Ballarpur Industries to simplify corporate structure

AUGUST-2012 – Ballarpur Industries, or Bilt, India’s largest paper manufacturer, will transfer two paper units to a step-down subsidiary that will ultimately be listed overseas as the Delhi-based company bows to demands by foreign institutional shareholders pressing for a simplified corporate structure. In the structural revamp, the flagship of the Gautam Thapar-led Avantha Group will exchange two copier paper making units for a rayon grade pulp mill, currently a part of the unlisted Bilt Graphics Paper Products (BGPPL). This will bring the entire copier paper business under Bilt Graphics which will eventually be listed overseas, either at London or any other exchange. “This internal restructuring was initiated as some investors felt that the copier paper business should be all together. It would be useful for listing as the structure would be very clean,” group finance director B Hariharan told.Of the industry capacity of 11.5 million tonnes, Bilt makes close to 1 million tonnes annually. The company plans to raise its pulp production by 290,000 tonnes mainly from its Malaysian unit. Institutional investors have been pressing for a simplified structure that would contain only paper and paper-related pulp as part of a single business to prop up valuations. Rayon grade pulp, which is not used in paper making, will now be shifted to Bilt. Some of the large investors in Bilt include LIC with 6.7%, Samena Special Situations Fund (5.9%), Platinum Fund 5.2%, Samena Capital 5%. General Insurance Corp 1.9% and HDFC Prudence 1.6%. The exercise will not reduce the valuation of parent company Bilt, as Bilt Graphics Paper is a subsidiary, said Mr. Hariharan, adding that there will be no change in the shareholding pattern. Bilt’s other subsidiaries include Ballarpur International Graphic Paper Holdings B.V, Sabah Forest Industries, Malaysia’s largest pulp and paper company and Bilt Tree Tech Limited which runs Bilt’s farm forestry programme in several states in India. Simplification of corporate structures to boost valuations have become a large trend with mining major Vedanta Resources and infrastructure company GMR Corp recently initiating efforts in that direction. Professional services firms Price Waterhouse and KPMG were mandated to prepare the valuation reports for Bilt and BGPPL respectively. Under the transfer of assets, Bilt will pay 115 crore to BGPPL. Ballarpur Industries posted a revenue of 4,651 crore in the previous fiscal year – the company’s financial year ends on June 30. Of this, the paper and paper products and office supplies accounts for 88%, while it accounts for about 71% of the operating profit. In 2011, Bilt had planned for a London Stock Exchange listing where it had targeted to raise $330 million to fund expansion and reduce debts. About $140 million was for expansion of the company’s plants in India and Malaysia, while the rest would have been used to cut debt. This was postponed after a large transaction in the Indian paper industry sparked re-rating of companies in the sector. In May 2011, US-based International Paper acquired AP Paper for about $423 million (then about 2,030 crore). Bilt also deferred the listing as equity markets turned choppy, said Mr. Hariharan. Rayon grade pulp, also known as dissolving grade pulp, forms a lucrative part of the operations of Bilt as the country has a shortage of such raw material. Viscose staple fiber companies such as Grasim Industries, are some of the large buyers of dissolving grade pulp from Bilt.
Friday, March 1, 2013
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