India’s Bilt Paper pulls $330 million London IPO

By Anurag Kotoky and Sanjeev Choudhary

NEW DELHI (Reuters) – BILT Paper’s $330 million London float has been pulled after the acquisition of a rival by a U.S. firm convinced its parent company to seek a higher valuation than achievable in the current rocky European market.

U.S. paper and packaging company International Paper Co (IP.N: Quote, Profile, Research) agreed on Tuesday to buy a majority stake in India’s Andhra Pradesh Paper Mills (APPM) (ADPA.BO: Quote, Profile, Research), India’s third-largest paper company by market value, for about $257 million.

“It is important to study the impact of this acquisition valuation over the next few months, and the potential rerating possibilities, as against the IPO valuation in London at this time which is dependent on the current UK IPO market sentiments,” Ballarpur Industries (BILT.BO: Quote, Profile, Research), India’s largest paper maker, said in a statement on Friday.

Ballarpur will reconsider plans to list its BILT Paper unit in the next two to three months, group finance head B. Hariharan said.

“Unless we get a substantial increase in valuation or a significant increase in valuation in India, we will not look at listing,” he told Reuters.

Shares of Ballarpur have risen about 10 percent since the Andhra Paper deal announcement, while those of smaller rival JK Paper Ltd (JKPA.BO: Quote, Profile, Research) have jumped 20.5 percent.

Emkay Global Financial Services noted that Indian paper companies currently trade at average price to earnings ratio of 6.7 multiple, while the Andhra Paper deal was done at an multiple of 44.2, based on fiscal year 2011 estimates.

“The valuations offered in the Andhra Paper deal is likely to trigger a rerating of all the paper companies in India since current valuations of Indian paper companies are substantially lower than the deal multiples,” the brokerage wrote in a note on Wednesday.

Ballarpur trades at 12 times its price to earnings ratio, according to Thomson Reuters data.

Ballarpur owns 79.5 percent of Bilt Paper, part of the Mumbai-based Avantha group, with the remainder held by private equity investors JPMorgan Mauritius and Lathe Investment.

The delay in the IPO will not have any impact on the company’s expansion plans and have only a slight impact on debt reduction plans, Hariharan said by phone.

The maker of writing and printing paper had plans to use around $170 million of the IPO proceeds to fund its capital expansion, and around $140 million to reduce long-term debt.


The European IPO market has had a rocky month, with volatility in global stock markets due to unrest in North Africa and the Middle East and fears of a nuclear crisis in Japan derailing two of the region’s biggest listings so far this year.

Although markets have rebounded, encouraging many firms to press ahead with their plans to list before Easter, the risk of further uncertainty and the glut of offerings competing for investor attention means buyers can afford to be discerning.

Oman’s Renaissance Services (RSC.OM: Quote, Profile, Research) pulled the plug on a $500 million London float of its oilfield services unit Topaz on Thursday due to concerns over valuation and growing regional unrest.

“If you look at the deals that are out there at the moment … the bottom of their price ranges are at a 30 to 40 percent discount to where their main comparables are trading,” said a source close to the BILT offering.

“(The decision to pull) is a combination of IPO market sentiment in terms of what investors are willing to pay on deals … and then this other deal happening crystallized value in the market for Indian paper companies.”

BILT, which is involved in all stages of paper making from tree plantations to distribution, has increased its annual paper production capacity by nearly 90 percent over the last two years and plans to grow it by another 50 percent by the end of 2014.

The listing, which was due to be completed in mid-April, was being run by Citigroup (C.N: Quote, Profile, Research) and JP Morgan (JPM.N: Quote, Profile, Research).

(Additional reporting by Kylie MacLellan in London; Editing by Tony Munroe and Jon Loades-Carter)

India’s Bilt Paper pulls $330 million London IPO