From Fraud to Fortune: The CG Power Revival Story | Govindraj Ethiraj

ELI5/TLDR

CG Power, the old Crompton Greaves, was a profitable 75-year-old maker of motors and transformers until its previous owners quietly siphoned out about 4,000 crore over three years and left it for dead. Banks declared it a fraud account, no one would lend it a rupee, and its factories went silent right as COVID hit. The Murugappa Group bought it out of the wreckage and parachuted in a 62-year-old finance veteran, Natarajan Srinivasan, who in 90 days paid off creditors, restarted the plants, and over a few years turned a corpse into one of the hottest companies riding the transformer boom. This is his account of how he did it.

The Full Story

What CG Power was, and how it broke

Crompton Greaves split into pieces in 2015. The consumer-appliances half was sold to private equity and lives on as Crompton Consumer Electricals. What was left — railways, motors, and power systems (transformers and switchgear) — became CG Power and Industrial Solutions, still run by the old promoters, the Thapars, who had pledged their shares to keep control.

Then the money started leaving. Between roughly 2016 and 2019, Srinivasan estimates close to 4,000 crore was diverted out of the parent company — long-term loans, working capital, assets sold off. The pattern was a familiar one in Indian conglomerates: a promoter quietly using the healthy flagship to plug holes in other businesses, except here it crossed from support into outright looting.

“The amount of money that had been diverted… it was so large. It was a rough close to about 4,000 crores. And I think the company could not withstand that kind of cash outflow being taken out.”

In August 2019 the board did something rare: it wrote a 35-page letter to the stock exchange disclosing its own accounts might be fake — liabilities understated, profits overstated. Banks declared it a fraud account, reported it to the RBI, froze the books. The Ministry of Corporate Affairs went to the National Company Law Tribunal and got the last five years of accounts thrown out, to be reopened, recast, and re-audited from scratch.

The handover

Because CG’s products feed the power grid and infrastructure, the banks wanted a serious buyer — one with management depth, governance, and cash. They approached the Murugappa Group. After a “Swiss challenge” auction in which nobody else dared bid (“it was very scary”), Murugappa won. Under an RBI framework, the new owner had to take 51%+ of equity, replace the entire board, and remove anyone named in the investigations. On 26 November 2020 Murugappa took 58% for 800 crore, and Srinivasan became CEO.

He got seven days’ notice. He nearly quit on arrival.

“I really had the shock actually. I thought whether I did the worst blunder of my life.”

The hole he stared into: 2,600 crore owed to secured creditors, 700 crore to unsecured, 45 crore in unpaid employee dues, 1,300 crore in guarantees on bad overseas loans, a 1,000 crore tax demand, nine idle plants, zero working capital, and investigators from the SFIO and CBI literally occupying the office. All during COVID, when only a dozen people were allowed in the building.

The first 90 days

This is the heart of the story, and it’s a clinic in turnaround speed. The Murugappa parent (Tube Investments) injected 800 crore of equity; on the strength of that, State Bank lent another 800 crore against a corporate guarantee. With 1,600 crore in hand, Srinivasan moved fast:

Secured creditors: he negotiated the 2,600 crore down to a 43% settlement — paid 1,000 crore, 600 now and 400 over four years. The moment they were paid, banks lifted the NPA tag and CG became a “standard asset” again.
Vendors (the 750 crore that had frozen all supply): settled in 60 days, with a promise to pay future bills in 90 days dropping to 60. Copper and steel started flowing again.
Employees: paid the 45 crore owed, plus two years of bonus they technically weren’t due, and moved everyone’s provident fund into a safe government account so they’d never have to trust the company’s own trust again.

“You don’t have to worry about anything about the past. Any legacy, everything, you send it to me. Your job is to only production, meet the customer demand… make the customers believe that CG has come back.”

Plants restarted within 30 days. The quarter of January–April 2021 booked 1,000 crore in revenue, a number not seen in seven or eight quarters.

Winning the market back: Project Regain

Market share in motors had slid from 27% as the company went dark. CG was the largest motor maker in India — a lakh of motors a month against ABB’s 30,000 — and crucially, its dealers and railway customers had been loyal for generations.

“Sir, we are there for four generations. We have been benefited. It is our time to help the company.”

In railways, the saving grace was that vendor approval takes two years, so competitors couldn’t simply slip in. Srinivasan paid an upfront 50 crore penalty on old orders, and within two months CG was back on the approved list. He named the whole effort “Project Regain” — regain markets, customers, geographies — and pushed share from 27% back up to 34% in about 18 months.

