Capacity expansion may drive gains for CG Power

The results of CG Power and Industrial Systems (CG Power) disappointed in terms of margins while witnessing strong order inflows. The company is focusing more on transformers rather than motors.

- DEVANGSHU DATTA

The board has cleared a qualified institutional placement (QIP) to raise ₹3,500 crore. CG Power reported a healthy 21 per cent year-on-year (Y-o-Y) revenue growth and a flat Y-o-Y adjusted profit before tax. Cash position as of H1FY25 stands at ₹900 crore. The industrial systems margin was weak, reflecting stiffer competition. Order inflows were up 31 per cent Y-o-Y and 1.35 times revenues for H1FY25 (up 44 per cent Y-o-Y for Q2FY25).

The order backlog grew 50 per cent Y-o-Y and up 10 per cent Q-o-Q. The management expects power transformer capacity to reach 35k MVA by March 2025 and shared plans to take it to 40k MVA. It is positive on the switchgear segment.

However, it may go slow on expanding capacity for low tension motors, given moderate market growth and high market share. It is on track to expand capacity for high tension motors, where it has a low market share. Capacity expansion could drive gains for CG Power.