Goenka: Cash course

Calcutta, April 8: Star Paper Mills is planning a private placement to fund the first phase of its expansion and modernisation plan, which will involve an investment of Rs 600 crore.

The company will raise the funds through internal accrual and debts. It has decided not to raise the amount from the public.

“We are exploring private placement options to fund the first phase of expansion. We had appointed a consultant to help us decide on the mode of raising funds. This programme will not only expand but also modernise the existing operations,” said G.P. Goenka, chairman and whole-time director of Star Paper Mills.

The company plans to hike its production capacity to 1.4 lakh tonnes from 80,000 tonnes.

“The company will complete the expansion procedure after two years. It will utilise its existing facility and not look at other locations,” Goenka said.

Star Paper has also lined up a second phase of expansion, which will require an investment of Rs 1,800 crore.

According to its plan, the company will rectify problems, such as a lack of bleaching capacity, revamp its old production units and also change its product mix, inclining more towards higher value-added products.

The company will commission a 5MW steam turbine, its second, which will help it reduce energy costs. Star Paper is also trying to combat a 40 per cent hike in raw material costs.

The firm needs another 4MW, which it will consider in the next phase.

Star Paper will set up a bagasse pulping plant for Rs 30 crore. The plant will have a capacity of 100 tonnes per day.

The company also reduced its finished goods inventory by 603 million tonnes, which helped offset its production loss partially.

The Indian paper industry is estimated at Rs 15,000 crore. According to consulting firm Pöyry, the industry has a compound annual growth rate (CAGR) of 6.10 per cent and is expected to have an output of 7.4 million tonnes in 2008-09. Industrial paper, which comprises almost 60 per cent of the market, has a CAGR of 6.7 per cent and writing and printing paper has a CAGR of 5.5 per cent.

Star Paper in 2005-06 produced 55 per cent industrial and 45 per cent cultural paper with a turnover of Rs 275 crore.