Investors, Lenders Want Gautam Thapar Removed As CG Power Chairman

Investors and lenders of power equipment maker CG Power & Industrial Solutions Ltd. want Gautam Thapar to be removed as chairman of the company after an investigation unearthed a multi-crore financial scam in the firm, people in know of the development said.

In a regulatory filing on August 20, CG Power said a probe by a legal firm revealed that the Gautam Thapar-founded Avantha Group flagship understated its liabilities and advances made to related and unrelated parties, among other financial irregularities.

The transactions were carried out by some key managerial personnel and other employees prejudicial to the company’s interest, according to an exchange filing. The transactions appeared to have been undertaken in a seemingly “fraudulent manner” warranting investigation, it said.

While the CG Power board had on May 10 sent Chief Executive Officer and Managing Director KN Neelkant on leave, pending an investigation into "suspect, unauthorised and undisclosed" transactions, Thapar has continued as the company's chairman.

According to the people cited above, some investors, at whose behest the probe was launched, now want Thapar and Neelkant to be removed from their posts to enable a thorough clean-up of the company affairs.

An email sent to Thapar seeking his comments on the CG Power scam and the move by the investors remained unanswered.

While the August 20 regulatory filing did not name anyone involved in the scam, the people said the investigation had found strong links to the present management.

Though CG Power, with 8,000-plus employees and manufacturing units at 21 locations worldwide, has an excellent track record and a strong order book, the alleged irregularities had led to it becoming overleveraged, investors and lenders felt.

The company's board is authorised to remove the chairman, and once this happens in the coming weeks, one of the independent directors may be named as non-executive chairman, the people said.

Thapar has only 8,574 shares out of 62.6 crore shares of the company. This does not provide him with a board position, they said, adding 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 shareholding after lenders in the previous years invoked the shares he had pledged to borrow money.

In the August 20 regulatory filing, CG Power stated that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further.

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 firms and connected parties.

Yes Bank Ltd. owns 12.79 percent of CG Power after it had in May invoked pledged shares of Avantha Holdings Ltd. Its stock too has taken a battering since the CG Power fraud came to light.

Mutual funds such as HDFC Asset Management Company Ltd. and Aditya Birla Sun Life Asset Management Company Ltd., as well as Life Insurance Corporation of India, are shareholders of CG Power.