Mumbai: Century Textiles and Industries Ltd (CTIL), a part of the B.K. Birla Group, is in advanced talks to sell its paper business to JK Paper Ltd in a deal valuing the paper division at close to Rs5,000 crore by enterprise value, two people aware of the development said.
The decision to sell the paper business is part of the group’s overall strategy to realign its businesses with those of the Aditya Birla Group, led by Kumar Mangalam Birla, and a sale has been in the works for over two years, the people said on condition of anonymity.
The company had evaluated a proposed sale to ITC Ltd in 2015 but differences over valuation blocked the transaction.
CTIL, established in 1897, began with a cotton textile mill in Mumbai and expanded to manufacturing cement, textiles, chemicals, pulp and paper products at plants located across India.
In October 2015, B.K. Birla, now in his 90s, appointed his grandson and Aditya Birla Group chairman Kumar Mangalam Birla as vice-chairman of CTIL as part of a succession plan.
The company’s pulp and paper division, called Century Pulp and Paper, was established in 1984 at Lalkua, near Nainital in the state of Uttarakhand. Its second paper unit, based on bagasse manufacturing, is located adjacent to the existing pulp and paper plant at Lalkua. It was established in 1995. The company also has a prime-grade tissue paper plant in Lalkua.
The division has rayon-grade pulp capacity of 31,320 tonnes per year, and writing and printing paper capacity of 197,800 tonnes. It also has capacity of 36,000 tonnes of prime grade tissue paper per year.
Emails sent to CTIL and Aditya Birla group remained unanswered as of press time. A JK Paper spokesperson responded by saying “no comments on speculation".
A large portion of the proceeds will go towards retiring the debt of CTIL, which was Rs4,715.21 crore in 2015-16, marginally down from Rs4,830.91 crore in the previous year.
“The transaction is expected to make the company completely debt-free," said one of the two persons cited above.
JK Paper is one of the largest producers of paper products in India with a combined capacity of 455,000 tonnes per annum and the deal will help the company strengthen its domestic market position, It is currently the market leader in the branded copier paper segment and among the top two in coated paper and high-end packaging boards.
The company was till recently in talks with Ballarpur Industries Ltd to acquire two units at Ballarpur and Asthi in Maharashtra.
The two factories make pulp, paper, paperboards and other products. But the talks broke down because of a disagreement over the valuation of the assets, Mint reported in November.