From Fraud To Fortune The Cg Power Revival Story

TITLE: From Fraud to Fortune: The CG Power Revival Story | Govindraj Ethiraj | The Core Report CHANNEL: The Core DATE: 2026-05-09 ---TRANSCRIPT--- CG had given guarantees to secure [music] some of the loans given to its overseas subsidiaries. And those loans have become bad and the value of guarantees outstanding [music] was 1,300 crores. So, January to March, you know, I was very very keen to get the production started.

Mhm. January to April 2021 uh we reported a 1,000 crore turnover, which was never seen in the last 7-8 quarters. [music] Lot of confidence came. And enormous amount of communication, even though there was COVID there. In that time period that you lost the market and then go back into the market to get it. Was there a I mean, that must not have been easy because others would have moved in. We came out with a project called Project Regain. You know, regain lost markets, regain customers, regain [music] geographies and then uh from 27% market share, which came [music] down 27th, then uh we moved up to about 34% in about 18 months. And I’m joined by Natarajan Srinivasan, author of The Great Revival. It’s about the CG Power’s comeback. So, uh the question, of course, is what is CG Power to those of you who may have tuned in late, as they say, and why are we talking about it? Uh so, let me start there, Mr. Srinivasan. So, CG Power, of course, is Crompton Greaves, but when did it become CG Power? What is the transition? And then there was a big shift in ownership and something led to it. Uh the previous owners of CG Power, that’s Thapars, stepping out and uh the Murugappas, who you represented, coming in. So, walk us through that period of history, recent history. Uh thank you, Govind. First of all, thank you for again having me having me here. Our pleasure. Uh just to give you a background, in 2015 there was a demerger of original Crompton Greaves. The consumer electrical business was spun off, which is a listed company even today. Mhm. Uh called as Crompton Consumer Electricals. And then the promoters divested this that entire stake to a private equity. Mhm. The residual company was called as a a CG Power and Industrial Solutions. It had only three businesses, the railways, uh motors, and then the power systems business. Our systems is actually transformer and the switch gears. So, both listed companies. Mhm. And then for all practical purposes the promoters got out of the consumer electrical business. I mean some kind of an indication that probably there were problems even at that point of time. Otherwise this entire sale if you look at was sold you know the the private equity picked up the entire stake at the share price of 90 rupees. Today it is at 250 or 260. And then they sold the entire thing and then they were supposed to manage the residual company which became CG CG Power and Industrial Solutions. Even here the promoters had their pledged their holdings and then uh they were running the company. Between 2015 and 2019, within a four a period of four years, subsequently you will know I think a large amount of money was diverted from this enterprise. So, this unit became sick. Gradually deteriorated is deteriorated. In 2019 a whistleblower sent a complaint to the management to the board alleging some kind of malpractices and board got a wind and then the wind of what was going on. And if I remember right on 19th August 2019, the board wrote a 35-page letter to the stock exchange self-disclosure saying that we we are not comfortable with the the accounts that we have in earlier disclosed. Something may be wrong. The liabilities may be understated. Profits may be overstated. So, we have appointed investigating agent an investigating agency to get get into all the details. Uh so, therefore we want to put the entire exchange on record. And then this went to since shockwaves. Then thereafter after this disclosure letter, it’s I think a lot of one of its rare kind. The board itself coming forward and saying something is wrong. Then the company went and did this a slow of investigation followed. The by the time the finances further deteriorated and then company became an NPA. Then bankers declared the company as a fraud account. And reported RBI. Bankers really took charge of the company at that point of time. In early early 20s at even early late 19 2019 itself they took charge of the company. They appointed a concurrent auditor. Therefore, the entire accounts were frozen. So they got So 2,600 crores was owed to the secure creditors. Therefore, then the bankers actually wanted to because the company was very important in the from the national point of view because some of its products go into the infrastructure and then electric electricity build up etc. They were wanting to bring in a promoter who has got a management benefit, who has got governance, and who has got a cash to support. So they were looking for and then they approached the Murugappa Group. The Murugappa Group after some preliminary ideas they evinced interest. Then there was a And after some negotiations some offer was made and then there was a Swiss challenge. The bankers said, you know, this is an offer from one of the company promoters have made. Whether anybody was interested uh, anybody was interested to bid and nobody bid because there are a number of reasons. If you see that kind of situation that prevailed at that point of time, it was very scary. Uh, then Murugappa’s succeeded in the bid. And then they they were allowed to take over the company under an RBI mechanism RBI’s asset mechanism. It had certain covenants. Uh, I’ll just briefly touch upon. You have to the new promoter coming in must own 51% of the equity. Entire board has to be changed and then all came and key managerial personnel and those involved in any of the mentioned in any of the reports also will have to go. It is under that is under this framework on 26/11/2020 Murugappa’s took over the company. They acquired they acquired 58% equity for a value of 800 crores and then I was appointed as the Indian CEO of the company. And then other other members also joined in Mr. Vellayan Subbiah became chairman of the board. I will stop here. Yeah. And it’s interesting because this is the time when most of the world would not even have noticed that this was going on because we were in the thick of COVID. Absolutely. So how