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Informist, Tuesday, May 6, 2025

By Rajesh Gajra

NEW DELHI – CG Power and Industrial Solutions Ltd. is placing strategic focus on being a long-term player in the consumer durables business in which it began making investments recently, tapping "aggressively" into exports markets for its railways business, and staying committed to semiconductor manufacturing into which it forayed in the financial year 2023-24 (Apr-Mar), according to the company's management at a post-earnings conference call with investors Tuesday. This will be in addition to building upon the strengths of its existing businesses in the two segments of power systems and industrial systems, according to the company.

"We want to become at least the top five players in the electrical consumer durable sector," the company's management said. Having made significant investments in putting the business unit and backend structure in place, and onboarding vendors, CG Power will be laying strong foundations for strong and sustainable growth for the future, it said. The consumer durables business has pumps, fans, and the recently-launched air coolers. "We are also planning to get into water heaters in a much more aggressive fashion," the management said.

In a press release on the March quarter earnings, the company said the investment in consumer business was one of the three main reasons for flattish year-on-year growth in the industrial segment's earnings before interest and tax, and for the decline in the segment EBIT for FY25. Inflation in commodity prices and increasing share of the railways business were the other two factors.

Currently, the railways business of CG Power is servicing of orders linked to Indian Railways which deliver little or no margin to the company. The revenue from this business grew in high double digits in FY25, the management said in the conference call, noting that the company is "serious and committed for Indian Railways".

But the management said, disclosing its strategy for the first time, that it is "very aggressively" targeting the exports business in the railways segment with a team "busy on research and development" for that purpose. "We are probably one of the first (Indian) companies certified by" the American Association of Railroads, the management said.

In FY24, CG Power had secured orders from US railway companies for the US market. In its annual report for FY24, the company had said this had paved the way for its accreditation with the American Association of Railroads, "opening up numerous opportunities for market expansion across North and South America".

To an analyst's question on whether recent news reports alleging that the outsourced semiconductor assembly and test projects under the India Semiconductor Mission are facing prospects of review or cancellation due to change in technology, the CG Power management said the company did not see "anything of that sort". The construction of the company's semiconductor unit "is in full swing" and employees are getting trained, it said.

The impact of any tariffs by the US will not be felt by CG Power, the management said, as the company's exports to US are negligible. Any change in US tariff policy will not change the company's exports strategy, it said. The company's sales footprint overseas covers a wide range of products and services in infrastructure, industries, and energy sectors, according to its FY24 annual report.

The March quarter performance of the industrial segment was weak in profitability because the company tried to balance margins with volume growth, the management said. In order to gain market share, it passed on only some of the rise in commodity prices to clients, according to the management.  

But in the power systems segment, where growth was strong in the March quarter, the management said it expects the momentum to continue. It does not see demand in the power sector going down in next 4-5 years, "not only in India but globally as well", given that demand is higher than supply.

On Tuesday, shares of CG Power ended 5.8% lower at INR 598.45 on the National Stock Exchange.  End

Edited by Rajeev Pai

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