ITC-Century deal: Industry reacts
Ever since WhatPackaging? confirmed the news that ITC has bought Century Pulp and Paper from the Aditya Birla Group for INR 3,498 crore, the market has been buzzing.
07 Apr 2025 | By WhatPackaging? Team
ITC's paper capacity will increase by 60% from the 8-lakh metric tonnes per annum to 12.8-lakh metric tonnes per annum
Mangalam Maloo, deputy editor at CNBC TV18, said, "It is a good deal because it immediately increases ITC’s paper capacity by 60% from 8-lakh metric tonnes to 12.8-lakh metric tonnes." Maloo added that ITC has generated revenue of INR 3,000 crore and an EBITDA of INR 500 crore. This, according to Maloo, translates into an EPS increase starting from the first year.
The paper business has been in a cyclical downturn for the last three to four years, so the metrics will improve when the cycle turns. The ITC-Century deal has been done at the bottom of the cycle.
Market watchers are saying that the cost of setting up a new plant exceeds INR one-lakh metric tonnes. Most major Indian paper companies are trading well below replacement cost. With rising paper imports from China and Indonesia, shrinking margins, and industry utilisation above 80%, consolidation by the paper majors seems inevitable.
Market pundits are saying the ITC-Century deal aims for a 30-40% increase in EBITDA per ton. Currently, ITC achieves an EBITDA margin of 21% in the paper segment and a return on capital employed (ROCE) of around 17-19%.
Other advantages include gaining access to raw materials, building capacity for debottlenecking, and establishing a presence in northern India. ITC’s Paperboard, Papers and Packaging business contributes 13% to its total revenue as of FY24. The Q3 FY25 revenue stands at INR 2,144 crore, while the FY24 revenue was INR 8,344 crore, signifying a 30.6% drop.
The transaction is subject to regulatory approvals, including from the Competition Commission of India, and will possibly take six months to complete. JM Financial acted as the exclusive financial advisor, while AZB & Partners provided legal counsel to Aditya Birla Real Estate (ABREL) during the deal.
RK Dalmia, managing director of ABREL, said, “This strategic divestment unlocks value for our shareholders and sharpens our focus on real estate. CPP’s strong performance and sustainability make it a good fit for ITC, and we are pleased to hand over the business to a credible, established player.”