Why CG Power Share Price is Rising

Technologies and innovations keep changing. Some of these stand the test of time by solving a solution, increasing operational efficiency, or reducing costs.

Companies engaged in developing and distributing such technologies and innovative products or services from initial stages eventually become futuristic sectors that offer attractive investment opportunities.

One such sector is semiconductor.

The semiconductor industry has been in the limelight in recent years due to its soaring demand and the persistent global shortage of chips, making it a favoured investment sector for investors looking for high growth.

One stock from this sector that has captured recent attention of investors is CG Power.

Over the last month, the stocks have climbed 23%. Here's what's driving the surge.

#1 Semiconductor Joint Venture

Shares of CG Power and Industrial Solutions have been on a roll.

This after the Mumbai-headquartered conglomerate informed exchanges about its plans to jointly build an outsourced semiconductor assembly and test facility (OSAT) in India.

It will be in partnership with Japanese Renesas Electronics Corporation and Thailand-based Stars Microelectronics.

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the project of the JV under India's semiconductor scheme on 29 February 2024.

While CG Power is a part of Tube Investments of India and the Murugappa Group, Renesas is a supplier of advanced semiconductor solutions. Stars Microelectronics (Thailand) Public is an OSAT provider.

The JV will be 92.3% owned by CG, with Renesas and Stars Microelectronics each holding equity capital of approximately 6.8% and 0.9%, respectively. The JV plans to invest Rs 76 billion (bn) over a five-year period, which will be financed through a mix of subsidies, equity, and potential bank borrowings as required.

The JV will bring together the unique capabilities of the partners with a vision to Make India for the World. CG possessed over eight decades of manufacturing expertise and was keen to build semiconductor capabilities and ecosystems in India.

Renesas will provide advanced semiconductor technology and expertise. Stars Microelectronics will provide both technology for legacy packages and training and enablement.

The manufacturing facility will be set up 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 like automotive, consumer, industrial, and 5G, among others.

#2 Land Allotment

Apart from this, the Gujarat government has allotted 188 acres of land to Tata Group and CG Power as part of its ambition to make the state India's semiconductor hub.

The state government has earmarked around 160 acres in Dholera for Tata Group to set up the country's first mega semiconductor fabrication plant at an estimated investment of Rs 910 bn.

While CG Power has been offered 28 acres in Sanand.

These ventures complement the Rs 225.2 bn chip assembly plant being constructed by Micron, a US-based memory chip maker, also located in Sanand.

What Next?

On the back of strong demand, CG Power's board has approved an expansion of its three manufacturing units.

It decided to expand the capacity of switch gears at the Nashik plant for Rs 1.6 bn and power transformers at the Bhopal plant at Rs 310 m for the addition of 10,000 MVA capacity. It also decided to ramp up HT motors at Bhopal.

This expansion is expected to boost the manufacturing capacity of LIM from 1,002 units per annum to 1,728 units per annum.

As part of its future growth strategy, CG Power and Industrial Solutions will expand capacity by investing Rs 4 bn over the next two years.

The firm plans to increase export revenue by 5-20% over the next 4-5 years.

Further, the centre announced the ambitious Semicon India Program under the India Semiconductor Mission (ISM) in December 2021 for developing the semiconductors and display manufacturing ecosystem in India. This program has a financial outlay of Rs 760 bn.

In addition to the Semicon India Programme, the government is launching the Design-led Manufacturing (DLM) Program to promote the design and manufacturing of semiconductors in India.

How CG Power Shares have Performed Recently

CG Power shares have gained 11% in the last five days and more than 77% in 2023 so far.

The company touched its 52-week high of Rs 541 on 21 March 2024 and its 52-week low of Rs 276.7 on 20 March 2023.

About CG Power

CG Power and Industrial Solutions Limited, formerly known as Crompton Greaves Limited, is a multinational engineering conglomerate based in Mumbai, India.

Since its establishment in 1937, CG has developed a diverse range of products, services, and solutions for power and industrial equipment.

With offices and manufacturing facilities in over 40 countries, CG has a global presence.

CG provides a comprehensive suite of solutions for power transmission and distribution, including power cables, switchgear, and substation automation systems.

CG offers a range of electrical and mechanical solutions for the industrial sector, including motors, drives, pumps, and control systems.

For more details, see the CG Power & Industrial company fact sheet and quarterly results.

You can also compare company with its industry peers:

CG Power & Industrial vs TD Power

CG Power & Industrial vs Focus Lighting Fixtures

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