Ballarpur Industries to sell Sabah Forest Industries for USD 500 million

Avantha Group firm, Ballarpur Industries has announced the sale of its Malaysian subsidiary, Sabah Forest Industries to Pandawa Sakti (Malaysia) for USD 500 million around Rs 3,307 crore.

The Company expects the funds to flow for next three months. This will help the company to correct the capital structuring of the group. Ballarpur Industries planned to use the proceeds from the sale of its Malaysian assets to reduce its debt of Rs 5,800 crore by Rs 2,000-2,200 crore.

By looking at the current market conditions, the company’s strategy of divesting assets at the right prices to maintain a healthy balance sheet, the divestment of Sabah Forest Industries is aligned with Ballarpur Industries objectives. The deal is expected to improve the leverage and strengthen the capital structure of the company significantly.

The equity consideration will be paid to Ballarpur will help the company for adjustments relating to debt, working capital and exchange rate fluctuations at the time of completion of the transaction. The deal is dependent on the approvals from the government of Sabah (Malaysia), as well as Pandawa Sakti’s financing agencies.

In 2007, Ballarpur Industries had acquired Sabah Forest Industries, Malaysia’s largest paper company, for USD 261 million. Ballarpur Industries had sold its Crompton Greaves' consumer durable business in April for Rs 2,000 crore and a power plant in Korba to Adani Group for Rs 4,200 crore in November 2014. A power plant in Jhabua, Madhya Pradesh, was also on the block and a deal in this regard was expected to be finalised by October.

Pandawa Sakti is planning to set up a pulp mill with one partner company in China with a capacity of about a million tonnes a year in Sabah. The financing for this project will be provided by Chinese banks.

Yesterday the stock price of Ballarpur Industries closed at Rs 16, it was up by 6.38 per cent.