MCA orders probe against CG Power, inspection report to be ready soon

CG Power and Industrial Solutions is under the lens of the Ministry of Corporate Affairs (MCA), which has ordered an inspection into the affairs of the company, said a senior government official. 

The probe was triggered after auditors of the power equipment maker resigned a few months ago.

“The inspection report will be ready soon and appropriate action will be taken,” the senior government official added.

After convening a board meeting that ran into the wee hours of the morning, the company announced that it will restate earnings after discovering “suspect, unauthorised and undisclosed” transactions.

The office of the MCA’s regional director, western region, is in charge of the probe. According to reports, auditors of the company resigned on April 27, 2018, on its request, following the advice of its overseas loan arrangers to recruit top auditors.

An audit committee of the company flagged off unauthorised transactions by certain employees of the company leading to an understatement of not only the company’s liabilities but also advances to related and unrelated parties of the group.

Thapar, the founder of Avantha Group, demerged the consumer business in face of financial troubles, which became Crompton Greaves Consumer Electricals, and the erstwhile Crompton Greaves became CG Power and Industrial Solutions.

His stake in Crompton Greaves Consumer, which also houses the brand, was sold to private equity (PE) funds Advent International and Temasek Holdings for Rs 2,000 crore in 2015. The promoters had also pledged CG Power shares against loans they took to invest in other businesses. The MCA could soon knock on the doors of the business tycoon as part of its inspection.