ITC Acquires Century Pulp for ₹3,498 Crore; ABREL Shares Up

April 1, 2025 – ITC’s Strategic Expansion in the Paper Business

Shares of ITC Ltd. and Aditya Birla Real Estate Ltd. (ABREL) showed mixed movements in the stock market on April 1, 2025, following ITC’s announcement of acquiring Century Pulp and Paper (CPP) for a lump-sum cash consideration of ₹3,498 crore. The acquisition is expected to significantly enhance ITC’s Paperboards and Specialty Papers Business, increasing its paper production capacity by 60%.

The stock market responded with muted sentiment towards ITC, while ABREL shares rose over 3% in early trade, reflecting investor optimism regarding the divestment’s impact on the Aditya Birla Group’s real estate ambitions.

Market Reaction to the Acquisition

At 9:20 AM, ITC shares were trading slightly lower at ₹408.75, marking a 0.25% decline, while ABREL surged by over 3%, reaching ₹2,019 per share on the National Stock Exchange (NSE).

Market analysts believe that while the acquisition strengthens ITC’s paperboard and packaging business, the immediate stock price movement reflects investor caution as they assess the long-term impact on the company’s balance sheet. On the other hand, ABREL investors appeared positive about the deal, considering it a value-unlocking exercise for the company.

• ITC share price: ₹408.75 (-0.25%)

• ABREL share price: ₹2,019 (+3%)

Strategic Importance of the Acquisition for ITC

ITC’s acquisition of Century Pulp and Paper aligns with its broader strategy to expand capacity, enhance operational efficiencies, and strengthen market leadership in the paperboard and specialty papers industry.

With this acquisition, ITC’s total paper production capacity will increase from 8 lakh metric tons per annum (MTPA) to 12.8 lakh MTPA, a 60% jump. This will allow ITC to scale its paper business operations while ensuring better supply chain resilience and risk mitigation through a multi-location presence.

ITC’s Key Objectives with the Acquisition:

• Capacity Expansion: Immediate addition of 4.8 lakh MTPA to ITC’s existing capacity.

• Market Leadership: Strengthening ITC’s position in the packaging, specialty papers, and board segments.

• Operational Efficiency: Improved economies of scale and better geographical distribution of production units.

• Portfolio Diversification: Reduced risk exposure across different business cycles in the paper industry.

• Locational Advantage: Century Pulp and Paper’s facility provides access to key raw material sources, helping optimize logistics and supply chain costs.

In a press statement, ITC emphasized that this acquisition aligns with its long-term vision of expanding the Paperboards and Specialty Papers Business at a new location, as its current facilities have limited scope for further expansion.

“The acquisition will immediately add significant scale and economies to existing operations with potential for further capacity expansion, provide locational advantage for efficient customer servicing and proximity to key raw material sources, mitigate operational risks through multi-site operations and enhance resilience across industry cycles through portfolio diversification,” said ITC in its statement.

Century Pulp and Paper: A Key Player in India’s Paper Industry

Century Pulp and Paper, a part of Aditya Birla Group, is a leading player in the Indian paper industry with a strong market presence and state-of-the-art production facilities. It has an installed capacity of 4.8 lakh MTPA, specializing in paperboard, specialty papers, and tissue products.

The acquisition ensures that ITC gains a ready-made, well-established production unit, rather than building new plants from scratch, which would have taken longer and involved higher capital expenditure.

With the increasing demand for sustainable packaging solutions, ITC’s acquisition is expected to enhance its ability to cater to industries such as FMCG, e-commerce, pharmaceuticals, and food packaging, which are shifting towards eco-friendly alternatives.

Aditya Birla Real Estate: Unlocking Value through Divestment

For Aditya Birla Real Estate Ltd. (ABREL), the sale of Century Pulp and Paper represents a strategic shift towards strengthening its real estate business. The ₹3,498 crore cash infusion from the sale will allow ABREL to accelerate growth in the real estate sector, which remains its core focus.

In its exchange filing, ABREL stated:

“The divestment of the Pulp and Paper undertaking is a value unlocking exercise for ABREL. It will further enable the Company to pursue growth opportunities in its core business: real estate.”

With the Indian real estate sector witnessing strong growth due to rising urbanization, commercial expansion, and increased housing demand, ABREL is expected to utilize the proceeds to invest in premium residential and commercial real estate projects.

Regulatory Approvals and Next Steps

While the acquisition has been announced, it remains subject to regulatory clearances, including approval from the Competition Commission of India (CCI) and shareholders of both ITC and ABREL.

Industry analysts expect that the deal will face minimal regulatory hurdles, given that Century Pulp and Paper primarily operates in India’s domestic market and does not significantly alter market competition dynamics.

Pending Approvals:

• Competition Commission of India (CCI) – Ensuring fair competition in the market.

• Shareholder Approval – Approval from shareholders of ITC and ABREL.

• Other Regulatory Clearances – As per India’s company law and corporate governance regulations.

Analysts’ Views on ITC and ABREL Post Acquisition

Market analysts have given a mixed reaction to the acquisition.

• ITC’s Perspective: While the deal is seen as strategically beneficial, the immediate stock reaction indicates that investors are weighing the cost of acquisition against future benefits. ITC’s increased capacity will likely strengthen revenue in the long run, but short-term execution risks remain.

• ABREL’s Perspective: The real estate sector remains one of India’s fastest-growing industries, and ABREL’s decision to divest a non-core business is seen as a positive step toward capitalizing on real estate expansion opportunities.

Brokerage Ratings:

• Motilal Oswal: Maintains a ‘Neutral’ rating on ITC, citing long-term benefits but near-term execution risks.

• ICICI Securities: Upgraded ABREL to ‘Buy’, emphasizing the value-unlocking potential from the divestment.

• Morgan Stanley: Expects ITC’s paper business to gain market share post-acquisition but remains cautious on short-term stock performance.

Highlights

✔ ITC acquires Century Pulp and Paper for ₹3,498 crore, boosting its paper capacity by 60%.
✔ ITC’s stock trades flat (-0.25%), while ABREL gains 3% on divestment news.
✔ The deal aligns with ITC’s strategy to scale its paper business and expand at a new location.
✔ Aditya Birla Real Estate to use proceeds to focus on real estate expansion.
✔ Regulatory approvals from CCI and shareholders pending before completion.