Big move

Calcutta, Feb. 22: ITC has embarked upon an ambitious expansion plan to double paper making capacity in the next five years. This could cost the company around Rs 3,000 crore going by the present benchmark valuation.

The company, the largest player in the paperboard business, has a manufacturing capacity of 400,000 tonnes per annum. ITC is planning to enter the writing and printing paper segment, which is 2.5 times bigger than the paperboard market. It is will consider both acquisitions and a greenfield facility for this.

Pradeep Dhobale, chief executive of the paperboards and speciality paper division, said the company was open to buying out existing units.

?There are units which can be taken over. We are always looking at new opportunities,? Dhobale added.

ITC had acquired the paperboard division of Ballarpur Industries a year ago.

Dhobale said the company could add about 100,000 tonnes at its existing facilities. This would leave about 300,000-tonne-facility either to be acquired or set up afresh. Going by the standard cost for capacity addition of $1500 per tonne, the exercise may dent a hole of about Rs 3,000 crore for ITC.

Dhobale, however, clarified that the board was yet to take a final call on the expansion project.

The development gains in significance for the fact that paper is clearly identified by the company as one of the growth areas.

?The growth in tobacco business, the biggest contributor to the company?s revenues and bottomline, will not be rapid. ITC has to depend on new areas like paper, agri-business and hotel for growth,? an analyst pointed out.

The paper industry in India is about 6 million tonnes with paperboard and writing and printing paper contributing 1 and 2.5 million tonnes, respectively. With ITC?s capacity set to touch 400,000 tonnes, the company has to look for other segments within the sector.

The writing and printing paper segment itself is valued at Rs 7,500 crore. JK, Ballarpur, Orient, Andhra Paper are the major players here. The industry is highly fragmented and top players control only 30 per cent of the paper industry with the rest being split among 600 small units.