ITC said the acquisition will immediately add significant scale and economies to its existing operations with the potential for further capacity expansion
New Delhi: Aditya Birla Real Estate Ltd (ABREL) on Monday announced the sale of its pulp and paper business to ITC for Rs 3,498 crore as part of its strategy to focus on property business.
ITC, on the other hand, said the acquisition will immediately add significant scale and economies to its existing operations with the potential for further capacity expansion, provide a locational advantage for efficient customer servicing and proximity to key raw material sources, among others.
Established in 1984 at Lalkuan (Nainital, Uttarakhand), pulp and paper undertaking Century Pulp and Paper (CPP) of ABREL is a well-established player in the Indian Paper industry with an installed capacity of 4.8 Lakh MT per annum, ITC said in a statement.
In a regulatory filing, ABREL informed that its board approved the execution of the business transfer agreement for the divestment of pulp and paper undertaking situated in Lalkuan, Uttarakhand, by way of a slump sale to ITC Limited.
“The transfer of the business will be for a lump-sum cash consideration of Rs 3,498 crore, to be paid by ITC to ABREL,” the real estate firm said.
The divestment of the pulp and paper undertaking is a value-unlocking exercise.
“It will further enable the company to pursue growth opportunities in its core business – real estate,” the statement said.
Aditya Birla Real Estate Managing Director RK Dalmia said, “The divestment of the Pulp and Paper undertaking by ABREL is a strategic portfolio choice and unlocks value for the 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, he added.
“Over the years, Century Pulp and Paper has become synonymous with strong performance and high sustainability standards.
“To take it to the next level in size and value, the company is pleased to have found in ITC, a credible and well-established player,” Dalmia said.
ITC Ltd Executive Director B Sumant said it will strengthen the market standing of ITC’s Paperboards and Specialty Papers Business and provide new opportunities in the domestic and international markets.
“The acquisition aligns with the company’s strategy of driving the next horizon of growth in the paperboards and speciality papers business by expanding capacity at a new location considering that the existing facilities are already saturated,” he added.
The strong linkages to afforestation and livelihood creation pursued by both entities contribute meaningfully to national priorities, Sumant added.
ITC said CPP is a one-of-a-kind asset with a strong strategic fit with its paperboards and speciality papers business.
“The acquisition will immediately add significant scale and economies to existing operations with potential for further capacity expansion, provide a 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 company said.
The business expects to drive structural improvement in the profitability of CPP through several value unlock interventions like capacity debottlenecking, product quality upgrade, efficiency improvement leveraging TPM/digital initiatives, supply chain optimisation, overhead rationalisation, and procurement efficiencies, it added.
ITC said its paperboards and packaging segment is expected to continue generating free cash flow going forward. During FY20-24, the segment generated a free cash flow of RS 4,000 crore.
