BILT to sell Malaysia arm for $500 mn

Deal to help group cut debt by up to Rs 2,200 crore

Ballarpur Industries (BILT), an Avantha Group firm, has announced the sale of its Malaysian subsidiary, Sabah Forest Industries (SFI), to Pandawa Sakti (Sabah) Sdn, Malaysia, for $500 million (Rs 3,307 crore).

The debt-heavy group had sold Crompton Greaves’ consumer durable business in April for Rs 2,000 crore and a power plant in Korba to Adani Group for Rs 4,200 crore in November 2014.

A power plant in Jhabua, Madhya Pradesh, was also on the block and a deal in this regard was expected to be finalised by October, said a senior executive.

“We expect the funds to flow in through the next three months. This will help us correct the capital structuring of the group,” B Hariharan, BILT’s group director (finance), told Business Standard. The group planned to use the proceeds from the sale of its Malaysian assets to reduce its debt of Rs 5,800 crore by Rs 2,000-2,200 crore, he added.

In 2007, BILT had acquired SFI, Malaysia’s largest paper company, for $261 million.

Hariharan said Avantha Group planned to continue focusing on paper and pulp business in the coming years, though there were no capital expenditure plans for the next two years.

“Given the prevailing market conditions and the company’s strategy of divesting assets at the right prices to maintain a healthy balance sheet, the divestment of SFI is aligned with BILT’s objectives. The deal is expected to improve the leverage and strengthen the capital structure of the company significantly,” stated Avantha Group Chairman Gautam Thapar.

The group said the equity consideration to be paid to Ballarpur would be subject to adjustments relating to debt, working capital and exchange rate fluctuations at the time of completion of the transaction. The deal is subject to approvals from the government of Sabah (Malaysia), as well as Pandawa Sakti’s financing agencies.

Pandawa Sakti, along with a strategic partner in China, proposes to set up a pulp mill with a capacity of about a million tonnes a year in Sabah. The project is based on financing by Chinese banks.

On Thursday, the BILT stock closed at Rs 15.8 on the National Stock Exchange, up 6.4 per cent.
PAPER AND PULP

• The debt-heavy group had sold Crompton Greaves’ consumer durable business in April for Rs 2,000 crore and a power plant in Korba to Adani Group for about Rs 4,200 crore in November 2014
• A power plant in Jhabua, Madhya Pradesh, was also on the block and a deal in this regard was expected to be finalised by October, said a senior company executive
• The Avantha Group planned to continue focusing on paper and pulp business in the coming years, though there were no capital expenditure plans for the next two years