CG Power's Rs 8,300 Crore Bet on Transformers and Semiconductors

Introduction to CG Power's Strategic Shift

CG Power and Industrial Solutions Ltd., a key player in India's capital goods sector under the Murugappa Group, has announced a series of ambitious expansion plans. The company is set to invest heavily in both its core power systems business and a strategic diversification into the semiconductor industry. These initiatives, backed by strong financial performance and a robust order book, signal a significant transformation aimed at capturing growth in India's infrastructure and electronics manufacturing sectors.

Bolstering the Core: Power Systems Expansion

To meet rising domestic and international demand, CG Power is undertaking a substantial capacity expansion in its power and distribution transformer segments. The company has approved an investment of Rs 712 crore for a new greenfield power transformer facility. This plant, expected to be commissioned by FY28, will have an annual capacity of 45,000 MVA and will manufacture transformers in the 220kV to 765kV range.

In addition to the new plant, existing facilities are being upgraded. The Malanpur unit's capacity is being increased from 25,000 MVA to 40,000 MVA, with completion targeted by March 2025. Similarly, the Bhopal plant, which manufactures distribution transformers, is seeing its capacity expanded from 6,900 MVA to 9,900 MVA. The company is also investing Rs 748.20 crore in a new greenfield switchgear manufacturing facility in Western India to strengthen its market position in Medium Voltage (MV) and Extra High Voltage (EHV) segments.

A Landmark Move into Semiconductors

CG Power is making a significant foray into the high-technology semiconductor space through a joint venture with Renesas Electronics of Japan and Stars Microelectronics of Thailand. The consortium will establish an Outsourced Semiconductor Assembly and Test (OSAT) facility in Sanand, Gujarat. This project involves a planned investment of approximately Rs 7,600 crore over five years.

The initiative is supported by the India Semiconductor Mission, which has approved a subsidy of Rs 3,501 crore. The facility is designed to have a production capacity of up to 15 million units per day, catering to diverse sectors such as automotive, consumer electronics, industrial, and 5G. A smaller pilot facility is expected by FY26, with the main plant scheduled for commissioning by FY27. This move aligns with India's goal of becoming a global hub for electronics manufacturing.

Financial Health and Strong Order Book

The company's expansion plans are supported by a healthy financial position. For the second quarter of FY26, CG Power reported a 21% year-on-year increase in aggregate sales to Rs 2,923 crore. Net profit for the quarter grew by 30% to Rs 284 crore. The company's Return on Capital Employed (ROCE) stood at an impressive 31% for the quarter.

Crucially, the order intake for Q2 FY26 was 45% higher year-on-year at Rs 4,772 crore. As of September 30, 2025, the unexecuted order backlog was Rs 14,953 crore, an 88% increase from the previous year, providing strong revenue visibility for the coming quarters.

Strategic Acquisitions and Corporate Developments

To complement its organic growth, CG Power has made strategic acquisitions. The company acquired a 55% stake in G.G. Tronics India Private Limited to enhance its capabilities in industrial automation and railways. It also acquired the radio frequency (RF) components business of Renesas Electronics, further deepening its involvement in the semiconductor value chain. These moves are part of a broader strategy to build technological expertise and expand its product portfolio.

Market Outlook and Analyst Confidence

Analysts have responded positively to CG Power's strategic direction. Morgan Stanley initiated coverage with an 'Overweight' rating and a price target of Rs 799, viewing the company as a strong proxy for India's manufacturing growth. Similarly, UBS maintained a 'Buy' rating, citing strong power sector order wins and projecting a significant upside. The company's successful turnaround under the Murugappa Group, coupled with these forward-looking investments, has bolstered investor confidence.

Conclusion: A Future-Ready Enterprise

CG Power and Industrial Solutions is executing a well-defined strategy focused on strengthening its core business while diversifying into future-oriented sectors. The substantial investments in transformer, switchgear, and semiconductor manufacturing position the company to capitalize on long-term industrial and technological trends in India and globally. With a strong order book and a clear vision, the successful execution of these large-scale projects will be critical in shaping its growth trajectory. The company's next board meeting to discuss financial results is scheduled for January 27, 2026, which will be closely watched by investors for further updates on its performance and strategic initiatives.