₹3,498 Crore Deal: ITC Takes Over Aditya Birla's Pulp & Paper Undertaking

In a bid to expand into the paper and packaging sector and diversify its business further, ITC Ltd has announced the acquisition of Century Pulp and Paper from Aditya Birla Real Estate Ltd for ₹3,498 crore.

The moves align with the business plans of both companies. While the Aditya Birla Real Estate Ltd is looking to focus on real estate in what can be best called a strategic portfolio choice, ITC has been looking to get a bigger foothold in the growing packaging industry.

ITC to benefit from Aditya Birla Ltd's installed capacity

India produces 23 million MT of paper and paperboards per annum and is its world's fifth-largest producer. With demand growing at 6%-7% per annum, there is clearly a lot of scope for big players to optimize revenue. ITC is already among the big players of the paper industry. Out of the company's overall FY24 revenue of ₹69,446 crore, ₹8,344 crore came from the paperboards, paper and packaging segment. In the same period, Aditya Birla Real Estate's pulp and paper division earned a profit of ₹3,375 crore.

Likewise, while ITC’s paperboards and specialty papers business produces around 1 million tonnes every year, Century Paper has an installed capacity of 480,000 mt per annum. All of ITC's four paper facilities are located in South India. This further gives ITC leverage in terms of transportation and diversification, with the Century paper factory located at Lakuan in Uttarakhand.

ITC aligns with emerging market trends

B. Sumant, executive director, ITC laid out the reason behind the acquisition: “The acquisition will immediately add significant scale and economies to existing operations with potential for further capacity expansion, provide locational advantage for efficient customer servicing and proximity to key raw material sources, mitigate operational risks through multi-site operations and enhance resilience across industry cycles through portfolio diversification. The acquisition aligns with the company’s strategy of driving the next horizon of growth in the paperboards and specialty papers business by expanding capacity at a new location, considering that the existing facilities are already saturated.”

Century Paper produces writing paper, printing paper, tissue paper, rayon grade pulp, paper grade pulp and paper board. For Aditya Birla Real Estate Ltd, the sale is a part of the bigger strategic portfolio restructuring. 

A long race horse, ITC is known for its involvement in sectors such as hotels, agriculture, FMCG and cigarettes. The company's acquisition of Century Pulp and Paper from Aditya Birla Real Estate Ltd aligns them with emerging market trends. Over the last few years, there has been an increased demand for eco-friendly products and packaging solutions and ITC is positioning itself to benefit from this trend.