did all of this happen? Or am I obviously on Zoom but how else did this So so COVID was a because there was a lot of first of all you know all the there are nine plants of CG. None of them are functioning either due to COVID or due to lack of funds. There was no working capital because 750 crores was due to the vendors. So no vendors was willing to supply to anything. If you want to say you can say because of COVID also we locked the So completely it was there. And then there were there were movement restrictions. You could not just like that go anywhere. Even in the office the day I came there were hardly about 10 or 15 people where people were allowed to sit at home and then there has to be social distancing. It made things more difficult and complex. So a few minutes on the company and the state you found it in. Now this is a company that was with the previous owners for decades several decades. What in your understanding caused this sudden you know change in let’s say the financials? Because I’m assuming that the promoter at that time would have intended to correct things at some point. But that didn’t happen obviously because either the problem the hole was too deep or uh, problem was just insurmountable. The since I have spent about 5 years and then gone into greater details, I can say this now. At the point of stepping in or even before taking a decision, this would not have been known. I’m being very open with you. Uh, so this company was a market leader in many of its products for about almost for about 75 years and competing with global giants like ABB and Siemens. It was all It was always profitable. Uh, always profitable. And all the plants and iron uh, plants located in India were actually, you know, mostly constructed through accruals and they had overseas acquisitions also were made out of the profits made in India. I think single reason uh, I would say that, you know, uh, the amount of money that had been diverted between before a period of 3 3 and 1/2 years from 2016 to 2019, it was so large. It was a rough close to about 4,000 crores. And uh, I think the company could not withstand that kind of cash outflow being taken out. Both in terms of, you know, its long-term loans and short-term funds, working capital funds were taken away, some assets were sold. So many things had happened. This is one. Second thing is uh, whatever the company did in terms of overseas and overseas acquisition etc., they did not do well either due to management failure or lack of attention or the way they were structured. Uh, so cumulatively these two really brought the downfall. In this is the parent company was actually the the main company which was supporting all the operations. The large part of the diversion took place in the parent company and then parent and operations of the parent company came to a halt. It became a non-performing asset under the RBI norms and also because uh, then they found out that it was a fraudulent activity and declared a fraud. Nobody wanted to ever touch the company. The company could not borrow one rupee from the market. No vendor were willing to come and supply. So that was what I mean that hit the final uh nail in the coffin. Right. So, and I’m going to come back to the whole uh you know, the idea of governance, but at a conglomerate level, since India is conglomerate and family-owned, uh there must be some takeaways from this because finally uh this was a case of a owner promoter trying to support some other businesses uh which may have been in trouble and not sort of maybe keeping enough in the parent business or the primary business. But, I’ll come back to that. So, tell us about uh the time that you walked in and what was your first uh task? So, actually uh I got only about 7-8 days notice from the Murugappa’s uh to take over this job. You know, I I knew that it was a sick company. There was some problem. And uh I I didn’t give me enough time, you know, I when I wanted to say never been in manufacturing. You I mean, as in you’ve been in the group, but you’ve been running finance. I’ve been with the manufacturing. In fact, uh NBFC was a short stint. Okay. So, I was very comfortable with manufacturing. Even prior to the doctor you were in Cholamandalam Finance and And then in I was actually the first joint position was CFO of Carborundum. Okay. Then uh see, in the Murugappa group, the finance director’s job is not finance job. Mhm. It is more uh a profitable the profit control, profit planning, acquisition. And then uh there are about 28 businesses, of which about more than 20 of them are in manufacturing. Mhm. And uh I was in the board of Tube Investments for 10 years. So, I’m fairly conversant with manufacturing. Earlier, the earliest things were Carborundum is grinding wheels and Grinding wheels and uh uh abrasives and ceramics, etc. Prior to that, I have I have set up uh sugar plants, power plants, you know, then I have fairly comfortable. In fact, I found the manufacturing to be easier than NBFC. [laughter] Okay. Uh so, coming to this question. Mhm. Uh so, where So, you had 7 days uh of so what what So, I So, therefore, the 7 days notice, I just joined. And then when the day I joined, you know, then the because of COVID nobody was there and it took me about 15-20 days two to three weeks to that you could get information on mail or you can do some video calls. Uh so that is the way you have to pick up. I really had the shock actually. I thought whether I did the worst blunder of my life. Because, you know, I just quickly, you know, six or seven things what was the facing the company. Uh 2,600 crores were due to secure creditors. 