto sector.