Bilt may raise funding from IFC for overseas arm, revive international listing plan

India’s largest paper company Ballarpur Industries Ltd (Bilt) is looking to raise funding from IFC, a lending arm of World Bank Group, for Dutch subsidiary Ballarpur International Graphic Paper Holdings (BIGPH), the company said in a stock market disclosure.

This could be in a combination of debt and/or equity in BIGPH and/or its step-down subsidiaries, it said in the filing.

In a separate disclosure IFC said it may invest as much as $250 million in the firm, including up to $100 million in equity, ‘A’ loan of up to $50 million and a ‘B’ loan/parallel loan of up to $100 million. This would comprise over half of the total project cost estimated at $472 million and  would make it one of the single biggest bets of IFC in what is essentially an Indian firm, to date.

Interestingly, IFC is also an investor in JK Paper, a key competitor of Bilt in the Indian market.

Seven years ago Gautam Thapar-led Avantha Group company went through a corporate restructuring by hiving off the commodity paper & pulp business into a separate step down subsidiary backed by JP Morgan and Singapore’s sovereign wealth fund GIC.

The idea, back then, was to drive a better valuation for the commodity part of paper business and to raise capital for further expansion at better terms. This was anchored on the argument that commodity paper business derives better valuation multiple in international markets compared with India.

The parent company Bilt was left with the front facing or retail side of the paper business including stationery paper, printing and photocopy paper and speciality paper, apart from the branded retail products under Bilt.

However, in 2012 it had flipped its strategy to move almost all of its paper production business in the country under this arm. As of June 30, 2013, Bilt indirectly held 79.2 per cent in BIGPH while the remaining stake was with GIC (11.7 per cent) and promoter’s private holding firm Avantha International Assets BV (9.1 per cent).

The group has around half a dozen paper production units including one in Malaysia.

Overseas listing

The paper manufacturing firm said it is also exploring the possibility of listing of equity shares of BIGPH at an overseas stock exchange. It had previously explored such options and even announced plans to raise $330 million through a listing on the London Stock Exchange. Bilt had later postponed and eventually put the plans on the back burner.

GIC and JP Morgan together picked up a minority stake in the Dutch subsidiary in a deal valued at $175 million in January 2008.

Bilt was eyeing a valuation of around $1.5 billion for the overseas arm's listing in 2011.

However, the listing plans were put in the backburner within weeks of the company announcing the proposed overseas issue. This followed a large inbound transaction in the paper sector three years ago, in which the world’s largest paper company, US-based International Paper, inked a deal with LN Bangur Group to acquire the entire promoter stake in the mid-size firm Andhra Pradesh Paper Mills Ltd for $257 million in cash, it was seen as a game-changer for the slow moving paper industry in India.

This deal was struck at a high valuation and there was a buzz in the paper stocks, with expectations that the paper sector would get rerated. However, after the initial flash in the pan, the valuations failed to perk up.

Bilt shares last changed hands at Rs 19.15, up 0.5 per cent on BSE in a flat Mumbai market on Friday.


Bilt in strategy flip, moving most of paper biz to PE-backed arm 

Paper Sector Lose Spark: Will Bilt Paper Revive Its London Dreams? 

Gautam Thapar's Private Investment Entity Picks 9% in Dutch Paper Arm

(Edited by Joby Puthuparampil Johnson)

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