CG Power surges 11% as JV to set up Rs 7,600-cr semiconductor unit

Shares of CG Power and Industrial Solutions (CG) surged 11 per cent to Rs 494.40 in Friday's intraday trade amid heavy volumes, after the company said that it will build an outsourced semiconductor assembly and test facility in India in association with Industrial Solutions Limited, Renesas, and Stars Microelectronics.

The joint venture (JV) will be 92.3 per cent owned by CG, with Renesas, and Stars Microelectronics holding equity capital of approximately 6.8 per cent and 0.9 per cent, respectively. The JV plans to invest Rs 7,600 crore over a five-year period, which will be financed through a mix of subsidies, equity, and potential bank borrowings as required, the company said in an exchange filing.

The Cabinet, on Thursday, approved the setting up of three semiconductor plants including CG India's. The construction of these plants will start in the next 100 days.

CG is keen to build semiconductor capabilities and ecosystem in India. Renesas, a leading semiconductor company headquartered in Japan, will provide advanced semiconductor technology and expertise. Stars Microelectronics, a Thai based OSAT, meanwhile, will provide both technology for legacy packages and training and enablement.

"The JV will set up a state-of-the-art manufacturing facility in Sanand, Gujarat, with a capacity that will ramp up to 15 million units per day. The JV will manufacture a wide range of products – ranging from legacy packages such as QFN and QFP to advanced packages such as FC BGA, and FC CSP. The JV will cater to industries such as automotive, consumer, industrial, 5G, to name a few," the company said.

At 09:21 AM, CG, the Murugappa Group company, was trading 6 per cent higher at Rs 471.05 as compared to 0.54 per cent rise in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 501.75 on November 23, 2023. Average trading volumes on the counter jumped three-fold today with a combined 4.8 million equity shares having changed hands on the NSE and BSE.

However, in the past two months, till Thursday, CG had underperformed the market by falling 2 per cent due to disappointing December quarter results. In comparison, the S&P BSE Sensex was up 0.36 per cent during the same period.

"During the quarter, weak demand for Motors led to a price war with everyone trying to sell their volume, poach into customers to retain their market share.
The company took a strategic call to sell equally aggressively to retain the customers and protect its turf. This had the effect of dipping the margins on the one hand and a market share gain on the other," CG said.