Aditya Birla Real Estate Ltd (ABREL) is divesting its paper business, Century Pulp & Paper, to ITC Ltd for ₹3,498 crore. This move allows ABREL to focus on its rapidly growing real estate segment, which has shown significant revenue growth despite lower margins compared to its paper business. ABREL's decision is driven by the struggling performance of its paper division and a need to manage increasing debt.
For ITC, this acquisition significantly expands its paper production capacity by 60%, enhancing its market leadership. The deal includes Century's paper mill in Uttarakhand, increasing ITC's total capacity to 12.8 lakh MTPA and providing a stronger presence in northern India. Financially, the acquisition boosts ITC's paper business revenue by 40% and is expected to be earnings accretive.
The acquisition is valued at approximately one-time sales of Century Pulp's FY24 revenue, aligning with industry peers' valuations. ITC plans to fund the acquisition internally. While the deal's success depends on a sectoral recovery, the paper industry is expected to benefit from anti-dumping measures and declining raw material costs. India's low per capita paper consumption suggests significant long-term growth potential for ITC.