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Health Care
In a significant move to expand its paperboards and specialty papers business, ITC Limited has signed a business transfer agreement to acquire Century Pulp and Paper (CPP), a well-established player in the Indian paper industry operated by Aditya Birla Real Estate Limited. This strategic acquisition is part of ITC's broader strategy to drive growth and increase capacity in the paperboards sector.
The deal is valued at a lump-sum cash consideration of up to ₹3,498 crore on a cash-free, debt-free basis[1][4]. Century Pulp and Paper, established in 1984 in Lalkuan, Uttarakhand, boasts an installed capacity of 480,000 metric tonnes per annum and is a key producer of packaging boards, paper products, and specialty papers[2][3]. The acquisition will significantly enhance ITC's paper capacity, increasing it by about 60% from the current 8 lakh MT to 12.8 lakh MT per annum[5].
ITC's move to acquire CPP aligns with its strategy to expand its Paperboards & Specialty Papers Business. The company aims to leverage CPP's location advantage for efficient customer servicing and proximity to key raw material sources. Moreover, this acquisition will mitigate operational risks through multi-site operations and enhance resilience across industry cycles through portfolio diversification[1][4].
Following the announcement, ITC shares saw minimal movement, while Aditya Birla Real Estate's stock experienced a slight increase. The deal has been welcomed by analysts, with Nomura maintaining a "Buy" rating for both ITC and Aditya Birla Real Estate[2][4]. This acquisition not only strengthens ITC's position in the paperboard market but also positions Aditya Birla Real Estate to focus more intensely on real estate development, potentially leading to debt reduction and enhanced growth opportunities[2][4].
India is the fifth-largest producer of paper and paperboards globally, with a growing demand driven by sectors such as FMCG, e-commerce, and pharmaceuticals[3]. ITC is poised to capitalize on this trend by expanding its capacity and enhancing its product offerings.
In FY24, Century Pulp and Paper reported a revenue of ₹3,375 crore and an EBITDA of ₹500 crore[5]. This acquisition is seen as EPS accretive for ITC, contributing positively to its financial performance from the first year itself[5].
ITC expects to drive structural improvements in profitability through various interventions, including capacity debottlenecking, product quality upgrades, and efficiency improvements[1]. The company aims for a 30% to 40% increase in EBITDA per tonne post two full years of operations and anticipates a high teen ROCE on investments in the medium term[1].
The deal is subject to statutory approvals, including those from the Competition Commission of India (CCI) and shareholder consent. It is expected to be consummated within about six months[1][5].
This strategic acquisition marks a significant milestone for ITC in its pursuit of growth and expansion in the paperboard sector. As India continues to see rising demand for paper products, ITC's increased capacity positions it well to meet these needs while enhancing its market standing.
The acquisition of Century Pulp and Paper by ITC Limited is a pivotal move in the Indian paper industry. It not only strengthens ITC's footprint but also aligns with the company's long-term strategy of driving growth in the paperboards and specialty papers business. With its focus on operational efficiencies and strategic expansion, ITC is well-placed to capitalize on emerging opportunities in the domestic and international markets.
