The Ministry of Corporate Affairs (MCA) has ordered a Serious Fraud Investigation Office (SFIO) probe in CG Power, and a dozen of its companies, sources have told Moneycontrol.
The MCA ordered an SFIO probe on the recommendations of the Western Regional Director of the MCA, which, in its report on CG Power submitted last month, found instances of diversion of funds.
CG Power has been under the spotlight after a whistleblower letter accused the company's management of misstating its numbers.
After the letter was disclosed, the company restated its FY18 numbers, with its consolidated receivables balances from various subsidiaries, promoter affiliated companies and connected parties jumping from Rs 131 crore to Rs 2,657 crore. Advances to related and unrelated parties of the company may have been potentially understated by Rs 1,990.36 crore, as on March 31, 2018.
Following the restatement, CG Power's lenders converted their debt into equity, taking control of management, led by PE firm KKR.
The new management also ordered a forensic audit and asked company chairman Gautam Thapar, and other key management professionals including the CFO, to resign from their posts of chairman.
Thapar has denied allegations of misappropriation of funds.
CG Power did not respond to Moneycontrol's queries for this story.
The Securities and Exchange Board of India (SEBI) also barred Gautam Thappar, two erstwhile directors of the company, and its Chief financial officer (CFO) from accessing the securities markets, according to a report issued by the regulator.
“The funds diverted from CG Power were fraudulently transferred to its promoter company. Avantha Holdings and entities related/connected with the company, Avantha International, Acton, Ballarpur International, Mirabelle and Solaris, without the knowledge of the company and without any approval from its board,” read the report.
Sebi also barred three entities that belong to the Gautam Thappar Avantha Group.
“The transactions were purportedly carried out by certain company personnel (both current and past) including certain non–executive directors, etc. The aforesaid transactions are prima facie designed to divert/siphon off money from the listed company, which rightfully belongs to its shareholders.”
“Some of the outgoing fund transfers do not appear to be supported by any comprehensible underlying transactions raising doubts on the bona fides and leaving gaps between various transactions,” wrote G Mahalingam, whole-time member, SEBI, in his order.
According to the MCA report, dubious transactions conducted by CG Power include the sale of properties at Nashik and Mumbai to Blue Garden Estate, and the overseas remittance to some Avantha Group entities.
Yes bank and KKR have converted their pledge shares of CG Power into equity.