CG Power shares gain nearly 12% on JV agreement for semiconductor unit

Shares of CG Power and Industrial Solutions Limited rallied nearly 12% to a high of ₹494.95 per piece on NSE on Friday after the company announced setting up a Joint Venture Company (JVC) for semiconductors.

In a filing to the stock exchanges, the Murugappa Group company said that it has inked a joint venture agreement with Renesas Microelectronics and Thailand's Stars Microelectronics to build and operate an outsourced semiconductor assembly and test facility.

“The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the project of the JV under India’s Semiconductor scheme on February 29, 2024,” the company said.

CG Power will hold a controlling stake of 92.3% shares in JV with Renesas and Stars Microelectronics holding equity shares of 6.8% and 0.9%, respectively.

The JV will invest ₹7,600 crore over 5 years, which will be raised through a mix of subsidies, equity, and potential bank borrowings. At 11:39 AM, CG Power and Industrial Solutions Limited shares traded at ₹467.30 up by 5.43% on NSE.

“CG’s entry into semiconductor manufacturing marks a strategic diversification for us. Our partners, Renesas and Stars Microelectronics will make our learning curves steeper and help us focus on innovation and excellence. This is a very exciting phase for the entire nation, and we are very keen to build out India’s semiconductor capability and ecosystem,” said S Vellayan, Chairman, CG Power and Industrial Solutions Ltd.

The new entity will set up a manufacturing facility in Gujarat's Sanand with an output of up to 15 million units per day. It will cater to a wide range of industries including automotive, consumer, industrial, 5G, and others.

Headquartered in Mumbai, CG Power and Industrial Solutions Ltd is among the market leaders in India's electrical engineering industry. The company primarily has two business lines industrial systems and power. It is engaged in the manufacturing of propulsion systems, traction motors and signalling relays for the Indian Railways. The company also manufactures and supplies a wide range of induction motors, transformers, switchgear, drives, and other allied products for the industrial and power sectors.