Paper maker Ballarpur Industries Ltd has signed a pact to sell Malaysian unit Sabah Forest Industries Sdn Bhd, its second such attempt after a previous deal fell through two years ago.
Ballarpur said in a stock-exchange filing on Thursday evening it will sell Sabah Forest to Malaysia’s Pelangi Prestasi Sdn Bhd for about $310 million (Rs 2,015 crore). Pelangi has deposited 10% of the amount in cash, India’s largest paper company said. It didn’t elaborate.
The agreement includes the sale of Sabah Forest’s procurement of fresh timber licences from the state government of Sabah, the company said.
Shares of Ballarpur jumped as much as 12.6% on the BSE on Friday morning, when the benchmark Sensex was flat. The shares pared the gains thereafter.
The development comes nearly two years after Ballarpur first announced it would sell Sabah Forest to Pandawa Sakti (Sabah) Sdn. Bhd for an enterprise value of $500 million. The deal was later scrapped as Pandawa Sakti couldn’t meet the deadline to sew the transaction.
The Indian company had acquired Sabah Forest in 2007 for $261 million. This was the first significant overseas acquisition by an Indian paper company and remains the biggest to date in an otherwise conservative and slow-moving industry.
Sabah Forest makes paper and paper-related products. It also makes solid wood-related products such as rough and chemically treated sawn timber and panel-based products including dried veneer and raw plywood. It exports its products to Iran, Syria, Yemen, South Africa, Jordan and Saudi Arabia.
However, Sabah Forest couldn’t generate sufficient returns on the investment, due partly to foreign exchange fluctuations. Sabah Forest produced 22,498 metric tonnes of paper during 2016-17, less than a third of the 75,911 metric tonnes the year before, according to Ballarpur’s annual report. Production was affected by a shortage of raw material supply and financial liquidity constraints, the report said.
Ballarpur is part of Gautam Thapar-led Avantha Group, which has divested several assets in the past few years including its stake in the consumer appliances business under Crompton Greaves and part of its power generation business to repay debt.
The paper company itself if making losses. For the nine months through December 2017, the latest period for which the financials are available, Ballarpur posted a consolidated loss of Rs 1,146 crore on revenue of Rs 1,782 crore.
Ballarpur said the deal with Pelangi is subject to necessary corporate and regulatory approvals, including from the High Court of Sabah and Sarawak in Malaysia.
Pelangi is part of Malaysia’s Albukhary Group, which operates in banking, seaport, e-commerce, construction engineering, book retail, sugar and palm oil plantations and airport management sectors.
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