International Finance Corp has signed a definitive agreement with Bilt Paper BV, a step-down subsidiary of India’s largest paper company Ballarpur Industries Ltd (Bilt), for subscription of new shares worth $100 million, valuing the Dutch subsidiary at $700 million, as per a stock market disclosure.
Following the completion of shares subscription, IFC — the private sector lending arm of The World Bank — will own 14.29 per cent stake in Bilt Paper, formerly known as Ballarpur International Graphic Paper Holdings (BIGPH). The deal values Bilt Paper at $700 million or $600 pre-money.
The subscription of shares is however subject to fulfilment of conditions set out in the definitive documents, the disclosure said.
In June, IFC had disclosed that it may invest up to $100 million in BIGPH, along with a long-term loans of as much as $150 million to the company.
Bilt Paper is also planning to list its shares at an overseas exchange.
The company had previously explored such options and even announced plans to raise $330 million through a listing on the London Stock Exchange in 2011.
Bilt had later postponed and eventually put the plans on the back burner.
As of June 30, 2013, Ballarpur Industries indirectly held 79.2 per cent in Bilt Paper 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).
Seven years ago Gautam Thapar-led Avantha Group company went through a corporate restructuring by hiving off the commodity paper & pulp business into this separate step down subsidiary.
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. The group has around half a dozen paper production units including one in Malaysia.
For IFC this is one of the biggest equity deals in the country and coupled with its proposed debt funding would be one of the single biggest exposures to an Indian firm. IFC is also an investor in JK Paper, a key competitor of Bilt in the Indian market.