700 crores were due to unsecured creditors. Employees dues about 45 crores. So CG had given guarantees to secure some of the loans given to its overseas subsidiaries. And those loans have become bad and the value of guarantees outstanding was 1,300 crores. So those lenders outside India they also wanted CG to uh pay pay up this money. This was on the on the liability side. Then there was a 1,000 crore tax demand. And then when everything when this notice came and the disclosure came, all investigators just went inside the company. The income tax department did its own part, you know, and they did something and they put a 700 crores tax plus interest etc. coming to about close to about 1,000 crores. Then because, you know, after the one of the during this investigation the Union of India actually Ministry of Corporate Affairs they came to know that this was fraud etc. They moved a petition to uh National Company Law Tribunal asking for and got a direction that last 5 years accounts of this company have to be rejected and they have to be reopened, recast, re-audited and so the because, you know, earlier also the last 2 years the auditors expressed a disclaimer. They said they will not be able to express any opinion on the FSR of the company true or false or rejection etc. So this was this was the thing which was outstanding. And then COVID was in full flow. And there was no money in the company. So this is what it initially the position was. And plans were not working. No nil working capital. Because of it the NPA, company was an NPA and also a fraud account. So, you have to address several things and then there was an investigation by SFIO, CBI. And then they were in the office, they were the majority people to sit. When you morning when you go, they’ll be sitting in the other rooms. They will expect you. So, this was the background under which you know, I just walked in. Mhm. So, what what was your first aspect? I’m assuming one is you were arranging all this money including from your parent company, talking to banks and creditors. What else did you So, I tell you first you know, initial reaction was whether I should go back. Because I thought that my BP was going up. And then I thought whether it will be this all worth it, whether it’s possible at all. You know, professional pride does I thought this may be my last assignment. What then will what will happen etc. I picked up some courage. I did more meditation and then picked up some courage and then one thing I realized was that I should not get stressed up. We I have to pick up the quality of handling stress without getting stressed. So, I used to write every morning 10 times, 15 times. You know, the I can handle stress without getting stressed. Handle stress without getting stressed like that. And gradually I I was able to develop some confidence. So, first 2 30 days, I was able to settle the secured creditors. No, 800 crores TI brought in for its equity. 600 crores immediately, 200 crores a little later. Mhm. On the strength of TI bringing in 800 crores, State Bank came forward to give another 800 crores. With a with a corporate guarantee of two investments. So, 1,600 crores was available to me to settle off all these matters and then restart the plant. Mhm. Within 30 days and after hard bargaining at 43% Mhm. of 2,600 crores 1,000 crores I settled. The 600 crores I will pay, 400 crores over a period of 4 years. Mhm. Immediately moment secured creditors were settled, I asked them to remove my NPA tag, they removed. They gave me a big tonic. So, I became standard asset. Then I spoke to all the vendors. Then I showed them that you know I’ll settle the payment immediately and then you asked them to again restart supplies. And then I showed them that within 90 days I will I will settle the payment and over a period of time I will reduce it to 60 days. And I will also assure them that a thing of that will never happen in future because of the sound financial planning and principles by which the Murugappa Group runs the business. So within 60 days I settled the vendors and settle Okay, that’s And vendors one of the main raw material is copper. Components you know everything you know steel, copper. Copper is one of the 15-20% is correct. Correct. Then you know then then packing materials everything even two weeks stationary nobody was paid. Then employees dues also I paid. So by we took over 45 crore was pending. Pending then I went to the board and also apart from 45 crore sir I made them agree to next to payment of two years bonus whether they are not eligible plant those working etc. Whatever is the minimum bonus. I think because they were impacted on two accounts. One is on account of COVID. The second is that stress whether the job will be there. So they were all worried a lot. I wanted them to have some money on hand. So that also I paid. By you know we as told you we we acquired the company on 26/11. By February end I paid off all this. So 30 days 60 days 90 days. Then the moment I paid everything vendors started coming. Then SBI gave some money then I requested them to provide some working capital which they also gave. So production started within within 30 days I could start production in all the plant. In the So this was the activity for the first 90 days. So January to March you know I was very very keen to get the production started. So first two quarters actually we reported that is 2021 January to April 2021 Uh, we reported 1000 crore turnover which was never seen in the last 7-8 quarters. Mhm. And then and then there was a lot of confidence came. Uh, in almost amount of communication, even though there was COVID. I vac- I vaccinated myself and then had the the thing, you know, mask. Then I did extensively traveled. I traveled to plants and then addressed all the employees, union. And then I told them, “Here is a chance for you. You can redeem You can redeem the entire company and then your own life. Mhm. And then you will go into the history of having created a new CG. And then how it was I showcased the Murugappa values, how 30,000 employees of Murugappa’s were taken care. They will take care of you.” So, I had a but I I was not very fluent in Marathi and Hindi. Therefore, I used to have a translator. But it worked. So, unions, I told them, “You have a responsibility. You can become a actually a talk of the town. That is the kind of work you can do.” The employees actually, because there was a a CG pride, you know, they most of them were in the company for second generation or third generation. So, they feel there’s an opportunity. We will and they said, “You do I told them that you don’t have to worry about anything about the past. Any legacy, everything, you send it to me. Mhm. You will Your job is to only to production, meet the customer demand, address customer’s calls. You have to come back. You have to make a uh, make the customers believe that CG has come back.” And it worked wonders. Mhm. Everybody the team entire team rallied around. Uh, a few things which I did actually also sparked. For example, I organized the vaccine camps. And then permitted people to work from home. Then you were at your