To be sure, the stock has been a favourite among investors since its acquisition by Tube Investments of India (TII) in 2020. Under the Murugappa group, which also owns Cholamandalam Investment and Finance, CG Power has transformed its business. And quite effectively too!
Its stock has appreciated at a massive 100% CAGR over the last five years. Is it too late to join the party?
Spectacular turnaround
When Crompton Greaves Ltd of Avantha group demerged its consumer and industrial verticals in 2016, it split out the cash-generating consumer business at a rather inopportune time.
The industrials business, now called CG Power, undertook aggressive acquisitions globally. But the economy and auto industry slowed down in the years which followed, leaving the motor and generator maker with stubborn losses and more than ₹2,000 crore in debt as of March 2019. Large related party loans, and financial irregularities and misappropriations had led to an ousting of the then-management, making matters worse.
In November 2020, CG Power was acquired by its vendor, TII. Since then, non-operating businesses have been closed down, debt has been pared off, and the company has turned consistently profitable. Cash flows have turned healthy as well.
More than a power company
CG Power and Industrial Solutions has two primary businesses, if we focus on current revenue-generation – power and industrials.
In its power business, the Mumbai-headquartered company manufactures power transmission and distribution components including transformers, circuit breakers, and switchgears. It also offers turnkey project solutions spanning the entire value chain from design, products, procurement, construction, and maintenance.
Its industrials business includes the entire range of motors and generators –from high-voltage (HV) and low-voltage (LV) motors to fractional-power motors, DC motors, HV and LV generators, and AC, DC, and variable frequency drives. Railway components, including the Kavach anti-collision system, are the latest additions to its Industrials kitty.
It has also entered semiconductors – assembly and testing, as well as design. In Q1 FY26, the company reported 29% year-on-year growth in revenues to ₹2,878 crore. While the largest segment, Industrials clocked a 16% increase in revenues, growth was propped up by the smaller segments. Thanks to these diversified revenues which stabilize growth, Morgan Stanley cited CG Power as one of the most diversified capital goods players.
Adverse margin-mix, but prospects promising
The company has a proven operational track record in the Power segment, particularly in HV transformers. It also boasts of a dominant product and distribution franchise in motors and other power products. It is the market leader in LT motors with pan-India distribution. With India’s rising demand for power, better realizations and operating leverage led to margin-expansion in the segment.
In the industrials segment, its subsidiary G.G. Tronics India recently won a ₹148 crore order for KAVACH anti-collision system. It has also won orders for propulsion components for Vande Bharat trains.
But intense competition in the drives and automation Europe business prevented passing on the increase in commodity prices to customers, and reduced operating leverage on lower sales.
Bleeding margins in the railways business also contributed to the contraction in industrials’ EBITDA margin from 14.1% in Q1 FY25 to 11.6% in Q1 FY26. In Other segments, higher investments, made particularly by CG Semi (semiconductor subsidiary of CG Power) weighed on margins.
Result? Despite 29% topline growth, net profit at the consolidated level for Q1 FY26 came in at ₹241 crore, reflecting a much mellower 11% growth over the same period last year. The company aims to focus on exports of railway components to support margins, while capacity expansion and new order-wins are expected to drive growth. The outlook for margins looks promising, considering the company’s order-book skew towards the high-margin Power sector.
Semiconductor foray
The government has been pushing for strengthening India’s semiconductor capabilities to achieve self-reliance in the industry that currently imports 85% of its requirements. PM Modi inaugurated Semicon India 2025, drawing renewed focus on the government’s push for a robust domestic semiconductor ecosystem.
CG Power has been among the first to recognize the potential. Through collaboration with Japan-based Renesas Electronics and Stars Microelectronics of Thailand, CG Semi has launched the world’s first made-in-India semiconductor chip. Backed by grants from central and state governments, along with ₹7,600 crore capital spending by the company over five years, it recently announced the launch of two outsourced Semiconductor Assembly and Test (OSAT) facilities in Gujarat.
This has made CG Power one of India’s first full-service OSAT providers, with solutions spanning both, traditional and advanced packaging technologies. It has also acquired Renesas’ Radio Frequency Components (RFC) business under Axiro to test waters in semiconductor design, particularly in wireless and satellite communication design. With a ₹3,000 crore QIP recently completed, the company’s new ventures are not expected to add debt to its books.
Multiple industry tailwinds
A bulk of the company’s revenues and profits come from its Industrials segment. This makes it particularly vulnerable to capex cycles. With the latest GST 2.0 demand push that has followed similar pro-growth measures on monetary policy and income-tax cuts, demand and consequently, private capex cycle are expected to pick up soon.
At the same time, its semiconductor business stands to benefit from global industry tailwinds. The global semiconductor industry is valued at $728 billion, of which India’s market stands at only about $50 billion. But amid tough trade relations between the US and China, the government’s persistent support, and growing demand from electronics, automotive, telecom, and AI are expected to scale up domestic demand for semiconductors to $100 billion by 2030. The government recently announced a Production-Linked Incentive (PLI) worth ₹76,000 crore to support India’s semiconductor vision.
These tailwinds reflected in CG Power’s order-book which expanded by ₹5,138 crore during the quarter ending June 2025. With this, its order-book stood at ₹13,072 crore as of June 2025.
Risks loom
In the mainstay businesses of industrials and power, rising competition can rain on order wins and stress out margins. Amid global geopolitical and economic uncertainty, delays in picking up private capex cannot be ruled out either. With an order backlog that provides revenue visibility of only about a year, order wins are critical to sustain growth.
The company is investing in railway components, semiconductors, and even clean energy, including biogas and ethanol. Done right, this should help it diversify its revenue sources and protect the business from economic cycles-led volatility. But as the company has itself witnessed previously, an unfortunately timed expansion can break down even good businesses.
Execution risks in new businesses add another layer of risk. Of course, the company’s zero debt position offers comfort. However, how debt evolves amid expansion and diversification plans will need to be closely monitored.
Projecting a 30% CAGR growth in EPS between FY25 and FY28, its target price has been pegged at ₹800-870 apiece. This reflects an upside of 4-13% over current levels. With the stock priced to perfection, any slipups on growth can lead to corrections.
For more such analyses, read Profit Pulse.
Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser.
Disclosure: The author holds shares of some of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
