The Avantha Group's paper division, Ballarpur Industries Ltd, is to raise around $330 million from a listing on London's main exchange, to fund further expansion and cut debts.
Around $140 million of the proceeds will be used to fund capital expansion in its operations in India and Malaysia, while the remainder will go towards cutting the firm's debts, BILT Paper Plc said in a statement on Tuesday.
The firm is 79.5 per cent controlled by the Avantha Group's Ballarpur International Holdings, with private equity firms Singapore's Lathe Investment and JP Morgan Mauritius holding the remainder.
BILT Paper hopes to complete the deal “before Easter” (April 24) a spokesperson for the company said on Tuesday. If fund raising goes according to plan, the listing should put the firm into the FTSE 250.
BILT Paper has been expanding rapidly in recent years, raising its paper producing capacity to 758,710 tonnes a year at the end of December – an 88 per cent increase on 2008. Its plans remain equally ambitious.
Between 2012 and 2014, the firm plans to raise its paper production capacity by 375,000 tonnes a year, centered around its Bhigwan unit near Pune, and also ramp up pulp production by 290,000 tonnes a year, centered in Ballarpur and its Sabah Forest Industries mill in Malaysia.
Like other recent Indian listings in London such as Essar Energy's $1.8-billion IPO last April, BILT Paper is counting on investor interest in the India growth story.
“Indian paper demand is expected to increase significantly throughout the next decade,” said R.R. Vederah, Chairman of BILT.
“The proceeds from the listing will help us meet this growth in demand.”
Indian paper usage remains significantly below international levels.
In 2009, per capita consumption of paper was a mere 8 kg in India, against 227 kg in the UK, according to data compiled by Scandinavian consultancy Pöyry.
The consultancy estimates a 5.5 per cent growth in Indian demand for paper each year from 2008 to 2020, higher than China's estimated 4.8 per cent growth and a shrinking market in Western Europe and North America. Demand for wood-free paper products in India is expected to increase at an even faster rate.
Second largest
The IPO will be the second largest listing in London this year, after Justice Holdings raised £900 million in January.
A number of international paper and forestry firms are listed in London, though an IPO in the sector hasn't taken place for a number of years.
However, the City has considerable analyst and investor interest in the sector – one reason why London was chosen for the IPO, the BILT Paper spokesperson said.
“The breadth of experience and interest in this area makes London the ideal place for a listing.”