The Hindu Business Line : `BILT on the lookout for pulp capacities'

BALLARPUR Industries Ltd (BILT) has been on a restructuring drive for several years, in the process improving its financial performance and rationalising its workforce.

After the peaceful division of businesses between the four older Thapar brothers some years ago, the LM Thapar group company has concentrated on maximising production output to become an integrated paper company. It is on course to cross the Rs 3,000-crore mark in two years. In an interview with Business Line, the Vice-Chairman and Managing Director, Mr Gautam Thapar, talks about the company's growth strategy.

Where do you expect BILT to be in three years in terms of sales, profitability and growth estimates?

According to a recent analysis by SSKI Securities, from a sales target of over Rs 2,200 crore in the current fiscal, BILT is expected to cross the Rs 3,000-crore mark by 2006-07. By that year, we expect net profit growth by 40 per cent to Rs 237 crore.

BILT has been through a comprehensive restructuring over the last four years. What was the aim of this exercise?

We began with the acquisition of Sinar Mas Pulp and Paper India Ltd and merged it within BILT, thus completing our paper portfolio.

After this, BILT conducted a comprehensive evaluation of each manufacturing facility vis-à-vis cost of upgradation and ultimate returns. We closed down the Chodhwar unit and upgraded the existing ones.

The company's board of directors recently approved a Rs 1,200-crore investment in capacity expansion over the next three years. What does this entail?

The investment has been okayed to generate growth and rationalise paper manufacturing. We now have six manufacturing sites, of which five are under BILT and one is with a company in which both BILT and BILT Paper Holdings have investments.

The one in Bhigwan makes 1.2 lakh tonnes of coated paper on a single machine, whereas the Ballarpur unit makes 1.2 lakh tonnes of uncoated paper on six machines; this unit also has a pulp mill. After the investment phase is over, Ballarpur will have two high-speed machines making 110 metres of paper a minute, whereas another high-speed machine will be installed at Bhigwan. The pulp mill at Ballarpur will also be upgraded.

The Yamunanagar unit has been revamped; it now makes only high-end speciality paper. This has allowed us to move into the business stationery segment with brands such as Royal Executive Bond and BILT Matrix.

The Sewa unit has also been upgraded, whereas at Ashti an additional Rs 60 crore has been invested to increase capacity and rationalise total copier paper production.

Between Ballarpur and Bhigwan, three lakh tonnes of new capacity will be added over three years, taking our total capacity to eight lakh tonnes per annum.

The Sinar Mas acquisition benefited BILT by providing product synergies. Are you open to further acquisitions?

We are constantly on the lookout, but not for paper capacities. Our main need is pulp. Where paper capacity is concerned, we do not need to look outside till we reach the one-million-tonne mark.

While we will look seriously at blending recycled pulp with our finished products, we need to acquire pulp capacities. However, our priority will be on the plantation side. We have been looking for plantations for three years, but this is not easy to find.

In India, forestry is closed to private sector. Only some countries allow foreign players in this sector.

We have looked at South East Asia, South America and Africa, but haven't found anything. Anyway, our priority now is to get the investment done. Currently, all our pulp needs are being met through farm forestry.

Meanwhile, we have been trying to convey to the Government that forestry initiatives are normally facilitated through government-to-government interactions. Besides, the Government must allow public-private partnership in forestry.

BILT has also been planning to enter new areas such as Cream Wove. Any details?

We are not entering any new areas, Cream Wove is already one of our products. However, this is not part of our long-term strategy.

After the investments are in place, our paper quality will be re-defined to be on par with world-class products. Also, restructuring will not mean any increase in consumer prices for paper.

The company has been betting on paper retailing recently. What is the strategy?

We have invested zero capital in this and do business worth about Rs 36 crore worth through retailing BILT Matrix.

The retail initiative began two years ago and this year we have extended it. This business would be Rs 100 crore in two years. We see this as a good value-addition strategy.

BILT has also been successfully rationalising workforce. What is the target headcount in the next few years?

We have been doing this slowly. At present, the total headcount is 9,500. Retirements alone will take away about 800-900 people over three years.

Then, when the bigger machines come, some will opt for VRS. We are looking at a workforce of 6,000 people across six mills over the next three years.

Has the family shareholding restructuring been completed? Any plans to raise your stake in the company?

That has been completed. Everyone is running their business.

Promoter stake in BILT is now 39-40 per cent and I think that is a comfortable level. We have to balance growth and capital against ownership and I think we are doing fine.

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