Restructuring aims to bring paper biz under 1 roof: BILT

The company considers listing its Netherlands subsidiary, which owns the paper business, Hariharan told CNBC-TV18. The company’s Netherlands subsidiary Ballarpur International Graphic Paper Holdings consists of two paper units and the Sabah Forest Industries. The rayon grade pulp unit would be put back into business with BILT.

Using the funds of the initial public offer, the Avanta Group looks to bring down its debt by Rs 300 crore by FY13. “The only reason why we will do an IPO would be if we get valuation which is significantly higher than the current valuation for BILT,” he said,

Below is an edited transcript of his interview with Latha Venkatesh and Ekta Batra. Also watch the accompanying video.

Q: Can you take us through the restructuring that you have within the Ballarpur Group. What is the purpose, the intent behind this and can you simplify the structure for us?

A: We have created a Netherland subsidiary for Ballarpur Industries (BILT) under which we have put in three units - two paper units and one rayon grade pulp unit. We had aslo acquired the Sabah Forest Industries under this structure. The current restructuring is to bring all the paper business under one structure, which is the Netherland structure, and take out the rayon grade pulp business back into BILT.

This is because the last time we were looking at an international listing for Ballarpur International Graphic Paper Holdings (BIGPH) there were some investors who had told us that it’s better to bring all the paper business under same structure. So that’s what we are trying to do now.

Q: In 2010-2011 there were reports with regards to listing possibly on the London Stock Exchange and then possible listing of Sabah etc. Where do all of those IPO plans stand at this point in time and was this restructuring a precursor to that?

A: The restructuring is being done with a view to look at an IPO, but we are not sure whether the market is conducive for doing an IPO internationally. We are going to keep the structure ready, and as and when the market improves we will be ready to do a listing. So that’s the plan going forward.

Q: Which is the possible company or subsidiary at this point in time that you would be most comfortable with listing? Also, what sort of valuations would you possibly be looking at and which stock exchange would you be focused on?

A: Our preference is to list the Nederland subsidiary BIGPH. We have filed intention to float at the London Stock Exchange because that is now going to own the entire paper business and also Sabah Forest Industries. So that is our preference.

In terms of stock exchange, we looked at London, we looked at other stock exchanges also, but we will take a call closer to the issue. We have not closed in on any stock exchange as of now. At the right time we will look at the stock exchange.

As far as valuation is concerned, the only reason why we will do an IPO would be if we get valuation which is significantly higher than the current valuation for BILT.

Q: What are you looking at in terms of valuations in the follow-up to the listing, and when you list, will it be an issue of fresh shares or will the promoter divest?

A: When we decided the intention to float at the London Stock Exchange, we were looking at a valuation which is 30-40% higher than the current marketcap of BILT. That was completely primary issues, there is not secondary sale at that point of time.

But now that we have raised 200 million perpetual bond last year, which is a way can be treated as equity, this time around we will have probably a portion of primary and secondary issuance.

Q: What are the numbers on primary and secondary issuance any ballpark numbers you have?

A: I think you can say that if 300 million is issue size, about 200 million will be primary, about 100 million can be secondary.