Rama Newsprint On The Block

27 November, 2011

Rama Newsprint and Papers Ltd, a publicly listed paper manufacturing company, is on the block, at least two sources briefed with the matter told VCCircle. One of the few private newsprint makers in the country, SK Bangur-led West Coast Paper Mills holds a strategic stake in Rama Newsprint after acquiring a large minority stake around eight years ago.

The company, with has a long history of losses, has continued to bleed over the recent past as well.

Investment bankers familiar with the development told VCCircle that the homegrown printing company has been in talks with players from time to time. Only last month, a Delhi-based investment banker was in negotiating for a sell-off deal with a European company. However, the deal did not go through.

At present, no bankers are engaged in scouting for buyers, one of the sources said.

When contacted, PS Maharaj, vice-president (corporate) and additional executive director at Rama Newsprint and Papers said, “We are not aware of any such move (talks of a sell-out).”

While West Coast Paper Mills owns 36 per cent stake directly, the promoters, put together, own 52 per cent of the mid-size firm paper firm. In January last year, the Ramsinghani Group, the original promoters of the firm, sold 16.84 per cent stake in the company to co-promoters SK Bangur Group for Rs 38 crore in an off-market deal. The Bangurs already had management control of Rama Newsprint.

A large stake sale by the promoters will now trigger an open offer for the company.

Rama Newsprint rose 1.6 per cent to close at Rs 10.03 a share on the BSE in a weak Mumbai market on Monday. At this price, the company has a market cap of around Rs 58 crore.

The company, which employs about 611 people, has seen its net loss jump around five times to Rs 140 crore even as topline has shrunk from Rs 347 crore to Rs 321 crore between FY’09 and FY’11. The firm that clocked profits during 2006-2008, slipped back in losses thereafter as the economic slowdown hit the paper industry with rising cost of operations.

Rama is a newsprint manufacturing company and also specialises in printing and writing paper. Based on virgin pulp as well as recycled fibre, the company has an installed capacity to manufacture either 1.44 lakh tonnes per annum of newsprint or 1.8 lakh tonnes per annum of writing and printing paper or a mix of both.

Its products include cream wove, super printing, base paper for coating, map litho, copier paper and newsprint.

Would-be Acquirers

Although quite a few large international paper companies have looked at Indian firms in the past, the small scale of business in the country has dissuaded large firms to strike deals in India. The handful of paper companies with a reasonable size are either not up for sale or have old-technology plants that do not interest global majors or even large Indian companies.

But the recent activity in the Indian paper industry may well signal a change. Earlier this year, the world’s largest paper company International Paper acquired majority stake in Andhra Pradesh Paper Mills for around $388 million (Rs 1,900 crore), making it the first global paper and packaging company with a significant position in India’s fast-growing economy.

This deal was struck at high valuation multiple and that has widened eyeballs even in smaller and mid-size paper companies in India.


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Rama Newsprint On The Block

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