convenience, you come, but you you are you are responsible for this job. I don’t want to police you. Like that I took a liberal attitude. Mhm. Then then third thing, you know, they were worried about their PF. Uh, immediately, you know, the company was running its own trust. I said, “Not to worry. I will send you a ledger statement of your entire balances. You verify and tell me. Every rupee of yours I will within 3 months I will transfer to a government account. Government provident fund account, so that will it will be safe forever. Mhm. And I don’t want the company to company has got better jobs to do than managing PF trust. So, these things I did you know the employees actually really this all helped build morale. Right. So, let me pick up one segment of the product mix. So, let’s say low tension motors in which there was at least a 1/3 market share. Now, this product along with let’s say traction motors for railways or transformers and switch gear they disappeared from the market and then they came back. Right, when production stopped. Or I mean this is my is a question that I’m asking. So, my question really is in the time period that you lost the market and then go back into the market to get it. Was there a I mean that must not have been easy because others would have moved in and your dealers would have been let’s say trying to find alternatives and so on. And of course the customers themselves. So, it was difficult but I tell you the we are I said we operate in three businesses. Motors then traction motors is rail railways and then power systems. The both the railways and power systems they are tender based. Now, in railways actually you have to supply to railways business only only you get an inquiry you supply. Railways are backlisted CG because you know you could not supply many of their orders earlier and they also knew that you know you don’t have a balance sheet financial because there was a recasting issue. So, I went and met them. So, I said I have put money our recasting is going on. And TI itself the promoter he is also a supplier for railways. And then you give me a chance. I know then in respect of old orders you know there was a they wanted to levy a penalty of 50 crores. So, I said I will pay it up front. I’ll pay up front. And then my number working capital there we will start working. So, once I did that within couple of months they they included me for future orders. In railways actually once you are approved as a vendor your quality is good you will get orders. And it It not easy for anybody to just like that going. Approval process will take 2 years. So so therefore That worked in your favor. Worked in my favor and then I was I was a quality supplier. So then within 2 months and I paid the penalty and then I said I everything is going on. I met the Arab people. They understood that you know what we are doing etc. Then they started giving me orders. That’s how it went. And motors actually, you know, there was there were three Motors a lot of retail Complete retail but one thing is you know, CG was the largest producer of motors. They produce about 1 lakh motors per month. The next to second biggest is only about 30,000 from ABB. So so we’re a large volume player. So when I met with the dealers they were all very happy that sir I’m very happy that you are So and the context there is that your key competitors are multinationals and this is the CG is obviously a home grown brand. Correct. There are also some local players on there. But not in the scale But you know, this kind of scale. So when I said that you know, even when company was not doing well some of them actually gave materials. You know, so they directly paid the some of the dealers we will pay for the material. You just manufacture and give it to us. Like that some production was going on. So when I met them they were everybody was happy. Sir, it is I’m very very happy that you are coming. And dealers too have been with the company for generations. Exactly. So this what they told me. Sir, we are there for four generations. We have been benefited. It is our time to help the company. Whatever you tell us we will do. You start giving sir, we will manufacture it. We will distribute and then we will be there. So we we came out with the project called project regain. You know, regain lost markets, regain customers, regain geographies like that you know, we went whole hog. And then the production was ramped up. Production was ramped up and then from 27% market share which came down 27th then we moved up to about 34% in about 18 months. So because of because motors because of one reason or because of quality and because of goodwill goodwill enjoyed by the company for years at least I would say 30 40 years 50 years. And then the ability to meet the customer. So I think So what would have been the gap between the market sorry the the product going off market and then coming back roughly? So most it’s as luck would have it it coincided with COVID some for 2 and 1/2 years everything came to a stop there was no demand etc. And when we wanted to do when we wanted to make a comeback then post COVID demand helped. Mhm. So I think what you’re saying effectively for 2 years plus there was no There was a there was a marginal and there was a big decline and very marginal sales. Right. So and and I’m going to going to come back to the product but you talked about liabilities but on the asset side CG has always had a lot of real estate and land isn’t it? I mean all the factories belong to you correct or rather that it sits on land belonging to the company. No so those for the lands you cannot do lands on which factories are built. There was one large property in Kanjurmarg they wanted to shift the plant and then realize 1000 crores cash. I mean it shows the kind of need for cash at the point of time. You know you take money not for expansion you know again take it back somewhere. And prior to our my joining it was in three phase phase one phase two. Phase one and phase two were sold and money is about 600 crores were taken off. Phase three was last pending. And the contract was so onerously structured you know for every month of delay you have to pay a 10 crore penalty on the entire value phase one phase two phase three put together against 490 crores when I when I took already about 180 crores of penalty was there. So that was the only hope for me you