CG Power shares rally 11%, stock nears 52-week high as JV to set up semiconductor unit in Gujarat

CG Power and Industrial Solutions (CG Power) shares climbed 11 per cent in Friday's trade after heavy electrical equipment maker said its joint venture (JV) with Renesas Electronics Corporation of Japan and Stars Microelectronics of Thailand, would set up a semiconductor unit in Gujarat's Sanand for Rs 7,600 crore. CG Power and Industrial Solutions' entry into the semiconductor manufacturing would mark a strategic diversification, said its Chairman S Vellayan, who believes the JV partners Renesas and Stars Microelectronics, will make his company's learning curves steeper and help it focus on innovation and excellence.

Following the development, the S&P BSE200 index constituent climbed 11.38 per cent to hit a high of Rs 494.40. With this, the stock edged closer to its 52-week high of Rs 501.75 hit in November last year. The Prime Minister Narendra Modi-chaired Union Cabinet had yesterday approved the project of the JV under India’s Semiconductor scheme. Renesas is a semiconductor company focussed on specialised chips. This Japanese company operates a total of 12 semiconductor facilities and is an important player in microcontrollers, analog, power, and System on Chip (‘SoC)’ products.

The CG Power semiconductor unit will manufacture chips for consumer, industrial, automotive and power applications. It would have a capacity of 15 million per day.  

The JV will be 92.3 per cent owned by CG Power, with Renesas and Stars Microelectronics each
holding equity capital of approximately 6.8 per cent and 0.9 per cent, respectively. The JV plans to invest INR 7,600 crores over a five-year period, which will be financed through a mix
of subsidies, equity, and potential bank borrowings as required.

"The JV will set up a state-of-the-art manufacturing facility 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 such as automotive, consumer, industrial, 5G, to name a few," CG Power said.