The land fight and the lucky tailwind

On the asset side, a Kanjurmarg property in Mumbai had been carved into three phases; phases one and two were already sold (600 crore, taken out). Phase three was tied up in a contract so punishing it charged 10 crore per month of delay. Srinivasan, who has a legal background, threatened to get the deed voided and squeezed the builder into selling phase three to CG for 425 crore. He also fought off a 1,000 crore tax demand and an 80 crore BMC claim on the Worli (CG House) property, which is now being redeveloped into a much larger commercial building.

Then luck arrived. As COVID lifted, demand for transformers and switchgear exploded — driven by the energy transition, the 500 GW renewables push (and the grid rebuild it demands), and data centers. Srinivasan saw it early in his inquiry book and doubled transformer capacity from 17,000 to 35,000 MVA over peer skepticism, just as Elon Musk was warning of a global transformer shortage. By year two the company was posting 500 crore of operating profit plus the 400 crore land gain.

The governance lesson

The uncomfortable part: all the diversion happened after the 2013 Companies Act strengthened audit committees and independent directors, and after SEBI’s heavy disclosure rules. The controls existed. They failed anyway.

“Unless there is integrity at the top, I don’t know whether this will work.”

His broader points for any business hitting trouble honestly: keep an 18-month stress-tested cash flow, and go to your bank before you default, not after. Raise equity, raise debt, sell an asset, run at reduced capacity — “so many options were available but nothing was attempted.” He sees a large unrealized opportunity in India’s pile of written-off-but-still-breathing distressed assets, if the RBI takeover mechanism that saved CG were used at scale.

Key Takeaways

CG Power was a profitable 75-year-old market leader (motors, transformers, switchgear, railways) hollowed out by ~4,000 crore of promoter diversion between 2016–2019, then declared a fraud account.
A self-disclosure letter from the company’s own board to the stock exchange in August 2019 — flagging that its accounts might be falsified — triggered the collapse. This kind of self-reporting is rare.
The NCLT ordered five years of accounts reopened, recast, and re-audited; the recasting was expected to take three years and Srinivasan finished it in under 15 months.
Murugappa acquired 58% for 800 crore under an RBI framework requiring 51%+ ownership, a fully replaced board, and removal of anyone named in investigations.
Turnaround sequencing mattered: equity injection → bank lending against guarantee → settle secured creditors at 43% → get NPA tag removed → restart vendor supply → restart plants. Done in ~90 days.
Generational loyalty of dealers and railway customers, plus a two-year vendor-approval barrier in railways, kept competitors from permanently taking CG’s market while it was dark.
The post-COVID boom in transformers/switchgear (energy transition, 500 GW renewables, grid rebuild, data centers) provided the demand tailwind; CG doubled then planned to quintuple transformer capacity.
Governance failed despite post-2013 controls (strengthened audit committees, independent directors, SEBI disclosures) — Srinivasan’s view is that integrity at the top can’t be fully engineered by rules.
Practical resilience advice: maintain an 18-month stress-tested cash flow and approach lenders before defaulting, not after.

Claude’s Take

This is a strong, specific turnaround narrative told by the man who ran it, and the value is in the operational detail — the exact debt numbers, the 43% creditor haircut, the 90-day sequencing, the builder standoff. That’s the stuff you rarely get on record. Srinivasan comes across as genuinely capable and refreshingly candid about nearly quitting and about meditating to manage his blood pressure.

Two caveats keep this at a 7 rather than higher. First, it’s a one-sided account: the man is also the author of a book promoting this exact story, so the heroism is self-narrated and the lucky transformer tailwind gets less weight than it deserves — a chunk of the financial turnaround was a sector boom he rode rather than engineered, and he half-admits it. Second, the interview meanders, and the host’s questions sometimes circle the same product-mix ground three times. The governance discussion is honest but ends on a slightly hand-wavy “you can’t legislate integrity,” which is true but not new.

Still, as a concrete case study in how Indian distressed-asset resolution actually works in practice — RBI mechanism, Swiss challenge, NPA tags, recasting accounts — it’s more useful than most business-press coverage. Worth the time if you care about turnarounds or Indian corporate plumbing.

From Fraud to Fortune: The CG Power Revival Story | Govindraj Ethiraj | The Core Report