JK Paper Ltd. (JKPL), a leading producer of office paper, packaging boards, printing, writing and specialty paper, has lined up an investment of around Rs 650 crore for capacity expansion and efficiency improvement, capital expenditures at its two plants and debt refinancing among others. Around half of this investment will be accounted for by the International Finance Corporation (IFC), which will provide the credit for improving the company’s productivity and restructuring its balance sheet.
The proposed IFC investment is in the form of secured non-convertible debentures (NCDs) worth Rs. 325 crore to be used in JKPL’s project locations in Rayagada, Odisha and Sonagadh, Gujarat. The financing is aimed at supporting JK Paper’s efforts to increase energy efficiency in its plants by reducing the use of water and coal. Additionally, the project supports the company’s efforts in sourcing pulp, which it does by supporting social farm forestry programs; in fact, JK Paper now plants more trees than it fells, thereby playing a vital role in enhancing green cover in the country.
The company has been making efforts to enhance capacity for quite some time now, which indicates its seriousness in charting a healthy growth story. About a year ago, JK Paper had made a non-binding offer to buy two units of Ballarpur Industries (BGPPL) in Maharashtra but the deal failed due to the reluctance by Avantha Group to part with these plants. Back then, JK Paper had stated that its nonbinding offer was preliminary and subject to customary conditions, including but not limited to initiation and completion of satisfactory due diligence, finalization and execution of definitive agreements, and receipt of applicable corporate and regulatory approvals.
Meanwhile, JK Paper is on advanced stage discussions for the purchase of the paper division of Century Textiles and Industries Ltd. (CTIL), owned by the BK Birla Group. JK Paper’s current production capacity at its Sonagadh plant is 160,000 tons per annum (tpa) of paper and paper board while the Rayagada plant has a production capacity of 295,000 tpa of paper. Part of the Rs. 650 crore investment is aimed at acquiring technologies to achieve energy efficiency, which the company feels will determine its future sustainability.
The company is also streamlining its raw material sources by supporting forest eco-systems and communities living in and off forests. In Sonagadh, JK Paper purchased around 26,000 tpa of bamboo from tribal villagers, who enjoy bamboo harvesting rights by the Gujarat Forest Department. Additionally, about 202,000 tpa of wood (eucalyptus, casuarina and subabool/leucaena leucocephala) is bought directly from about 2,500 farmers engaged in farm forestry, at a guaranteed fixed price. The plant needs 250,000 tpa of wood and the shortfall is tackled by importing pulp.