Ballarpur Industries Divestment Plan

The Ballarpur Industries (BIL) board has approved the divestment of its entire equity stake of 98.08 per cent in Malaysian subsidiary Sabah Forest Industries. The company had acquired Sabah Forest Industries, a pulp and paper manufacturer for USD 261 million in the year 2007. The divestment will take place after regulatory approvals of the Government of Malaysia. BIL share price surged by 7.58 per cent on BSE and trading at Rs 15.61 on intraday.

BIL is a part of the USD 3 billion Avantha Group. The company is India’s largest manufacturer of writing and printing (W&P) paper. Its state of the art plant delivers more than 50 per cent of India's coated wood free grades. BIL holds an impressive 85 per cent share of the bond paper market and nearly 45 per cent share of the hi-bright Maplitho market in India. The company has secured a position in the global top 100 list. It has seven manufacturing facilities, six in India and one in Malaysia.

Sabah Forest Industries manufactures paper and paper related products. The company offers wood related products such as rough and chemically treated sawn timber and panel-based products including dried veneer and raw plywood, and exports its products to Iran, Syria, Yemen, South Africa, Jordan and Saudi Arabia.

The Avantha Group is facing high debt burden and has divested several assets in the recent past such as stake sales  in the consumer appliances business under Crompton Greaves and part of power generation business.

BIL changed its financial reporting from June to March from FY 2015. The company's consolidated revenue was Rs 3687 crore in FY15 whereas it was Rs 5296 crore in year ended June 2014. Its EBITDA stood at Rs 590 crore in FY15 as against Rs 948 crore in June 2014. BIL's EBITDA margin remained at 16.01 per cent in FY15 and 17.9 per cent in year ended June 2014. The company posted net loss of Rs 21 crore in FY15 while it had net profit of Rs 50 crore in the year ending June 2014. BIL's total debt burden was at Rs 4908 crore in FY15.

The Paper Industry in India is moving up with a strong demand push. According to Indian Agro & Recycled Paper Mills Association, there will be demand of 20 Million tonnes of paper by 2020. BIL products may require considering demand in the sector.