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ITC to buy Aditya Birla’s pulp and paper unit in $410 million deal
This acquisition will bolster ITC's paper production capacity by 60%, increasing it from 8 lakh MT to 12.8 lakh MT per annum, strengthening its market position in the paper industry.
ITC Ltd has acquired Century Pulp and Paper from the Aditya Birla Group’s real estate arm in a $410 million (Rs3,498 crore) deal, the conglomerate said in a statement to the exchanges.
The listed Aditya Birla Real Estate Ltd houses the group’s pulp and paper business, which will be sold via the slump sale route helping streamline the focus of the company which has been building its real estate portfolio.
In a slump sale, one or more entities are transferred as a whole for a lump sum consideration, without values being assigned to the individual assets and liabilities in a bid to offload certain assets, divisions, or subsidiaries quickly and efficiently.
The lump sum consideration is subject to certain adjustments as per the agreement. The transaction is contingent on necessary statutory and regulatory approvals including approvals from the Competition Commission of India (CCI) and shareholders.
Aditya Birla group had rebranded the erstwhile Century Textiles Ltd as Aditya Birla Real Estate on 18 September, reflecting the changed priorities of the company.
ITC’s latest acquisition will help expand its own paper capacity by half and gain a foothold in the north.
While ITC’s paperboards and specialty papers vertical has an annual capacity of over 1 million metric tons, Century Pulp and Paper has an installed capacity of 480,000 metric tons per annum.
ITC’s four paper facilities are located in South India, while Century paper factory is situated at Lakuan in Uttarakhand.
“The divestment is a strategic portfolio choice and unlocks value for shareholders of ABREL. The company has embarked on a transformational growth phase, and this move will further sharpen its focus on real estate to drive sustained value creation,” R.K. Dalmia, managing director of Aditya Birla Real Estate Ltd, said.
“The acquisition will immediately add significant scale and economies to existing operations with potential for further capacity expansion, provide locational advantage for efficient customer servicing and proximity to key raw material sources, mitigate operational risks through multi-site operations and enhance resilience across industry cycles through portfolio diversification,” the ITC statement said.
India is the fifth-largest producer of paper and paperboards globally, with an estimated production of around 23 mt per annum and an annual industry turnover of over ₹80,000 crore.
India’s per capita paper consumption is about 16kg per annum against the global average of 57kg, reflecting immense headroom for growth.
The country is one of the fastest growing markets in the world, with demand for paper and paperboards growing at 6-7% per year, translating into incremental demand of over 1 mt annually, an ITC presentation showed.
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