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CONSOLIDATION BILT's Paper Dreams Undeterred by investor apathy, BILT has begun work on consolidating its lead and turning more profitable. By Jaya Basu
Disparate businesses as those of leather, glass, and nylon fibre have been exited. The chemicals division has been spun off into a new company where another group firm APR Ltd is a partner. And APR's (formerly Andhra Pradesh Rayon) pulp facility has been transferred to BILT to strengthen its raw materials base. The report card: helped to a large extent by the recent upturn in the paper industry (demand is clipping at 7 per cent annually), the reorganisation has turned around the 55-year-old company's fortune. For the year ended June 30, 2000, it reported a 253 per cent jump in profit after tax (pat). Even better, the first quarter of 2000-01 saw the bottomline more than double to Rs 23.09 crore over the same period last year. Says Thapar: ''Better price realisations, change in product mix and capacity addition, and the business reorganisation have been the pivot of BILT's revival.'' Yet, except for oddball opportunists like Calcutta's jute baron, Arun Bajoria, investors have more or less shrugged off BILT's recovery. Apparently, the poor sentiment has not so much to do with BILT per se as the paper industry's outlook. Says Pramod Jain, President, Indian Agro Paper Mills Association: ''The current scenario looks favourable to manufacturers, but some acquisition or alliances are expected to happen.'' The Paper Chase As the head of India's largest paper company-it makes 2.3 lakh tonnes per annum-Thapar is preparing not just to stay the top dog, but also to cash in on whatever consolidation that may be in the offing. Says Thapar, a chemical engineer from Pratt University (USA): ''Only companies with adequate raw material supplies, large capacities, and a strong distribution network will survive in the long run.'' On top of the young CEO's agenda is a plan to turn BILT into a one-stop-shop for all kinds of paper, with APR serving as the the holding company for all the group's paper businesses. Currently, 84 per cent of BILT's revenue comes from writing and printing paper. But over the next five years, the share of value-added products like coated paper and copier paper is expected to double to almost 44 per cent. Meanwhile, efforts are on to consolidate the industrial paper and packaging paper businesses under BILT Industrial Packaging Company (BIPCO). In July 1999, BILT paid Rs 14 crore to buy the 51 per cent it did not already own in Servall Paper Board, adding 60,000 TPA of folding box board capacity. Now renamed bipco (where APR holds 80 per cent and financial institutions the rest) the new company could go public in another few years. Admits a senior executive in JK Corp, BILT's Delhi-based competitor: ''BILT focusing only on paper means tough competition ahead for us.'' Not atypically, debt is a big problem at BILT. As on June 30, 2000, it had long-term debt of around Rs 850 crore versus an equity base of Rs 110 crore (although, thanks to a huge share premium reserve, the networth is Rs 843.65 crore). The result? Rs 113 crore in interest outgo last year. Notes B. Hariharan, CFO and Vice-President, BILT: ''In the current upcycle this is not a problem. But there could be a downtrend in another three years. By reducing debt, we are insulating the company against any adverse impact.'' In May 1998, BILT sold the loss-making daily newspaper, The Pioneer, to CMYK Printech. The Thapars are also scouting for a buyer for the ailing, Thailand-based Phoenix Pulp & Paper. Whatever money comes from the sale-BILT is asking for Rs 135 crore-will be used to lower the debt burden. The Market Push A cleaner balance-sheet will be critical to BILT's future strategy. Although it is already the largest player in the Indian industry, it needs further economies of scale not just to lower its cost of production, but also to consolidate its raw material supplies and marketing. Explains Hariharan: ''Writing and printing paper is closely linked to the supply of pulp word wide. In future, it will be difficult for small capacities to sustain themselves.'' BILT is expanding capacities at its three factories in Yamunagar (Haryana), Sewa (Orissa), and Ballarpur to touch 3.3 million tpa in another two years. Half of the new one lakh tpa capacity will go on stream next year, and mainly produce value-added paper. That apart, the company is open to buying up paper plants with 60,000 tpa or more of capacity. Says Thapar: ''Currently, there is no overcapacity in the industry, and international prices are much higher than domestic prices.'' Even so, BILT's focus in the past year has primarily been on the domestic market, where it wants to consolidate its presence. To that end, it has also tied up with international suppliers to source certain varieties of paper it does not make on its own. For instance, it has marketing tie-ups with Hansol and Dai Ichi to sell imported art paper in India. And Al Murjan, a Saudi Arabia-based business group, is a strategic investor in the company with a 16 per cent stake. BILT also plans to launch newer varieties such as blade-coated paper, superior chromo papers (used in high-quality printing), and branded low-cost paper for students. Says Thapar: ''We've launched new direct marketing initiatives and put our customer relationship management (CRM) and b2b strategy under review.'' The target: a 10 per cent growth in topline and an EPS of Rs 15. Hopefully, then, investor interest will perk up. |
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It must be
trying being Gautam Thapar. In a bid to appease Dalal Street, the
40-year-old nephew of the Thapar family patriarch, L.M. Thapar, has spent
his last 20 months in the corner room at Ballarpur Industries Ltd (BILT)
restructuring the awkwardly diversified flagship company. And, even as his
worst critics would admit, he's done a good job of paring BILT's focus
down to paper.