CG Power shares jump 11% on plans to set up ₹7,600 cr semiconductor unit in Gujarat

Shares of CG Power and Industrial Solutions, also known as Crompton Greaves, rallied over 11% in opening trade on Friday after the engineering company announced that its joint venture (JV) with Renesas Electronics Corporation of Japan and Stars Microelectronics of Thailand, will invest ₹7,600 crore  to set up a semiconductor unit in Sanand, Gujarat. All the three companies had recently signed an agreement to establish a JV to build and operate an OSAT (outsourced semiconductor assembly and test) facility in India.

Reacting to the news, shares of CG Power surged as much as 11.4% to hit a high of ₹494.40 in early trade amid strong volume. The stock opened higher at ₹484, up 9% against the previous closing price of ₹443.85 on the BSE.

At the time of reporting, CG Power shares were up 6% at ₹470.50, with more than 5 lakh shares changing hands over the counter, while the market capitalisation stood at ₹71,860 crore.

The largecap stock is inching closer to its 52-week high level of ₹501.75 touched on November 23, 2023, while it has risen 78% against its 52-week low of ₹276.90 touched on March 20, 2023. The stock has given 53% returns in the last one year; 11% in six months; and 5% year-to-date (YTD).

The announcement came a day after 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 cabinet on Thursday gave nod to the establishment of three semiconductor units with an investment of ₹1.26 lakh crore. While Tata Group will set up two units – Dholera (Gujarat) and Morigaon (Assam), CG Power will establish a unit at Sanand (Gujarat). All three units will start construction within the next 100 days.

In an exchange filing today, CG Power, a part of Tube Investments of India Limited and the Murugappa Group, says that it will own a majority stake of 92.3% in the JV, while Renesas and Stars Microelectronics will hold equity capital of approximately 6.8% and 0.9%, respectively. The JV plans to invest ₹7,600 crores over a five-year period, which will be financed through a mix of subsidies, equity, and potential bank borrowings as required.

S. Vellayan, Chairman, CG Power and Industrial Solutions Limited, said, “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.

As per the release, the JV brings together unique capabilities of the partners with a vision to “Make in India for the World.” “CG, with around 86 years of manufacturing expertise, 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, will provide both technology for legacy packages and training and enablement.”

The JV will set up a manufacturing facility in Sanand, Gujarat, with a capacity that will ramp up to 15 million units per day. The unit 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, and others.

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