India’s Murugappa Group added $3 billion in market value Wednesday after one of the conglomerate’s unit announced a foray into semiconductors.
The shares of the group’s electric motor maker CG Power and Industrial Solutions Ltd. surged by the 20% limit to a record, prompting similar-sized rallies in two other group stocks, after saying it plans to invest $791 million in a semiconductor assembly and test facility over five years.
The proposal comes against the backdrop of India’s ambition to create a robust tech manufacturing sector that has already drawn investments from Apple Inc. suppliers. The foray would also provide investors an opportunity to bet on a sector that’s added trillions of dollars in stock values globally this year, but has been largely absent from the nation’s $3.7 trillion equity market.
“Murugappa Group is capable of foraying into this business, which is highly sophisticated and requires technology collaboration with global players,” said Kranthi Bathini, a strategist with Mumbai-based WealthMills Securities. Still, the venture is capital intensive with a longer payback period, he said.
Other group companies — Tube Investments of India Ltd. and Shanthi Gears Ltd. — surged 20% each, while Carborundum Universal Ltd. climbed as much as 9%.
CG Power plans to fund the investment via subsidies, debt and equity contributions from partners, according to a statement.
The Murugappa group, which began in the banking markets of Burma in the 1900s, operates 29 businesses and is present in 40 countries, according to its website. Business Standard