Case study of Crompton greaves and its down fall

1. Crompton
Greaves
By: Pushpendra Singh
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2. 2
Family History
Karam Chand
Thapar
Inder Mohan
Thapar
Vikram Thapar
Madan Mohan
Thapar
Lalit Mohan
Thapar
Brij Mohan
Thapar
Gautam Thapar

3. In 2007, after the demise of LM Thapar, Gautam Thapar
became the rightful owner of his part of the business as well,
and consolidated all his inheritance under one banner: Avantha
Group. It had exposure to sectors such as paper, pulp, power,
industrial solutions, consumer electricals, food processing,
chemicals, farm forestry and information technology-enabled
service, among others.
The two flagship companies of the diversified conglomerate,
Ballarpur Industries (BILT) and Crompton Greaves, were over
$1 billion companies each. Crompton Greaves clocked total
revenue of Rs 6,900 crore during 2007-08, while BILT earned
consolidated revenues of Rs 2,849 crore, delivering combined
revenue of $3.5 billion. 3

4. DOWNFALL OF
AVANTHA GROUP
Once a Business Tycoon Gautam
Thapar, Founder of Avantha Group
Now Lost control over the group
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5. What went wrong?
• Between 2005 and 2012 Crompton Greaves had made 10
overseas acquisitions
• BILT acquired Sabah Forest Industries(Malaysia’s Largest pulp
and paper mill)
However the cost of importing from that plant to India became
higher than buying it locally
• Most of the funding was through Debt and the acquisitions were
not able to compensate the debt
• The combined Borrowing of CG topped 7500Crores in 2014
• In 2008, Thapar announced new entry in the Power generation
section, and invested 5000Crore to build two power plant in MP
and Chhattisgarh of 600MW capacity
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6. What went wrong?
• The group continuously kept pumping the money into the power
venture even when it wasn’t able to generate returns for them.
• In 2015 CG decided to sale CG but wasn’t able do so because of
the debt it carried
• So in order get some cash, CG Consumers Electrics was created
as separate entity and sold his entire stake of 34.37% for 2000
Crore to Advent&Temasek
• Industrial segment was bleeding and Cash cow Segment was sold
• Company was left with no funds and still had a lot of debt to pay
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7. 7

8. STOCK
PRICES
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9. 9
Demise of CG
 Market Capitalization of the company went from 18000Crores to mere 750Crores
 Fraud of 5000 Crore uncovered
 Stock prices fell from triple digits to single digit number
 Understated Liabilities of more than 2600 crore
 Understated Advances to related and unrelated parties by 1990 crore, 2806 crore
respectively as of FY17-18 and by 1479 Crore and 1331 Crore as of FY16-17
 Assets used as Collateral without Due Diligence
 In 2015 Demerged Consumer business

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How the fraud came into Light?
 It all begin after the intervention of KKR (private equity onwers) probed into the
company by removing the MD K.N. Neelkant from day-to-day management,
turning Mathur from a independent director to a whole time executive director of
the company.
 Financial Irregulatories
 Vaish Associates and Deloitte alleged that these transactions appeared to be
fictitious. These were discrepancies in the invoices issued: signatures did not
match, tax numbers, addresses and information on directors of particular entities
could not be found and there was no documentation to support claimed physical
movement of goods.

11. THANK YOU
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