Ballarpur’s no deal may have far-reaching consequences

Whatever lies at the root of Ballarpur’s problems, the resulting fall-out has resulted in “paper shortage” that is unprecedented in the history of the Indian printing industry. Already tales of no delivery for small, low-value orders are rife.

The business was until recently India’s largest paper group. More than 50% of India's coated wood-free grades roll out of BILT’s plants. BILT holds an impressive 85% share of the bond paper market and nearly 45% share of the hi-bright Maplitho market in India.

And while its market share has dwindled at the same time as its problems were magnified, BILT still carried out a huge amount of trade. Informed sources said the firm was probably handling a fair share of paper supplies. 

For Indian printers, the more immediate issue is “continuity of paper supply”. The good news is that paper merchants have for a long while now been making contingency plans since September 2015 for scenarios involving the failure at Ballarpur – even for such an extreme happening as sudden closures.

A major paper supplier told PrintWeek India, “All of us have to do our best in the coming weeks. We tried to plan for all eventualities. As paper traders, we are trying to maintain service levels, especially for loyal customers who’ve been with us for years.”

Another trader who visited the PrintWeek India office last week cautioned that “Printers may have to escalate payments if they want paper. Trading terms may tighten.” He added, “Many printers are stocking up. Some of our customers are having an early dialogue about their commercial and production position, and it’s wise to pay bills on time.”

Even though ‘Don’t panic’ is the message from paper merchants, there is a clear sign of a paper shortage. No one knows the accurate amount of paper stock that is tied up in the Indian supply chain at present. Ballarpur’s cash flow crisis had caused it to run stocks down, and there were reports of it offloading what paper stock it had. 

Many printers that PrintWeek India spoke to are “appointing alternative channels”, and importing paper, directly.

For those of readers who have not been up-to-date on the action, the Ballarpur deal fell through as the buyer, Pandawa Sakti (Sabah) could not arrange for cash even after the extended deadline. Ballarpur has invoked performance guarantees of USD 50 million.

[[Read more: Ballarpur's USD 500-million deal to sell 98.08 per cent stake in Malaysia arm called off]]

Last September, Ballarpur Industries had announced that its subsidiary Ballarpur Paper Holdings BV would sell entire 98.08 per cent stake in its Malaysian arm Sabah Forest Industries for USD 500 million (about Rs 3,307 crore). In 2007, BILT had acquired Malaysia’s largest paper company for USD 261 million.

The calling off of the deal comes after several extensions of the deadline. On 8 February 2016 BILT had said it had been extended to February 29 and then to March 31. Then on April 4, the company said it has extended it to May 16, 2016 on the buyer’s request.

This has had a serious impact on paper production at BILT factories in India.

Please nb: Repeated attempts by PrintWeek India to contact Ballarpur's registered and corporate offices were left unanswered.