know I wanted to relieve that 490 crores bring it here for use the revival of the company and then I have to fight with the fight the contract I had to fight the builder. And then there is an unreasonable term that we will not give up after 18 months. I have some legal background. So actually I I told him that you know I you don’t take me like the earlier interim management. For me already there was some 10-15 cases. That was the 11th case. I will go to Supreme Court. I didn’t give it up. Then finally after 18 months of hard bargaining negotiation I mean we don’t have time to get into my new details. But it’s in the book what I think. But I told him that you know that you know real estate is looking up. Instead of fighting with me, you sell it to me and then you make money in your business. Otherwise you know I will ensure that the deed is sale the agreement itself is struck down as void and you know based on some illegality. I met his lawyer also and I I know his lawyer. Therefore I point told him that what are the points on which I’m looking at. Then he came to the negotiating table. He asked for 100 crores discount. And settled at 425 crores. I told him within 30 days he have to sell that complete the transaction. He agreed. Then I got 425 crores. This is the second year. And second year you know then our working everything went up. I asked for unconstrained business plan. The team was a gung-ho. We produced 500 crores PBT plus these 400 crores. Then things changed. Mhm. Let me uh let me come back to the product. So uh whether it’s low tension motors or motors in general, traction motors, transformers, switch gear, all of this was uh a market where let’s say the product need was more or less similar or consistent over the years. So my question really is from the time let’s say you took over and as you looked ahead, what was changing in the marketplace for some of these products or what was changing in customers’ requirements? So actually first in motors there was no change because motors customers are motors. So motors generally you know there are ISS, Indian standards are there. Then the the bureau actually describes. So therefore that is there’s generation three, gen four, gen five motors like that. So, the the scale was taking up. And what is And it was nothing unusual, you know, if you want to go to gen four, it is transparent, anybody can do. I can do, ABB can do, and somebody another small scale player, regional player also can do. It was not a big thing. So, there was not a such I would say epoch-making changes. Some changes were taking place, but this was manageable. Then the transformer switchgear actually first two 2 years are things were very bad. You know, market was bad. Then but I told our team that, you know, you you don’t have to take loss-making orders. Instead of that, you work on your internals. You bring down your cost of manufacture, then, you know, improve your design, you build yourself. Then, you know, we had a program with a Japanese consulting in a Shinjitsu consulting for lean management. You work with them to just set your house in order. Don’t take one single loss-making order or where the So, there the problem was, you know, in government orders, either you will not get your money or or the execution will be delayed and they won’t compensate you. I said I don’t want anything of that sort. I don’t want any situation I made 100 crores in motors, 50 crores in railways, and 100 crores loss here. You do I will instead of that, I’ll pick up your just non-operating loss of I mean because of your reduced capacity. They worked on this, therefore, for 2 years actually it was not a good thing, but the team worked hard to set right their position and then they were ready. But opposed to COVID, things changed. Demand for transformers went up. Because of energy transition. I was the first one to note that, you know, because inquiries the way I was using inquiries It was a solar power Everything Everything was going up. So, going up, therefore, they immediately went to the board. So, we are make profit making. This company had 50,000 MVA capacity, but it was all completely, you know, either you know, it got destroyed or removed or something like that. We are only 17,000. Let us immediately double to 35,000. Demand is coming. So, in fact, one of the interview said some other company peers called, “How are you so bullish about this?” This is a estimate I mean, just a feel from the inquiries and what I’m seeing, etc. That was the time when Elon Musk also made a statement. There’s going to be a global shortage of transformers. Then data centers. They never took off. Then it never changed actually. So, this was the change. So, the transformer uh demand for transformers, switch gear, and the entire power auxiliaries because of the data centers and the from data centers and then the energy transition, government’s big push to uh get into 500 gigawatt of renewable power. And they didn’t change. So, that gave a different outlook for them. Railways actually there was neither a change in our industry direction. They were going on. There’s something like Vande Bharat keep on coming and going, etc. So, there also then the railways big thing was the Kavach was a new thing. Kavach. So, that for that, you know, safety Uh so, that safety. That we acquired another company to to earlier. Uh which was already approved. There are only four companies that which were approved. Ours was approved. So, we our entry we will take time. Therefore, we acquired that company. We took a 58% 60% stake. And then through that, you know, we entered Kavach. So, by and large big push came only for power, which also I think for next 2 10 years the power sectors will continue to have so much. So, at the time you left, which was July 2024, what was the revenue split between these three? So, still revenue split was motor was higher. Motor was about I think 55%. Then power was about 35% 30%. Then railways was 15. But they were all at the time when acquisition came. Now then you know, probably now power power will equal motor. And then railways actually would still be 25% something like that. But and and the areas like transformers, you you do you see that going you know, I mean, there’s been a lot of talk particularly in the last few months even as more data center capacity has been announced that transformers business will be seen because