India's largest paper maker Ballarpur Industries Ltd is targetting to raise roughly $300-400 million through an initial public offering of its Netherlands-based unit on the London Stock Exchange, its finance chief said on Monday.
"We have an in-principle clearance," B. Hariharan, group director (finance), told Reuters over the phone on Monday, adding the company was aiming to list in the middle of April.
At present, Ballarpur holds 79.53% in the Netherlands-based unit, while the rest is being held by two private equity investors.
Ballarpur Industries will use the proceeds "partly for pulp (capacity) expansion which we are doing and partly for deleveraging", Hariharan said.
After the IPO, the company plans to cut by 6 billion rupees its current debt of about 30 billion rupees, Hariharan said.
Of the 15 billion rupees Ballarpur Industries has earmarked for pulp capacity expansion in India and Malaysia, the balance 6 billion rupees will be spent in 2011.
NET UP, MARGIN DOWN
Earlier in the day, Ballarpur Industries reported a 10% rise in consolidated profit to 589 million rupees in Oct-Dec on expanded capacity. Sales rose 28% to 11.26 billion rupees.
The quarterly margins shrank 300 bps to 20% from a year ago as expensive pulp purchased in the first half of the fiscal partly kept the cost high in the Decemeber-quarter even though the pulp pices are softening now, Hariharan said.
The margins are expected to expand by 100 bps in Jan-March quarter to 21% as pulp prices have softened and paper prices are expected to go up, Hariharan said.
"The market is good, so there might be a possibility of increase in (paper) prices by another 1,000 rupees a tonne," Hariharan said, adding he expected pulp prices to remain stable.
With new pulp capacity in Malaysia and India coming on stream by mid-2011 and early-2012, respectively, the company will become fully integrated and margins will go up to 25-26% next year, he said.
The company buys about 40 percent of its total pulp requirement at present.
Ahead of the earnings announcement, shares in Ballarpur Industries, valued at about $470 million, closed 3.82% lower at 31.45 rupees in Mumbai market that closed 0.37% down.