If concluded, the deal will likely give Murugappa at least 70% of the debt-laden company.
Separately, the Welspun Group and L&T Group have also initiated preliminary talks with lenders to buy CG Power, one of the sources cited above said.
“Other buyers have evinced interest but lenders are considering Murugappa Group as they have already submitted a non-binding offer. The deal is on the negotiation table and lenders want to extract as much value they can,” said a senior bank official involved with the deal. “The money that the potential investor brings in would be used to meet operating and working capital expenditure. Plus, there will be a separate debt restructuring.”
The Rs 40,000-crore Murugappa Group earlier submitted a non-binding offer that involved an equity infusion of Rs 750 crore; this offer was later increased to Rs 850 crore, lenders in the know said. The investment is contingent upon lenders agreeing to the debt restructuring at CG Power. The company had net debt of more than Rs 3,000 crore in July.
The Murugappa Group has an engineering division, indicating potential synergies with CG Power and Industrial Solutions that designs, manufactures, and markets products related to power generation, transmission, and distribution.
CG Power, Murugappa Group, L&T and Welspun Group did not respond to mailed queries.
On July 2, CG Power informed the exchanges that it was working on a debt resolution plan with its lenders and had signed non-disclosure agreements with certain potential investors for undertaking due diligence. However, none of these have culminated into a binding offer by the potential investor, which has been accepted by the company or lenders.
ET had earlier reported that a State Bank of India-led consortium including ICICI Bank, Axis Bank and Yes Bank have been reluctant to offer additional funds, except for operational purposes.
Issues at CG Power started when a board-instituted investigation found major governance and financial lapses, including some assets being provided as collateral and money from loans siphoned off.
After the scam came to light, the company sacked founder Gautam Thapar as chairman, and a new board undertook the exercise to clean up the accounts and fix governance issues. The Serious Fraud Investigation Office (SFIO) and SEBI are probing the former management of CG Power for lapses and fraud.