that’s the sort of un or the less glamorous part of the whole. Also, I think you know, I would say not only transformer so then switch gear then the entire transmission. So look at this way. So they were earlier the grid in India was prepared was was set up only for a thermal power generation or a or all large like 5,000, 1,000, 2,000 etc. Now when this renewable thing came 20 MW, 30 MW, 40 MW, 50 MW solar everything so the grid itself uh has to be completely changed to manage these kind of inflows from these small plants. This is happening worldwide. Therefore, you know, governments actually, you know, the plan con- a lot when they said, you know, 500 GW has to be done from the renewables. They’ve already said 10 lakh crores they’ve set apart for transmission. And similarly when you won’t have a substation. When you have to have a small uh thermal power I mean solar plant etc. You must have a substation able to distribute. Substation will require a transformer as well as switch gear. This is one domestic part. Based on the demand etc. all these players will have a very good play. And you know, so Ukraine at some point will have to be constructed reconstructed. 3,000 km of grid has been destroyed. They will have to come global players will then now secondly, you know, what is happening in Gulf. So I think these are there’s going to be a huge number of worker for all these players. And and what was CG’s exports roughly as total percentage I see? I don’t know. Roughly? Maybe 1,000 Okay. Power will be about 1,000 crores. So I’m not following the numbers now. Okay. No, I’m saying all at the point that you know I think it will be 1,000 maybe it easily for power will be 1,000 because recent public information 900 crore from single order for transformer for US data center they have taken. I think there will be huge. Then now the capacity is a matter. constraint is capacity to manufacture and execute for transformers. Yeah. And how many plants make transformers in the you said there are nine plants? No, there are about one, two, three. Now, they’re sitting up a fourth plant for a large size. Mhm. So, from from Three of the nine From 17,000 I made it to 35,000. So, I think now they’re taking it to close to 90,000. The capacity of Yeah. capacity So, you’re saying three out of the nine plants are making transformers? Three out of them is maybe four. Yeah. Okay. Then switchgear is separate. Switchgear they have one one large plant. Two two plants, I think. One large plant. And two plants. So, this is the now the fastest growing segment within the CG Power portfolio. Driven both by global as well as Indian demand. Correct. Right. Okay. So, now if if you were to look back and couple of questions. So, one is to do with governance as a whole. Now, this was part of a conglomerate and once again it’s part of a conglomerate. And both cases family owned businesses. What is the lesson here for everyone? I’m saying for investors, for founders, when they manage businesses. And the reason you’re a conglomerate also is because you’re trying to manage cycles. Some businesses may do well in some cycles, others may not. And the obviously the idea is that you support each other. But when you over support or you divert funds then things go wrong. I’m assuming that’s one lesson. But what are what are some of the lessons that you can So, so I think one thing you know, whether it is governance or integrity. Mhm. So, this whatever happened in CG is happened between 2019 15 to 2019. Much softer. The new companies at 2013 came in. The new companies at 2013 uh strengthened the role of audit committee, role of independent directors. And apart from this SEBI came out with the LODR. Uh and then we called for so much of disclosures. I mean, it is really I mean, I can’t imagine how these kind of diversions can take place with this so much of controls and so much of system within a period of 4 years and then it did not come to light for a period of 3 years or at least so unless there is integrity at the top I don’t know whether this will work. You know, after this I when companies where I’m still involved, I will tell them that don’t take things for granted. So I so if a subsidiary has taken see that there will definitely be an increase in the level of borrowing and then subsequently in this case, you know, subsidiaries have borrowed money without knowing without the the knowledge of the parent. What kind of you know, people have not really gone in I mean I can’t understand and auditors must have found out auditors simply put a disclaimer and then you know, first 2 years they had their own auditors. So therefore it see one thing one thing you know, however well you plan systematically you want to just to plug the loopholes and then do something I think your your system is not able to prevent. You have to move maybe I don’t know what can happen. In this case this is what has happened. In several other cases you can see after IL&FS, Yes Bank, Lakshmi Vilas Bank, DHFL, all these are cases if you see where system has been overturned and then you know, they found promoters had won the founded way. So so You were also on the advisory committee for IL&FS. I was on the board post fraud. Post fraud yeah. I was there to reconstitution to rectify the fraud. Yeah. Which was chaired by Uday Kotak. Correct. So therefore so the governance you know, they have strengthened a lot. They have the role of audit committee etc. Either you know, the people who are in charge they did not do their job or you know, how do you address lack of integrity? I think this is a big question. So if there is a lack of integrity and then he wants to somehow find out a scheme method a maneuver out maneuver the whatever the systems are there Uh, is going to be tough. So this is what I feel. In In this case, it is not merely to say this the I mean, governance has failed it definitely. Governance has failed. But, I think the to what extent the independent directors one thing in audit committee, why it did not find out all this. It is again a is a clear question for thought. So, similarly it happened in IL&FS. IL&FS rating from AAA it came down to D in in 3 days. It can normally from AAA AA- etc. it came to the default. Rating agencies did not see. Here also the same thing. So, so I think the answer lies in trying to behave in honest manner. And then maybe some qualifications have to be prescribed for