ITC’s Latest Expansion: All You Need To Know About The Rs.3,498 Crore Deal

Though the market started with a slight drop in the primary indices, a few stocks saw a jump in share prices owing to different announcements, including equity conversions (Vodafone Idea) and contract deals (Hindustan Aeronautics Ltd.).

One such highlight of the initial market hours is ITC’s acquisition of Aditya Birla Real Estate’s pulp & paper arm, Century Pulp and Paper. How will this affect the companies, and what was the strategy for doing so? Let’s understand it in detail. 

Overview of Century Pulp and Paper

Category	Details
Established	1,984.00
Location	Lalkuan, Uttarakhand
Total Capacity	~5 lakh metric tonnes per annum
Manpower	6,000+ employees
Trees Planted	105 lakh (as of Sept 2024)

Established in 1984, Century Pulp & Paper (CPP) is a leading player in the paper industry, manufacturing paper, board, tissue, and pulp products. It operates one of India’s largest single-location integrated manufacturing facilities, located in Lalkuan, Uttarakhand, near the foothills of the Himalayas. CPP has a strong presence in domestic and export markets, with a network of service centers and sales offices across India. The company’s product offerings include 

• Writing & Printing Paper
• Copier Paper (70-85 GSM)
• Tissue Paper 
• Paperboard (Prima Plus & Omega Plus Boards)
• Rayon Grade Pulp
• Century Green Pulp (Produced from bagasse)

Acquisition Details:

ITC Limited has announced the acquisition of Century Pulp & Paper (CPP) from Aditya Birla Real Estate for Rs.3,498 crore through a slump sale transaction. Under this structure, ITC will take over CPP’s entire business – including assets, contracts, and employees – as a single entity without assigning individual values to specific assets or liabilities. This approach allows for a streamlined transfer and aligns with ITC’s rapidly expanding Paperboards and Specialty Papers Business strategy. 

The deal, disclosed in a stock exchange filing on 1st April 2025, is expected to close within six months, subject to regulatory approvals, including from the Competition Commission of India (CCI). Here’s how it affects both ITC Limited and Aditya Birla Real Estate:

Outcome Of The Deal For ITC Limited

1. Revenue Increase:

In FY24, ITC’s paperboards, paper, and packaging segment contributed Rs.8,344 crore to its Rs.69,446.20 crore total revenue. 

With CPP generating Rs.3,375 crore in revenue and Rs.500 crore in EBITDA in FY24, these figures will immediately be reflected in ITC’s financials post-acquisition. Since CPP is already profitable, its revenue will directly boost ITC’s earnings, increasing ITC’s Earnings Per Share (EPS) from the first year.

2. Production Capacity:

The deal is also poised to increase ITC’s total paper production capacity by 60%, from 8 lakh MT per annum to 12.8 lakh MT per annum, positioning it strongly in a market where demand for paper and paperboards grows at 6-7% annually.

3. Operational Edge:

Additionally, CPP’s location in Uttarakhand offers ITC an operational edge, providing efficient customer servicing, proximity to raw materials, and a hedge against operational risks by diversifying its production footprint.

ITC expects to leverage synergies from the acquisition, targeting a 30-40% increase in EBITDA per tonne and improved Return on Capital Employed (RoCE) over the medium term.

Outcome Of The Deal For ABRE

The divestment is part of a broader strategic shift for Aditya Birla Real Estate. Formerly known as Century Textiles Limited, the company rebranded itself as ABRE in September 2024 to reflect its sharpened focus on real estate. The sale of its pulp and paper business will allow it further to pursue growth opportunities in its core real estate business. 

The divestment will also free up capital from a non-core segment. It can then be channeled into high-growth areas such as real estate, paints, and jewelry retailing, where it has made significant capital investments. The slump sale structure ensures a clean exit from the paper business while unlocking shareholder value. 

Changes In Share Price Of ITC and ABRE:

Following ITC’s announcement, the company’s share price slightly increased. On Tuesday, the stock rose by 0.11%, reaching Rs.410.2 per share on the National Stock Exchange (NSE) at 9:24 am. Despite this uptick, ITC’s share price has fallen by 0.18% over the past five trading days. However, over the past month, the stock has gained 3.22%, reflecting some positive momentum in the market ahead of the deal’s completion and the expected acquisition benefits. 

As for Aditya Birla Real Estate’s share price saw a 3% increase, reflecting a positive market reaction to the divestment of its pulp and paper business.

Takeaway For Investors

The acquisition of Century Pulp and Paper by ITC will immediately impact its revenue and earnings, with a notable increase in paper production capacity. This development adds scale to ITC’s paper business and positions it for further growth.

For Aditya Birla Real Estate, selling its pulp and paper business allows the company to concentrate on its real estate operations, freeing up capital for reinvestment. Overall, ITC’s financials will reflect the added capacity and revenue, while Aditya Birla Real Estate will focus on its core sector moving forward.

Bottomline:

The acquisition of Century Pulp & Paper (CPP) by ITC marks a strategic move that will significantly bolster ITC’s Paperboards and Specialty Papers Business. ITC positioned itself for more substantial growth in an expanding market. ABRE is now ready to focus on its core real estate business, freeing up capital for further investments in high-growth areas.
However, as investors, whether to invest in these stocks or stay invested if you are already a shareholder is a decision to be made after thoroughly analyzing the effects of the deal on share price, the market scenario, and other external factors.

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