homebusiness Newscompanies NewsCG Power eyes 10% profit margin from semiconductor assembly and testing unit
CG Power eyes 10% profit margin from semiconductor assembly and testing unit
Natarajan Srinivasan, MD & CEO of CG Power said it will take around three years to set up the semiconductor unit.
Murugappa Group company CG Power & Industrial Solutions anticipates a profit before tax (PBT) margin of 10% from the new semiconductor assembly, testing, monitoring, and packing (ATMP) unit, which was one of the three units that received the Union Cabinet approval on February 29.
The government approved a massive $15 billion investment in the establishment of three semiconductor plants in the country, including a proposal from Tata Group to build the country’s first major chipmaking facility.
CG Power — in partnership with Renesas Electronics Corporation, Japan, and Stars Microelectronics, Thailand — will set up its semiconductor unit in Sanand, Gujarat with an estimated investment of ₹7,600 crore over five years.
CG Power, Renesas, and Stars Microelectronics are to invest, in one or more tranches of up to $205 million, $15 million and $2 million, respectively, as equity capital of the JV company, which will represent around 92.34%, 6.76% and 0.9%, respectively. This is expected to be financed through a mix of subsidies, equity, and potential bank borrowings as required.
CG Power stock spiked nearly 12% to ₹495 apiece early on March 1. At 11.30 am, it was trading a little over 5% higher at ₹466 apiece on the NSE. The stock has gained 52% over the past year.
Sharing details on the development, Natarajan Srinivasan, MD & CEO of CG Power told CNBC-TV18 that it will take at least around three years to set up the entire unit before production can begin.
“If you run it efficiently, I think you can get PBT to sales of 10%, conservatively. I am saying there are companies who are doing much better, but I am saying that this definitely is possible,” he noted, adding that the demand for semiconductor chips in India is expected to grow at 10-15% per annum.
Srinivasan said at least 30-40% of production can be exported.
CG Power reported standalone profit after tax (PAT) of ₹216 crore for the third quarter (Q3FY24) versus ₹243 crore last year.
The Mumbai-based company has a market capitalisation of ₹ 71,401.30 crore.
(Edited by : Shweta Mungre)
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