the depending upon the size of the company, the the fit and proper criteria will have to be applied better. That’s what I would say. In selecting the people. Yeah. So, I mean, businesses go through bad times. So, let’s say this was a standalone company and the founder maybe legacy founder or new founder is faced with you know, falling market share, COVID, really events which are beyond one’s control, you know, force almost like a force majeure. What could they have done differently? Assuming that there was no intent to cause harm to the company’s balance sheet. So, the one thing you know, this is not the case of falling market share. Or because of issues of COVID. I’m saying if that if assuming there was yeah. That So, then you know, so every So, there are several ways by which you can restructure yourself. You anticipate. In business you must have at least a feel of what is going to happen next 2 years, 3 years. I always used to have a cash flow for 18 months. So, in a stress stress test cash flow, when I’m likely to have a deficit, I will have that kind of If you go to the bank and tell him that I have a problem after 12 months, I want to restructure. I want to do something. I want to augment my capacity. Bank will help you. You won’t tell him that I have defaulted. I’m coming here. Then they they are helpless. They would like to take action against you. So, in this case, if there is an issue, they really wanted you know, money was required elsewhere or if there is a problem, they either they should have raised some equity or they should have raised some debt or they should have postponed sold the worst scenario is sell some of the assets. So so many options were available but nothing was there nothing was attempted. Simply blatantly money was taken from here left right and center and then that killed this main company’s operations. Right. So you’re saying that one is stress test for any company. I mean in general. I mean in a in a in a world where things can go up and down quite dramatically now including now. So one is stress test, 18-month cash flows. What else? So then there are there are there are innumerable amount of things you can do. For example, right now if you take supposing gas is not going to be available, then you’ll have to think of declaring a layoff or whether you can alternate alternate fuel is available. Then you know, because of this supposing your payment is likely to get impacted you’re likely to be a default. You can approach banks will consider because this is a very genuine case because of externally you know this is not available. So the thing is you know, sit down and then working out stress tested scenarios and then how do you build the cash flow gap and what are the options? So you can close the plant for some time or you can operate at a reduced capacity. So many things are possible. So so nothing I seem of that sort has been attempted. In this particular case. Particular case. Okay. So one of the things that you talked about is how you in the beginning felt that you wanted to go back because it was looking too difficult and your own challenges including of high blood pressure. And I also noticed that you were working from 3:30 a.m. till 9:00 p.m. Correct. So I mean that’s a fairly grueling schedule. So how did you manage that? So one thing you know in a turnaround first of first two four to six weeks you must have firm up your thought and give a communication. You you must have you must have clarity. Well, clarity will not be there, but you have to come to some view. You have to make some assumptions and you can do course corrections. And then speed is of the essence. You know, that nobody is going to wait for 3 years, 4 years if you have not done anything. Finished. So, you have to you have to make a decisive impact. This is one. Second is within 18 within 4 weeks you have to communicate to what uh what are you going to do and what is the expectation? The entire population will be Not only the company employees, vendors, other regulators, everybody will be expecting from you. They will expect some clarity. And employees would like to know what is it that you are expecting from them. Now, this is one. Second is you should this companies this kind of stressful companies will have hun- hundreds of problems. So, you must be available to them. Supposing somebody takes time to communicate to you for 3 days then they will get fed up. So, I said, you know, my lines will be open. So, I I took a very aggressive schedule. Within 2 years I think I should finish off all this and then I didn’t production you should go on from right from day one. And if there is I’m I’m reasonably connected in the market so in the financial market so people know me. So, I can once my restructuring was completed people are willing to give me any money. So, I demand subject to demand you know, everybody will have to go on. So, I I said, you know, before every mail from me, I I made it a point that I will reply within 4 hours maximum. So, morning before morning I go to office, my mail inbox will be empty. And also everybody who whoever I wanted something to be done, what I’m expecting them to do that day, next two days, etc. I would have communicated. So, this culture I believe actually people felt this guy is working hard. He’s Let us try to cooperate with him but kind of feeling came. So, you said hundreds of things. Give us an example of something, you know, you had to deal with which you would have not dealt with let’s say uh your earlier role uh in Cholamandalam Finance or many of the other companies that you were The investigation agency is dealing with the chemistry agency. Very tough. So, he will get a call at evening 6:30. They will ask you to come in the morning 9:00 next day morning. So, you’ll have to go and find a ticket COVID time. So, I was really finding difficult to my uh health I didn’t want to get into this. You get sucked up in health. Then I I told them also. Then I told them I earned the confidence. Whatever information you want, I’ll give it only from MSEB. I don’t have anything else. I’ll give you access to SAP. I’ll put a parallel server. You want anything, you take it. Mhm. But the door is a 9:00 if I go, then you will call me only at 3:00. Mhm. I’m not suitable for this. You please give me some mercy. So, like that So, that was a very tough experience. But then most then most of it I was handled by my CFO. I didn’t have to go. Mhm. Yeah. And any other unusual kind of uh areas or issues which you had to intervene which again you would have So, I tell you in terms of challenges Mhm. recasting challenge because you know, there were subsidiaries. Subsidiaries accounts were not available. Then many of the employees were left. The boards were not there. Auditors were not So, we have to reconstruct the accounts. Only through COVID on phone and we get the message. We have to do it aggressively. Every Everyone thought the recasting will take about 3 years. Mhm. I could complete it in about less than 15 months. The recasting was a big challenge because there was no precedent. So, without the board the board approved accounts the auditors will not look at the accounts. And nobody was willing to join a company which was under investigation into the board. Mhm. After trying out various things, finally I convinced some of my employees to be to be on the director on the on the companies as a directors. Uh assuring that you know, I we will compensate if there any issues etc. We’ll take care of them. Covered them under the corporate DNA policy. So, that was a big Every item was a new thing. They’re dealing with the the builder. Mhm. Uh so Is the Kanjurmarg property in North Mumbai? me that don’t be aggressive. These guys are very difficult you know, but I didn’t give it up. So then thousand court tax demand finally you know we knocked it off. Quashed the entire demand. Then there was a BMC building. So 80 crore the current BMC in our building you know under CG house. It was 80 crore demand therefore they wanted us to remove the gate. Then I fought the fought the demand and then finally it all the entire 80 crores was quashed and lease was renewed. Today the building is being developed with you in the hedges in Kala Ghoda. No in What is the one in Worli? Worli. Very posh property. Brilliant property. So but it’s a new building and you are knowing it down and you are building But you know currently it’s only 80,000 square feet is being built. As per the new guidelines we can build 4 lakh square feet. So CG will get after the post new building will get 2 lakh square feet from the 80,000 square feet. Their investment will be very marginal. Most of it will be So it will continue to be a commercial property. A commercial property. Right. Okay. All these dealing in BMC matters etc. you know I mean they are all you know I have to buy the book and then understand the entire thing. Then actually fight the system. It took me some time. So now let me ask slightly broader question. Now this is a company which came to you in a manner of speaking to the Murugappa Group. RBI had already decided that this is the path they are going to follow for its resurrection. When you look around you and and as you look back over the years do you feel that there are many companies like this? When I say like this I don’t mean necessarily with fraud being the being the trigger but companies which are maybe not well managed have products which have which have potential in the market could do more. Maybe there are financially they are weak and therefore they need injection but after injection can they you know manage the same fund better. So when you look around you think there are gems like this if I would could use that word. So I can’t say whether they’ll become gems sir but there is a huge No, there are there are huge non-performing assets in this country. But you know, a large part of MP has been written off by the banks over a period of time. They have written off in the books, but they exist in some form or the other. Now, if those are to be turned around, you know, today I mean, this IBC was a big uh epoch-making legislation. Uh but IBC then later on, you know, so it has settled down because it originally wanted to be a solution provider within a period of 12 months. But you know, many cases got delayed beyond 2 years, 3 years, 4 years, etc. Then the RBI mechanism was actually formed quicker. Then there is surface, then there is a debt tribunal. So, if there is a mass movement to just to uh bring bring bring up or develop all the non-performing assets, I think there’s plenty of opportunity. Country will be economy will be on a steroid. So, but all these things, you know, so uh see the one one thing is when there are the promoters no no disrespect meant to anyone, they will try to cling on. They won’t like to leave. Then you know, they will like to cling on, etc. The The moment there’s a change and the person putting money or some who has given some concessional terms, they will try to bring up the revive the assets. I think that has to be that has to be done on a big scale. I even wrote a letter to the authorities that you know, this uh RBI mechanism can be tweeted and can be used to bring up a lot of assets. And there’s I think it’s a good opportunity available. And and you can see this around you when you see some products in the market or some engineering companies, you feel that Yes, there will be hundreds to see. They could be turned around. created 20x returns. Every case may not create 20x returns. The fact is if you are viable and then if you become profitable, the it is good for the economy, good for the nation. I think that can really happen. Right. So, last question. So, you were about 62 when you wrote this book as well and Age wise I’m 68 now. Okay. 67 When you went in you were 62. Correct. So, this was a very high intensity engagement and assignment. So, now once you finished or you stepped down in 2024 July, did you feel like you were now missing the action and you wanted to get back? Well, I’m basically a very intense person. Mhm. So, it have it was like that. You know, it is a problem if you have to manage. You know, I’m used to work I used to get up at 4:00 every day. Mhm. It is my style. And then I used to work very intensely. In America even even at 85 even the friend governor is 85 as I see. But in India after 60 generally you are not employed. Mhm. Uh so, so I’m trying to spend time. I’m on some boards and some company people are help asking for help. Uh Let us see there is an opportunity I will definitely take it up. Maybe I can do few more years. That’s the one of the reasons why I come back to Mumbai. Okay. Anyway, lovely speaking to you. Thank you so much for joining me today Mr. Subbarao. Thank you very much. Thank