Birla Sells Its 79% Revenue Arm to ITC—What’s the Game Plan?

It’s not every day that one of India’s oldest business groups decides to part ways with a legacy industrial asset.

But Aditya Birla Real Estate Ltd. (ABREL) just did that—divesting Century Pulp and Paper for ₹3,498 crore. And the buyer? None other than ITC, a conglomerate that seems to be expanding quietly but strategically in everything from biscuits to boards.

At first glance, the deal looks transactional—money paid, business handed over. But dig deeper and you'll see something else: this is a case study in corporate reallocation. One group is shedding its industrial past to go big on real estate. The other is doubling down on supply chain control to future-proof its consumer goods empire.

So, why is paper no longer good business for Aditya Birla? And why does ITC think it’s worth ₹3,498 crore?

Why Is Aditya Birla Selling?

Century Pulp and Paper isn’t a struggling asset. It’s operationally sound, contributes 79% to the company’s total revenue, and boasts a legacy of steady clients and established capacity. 

Because firstly, it no longer fits the vision.
Secondly, just revenue isn't good enough.

This shift wasn’t impulsive. In fact, it’s been in motion for nearly a decade. Back in 2015, a potential sale to ITC was explored but abandoned over valuation issues. A second attempt in 2017 with JK Paper Ltd. also didn't materialise. 

And here's the interesting part—if even large corporations like ITC and JK Paper walked away from deals due to overvaluations, why should you, as an investor, settle for overvalued stocks? Just like them, you should aim to buy at a fair price. Subscribe to Finology 30 for stock picks at fair prices for your long-term investments.

Back to the story, the group was slowly—and steadily—exiting legacy businesses to establish a sharper, real-estate-first identity.

To make this happen, they’ve systematically exited multiple divisions:

• Cement: Demerged and merged into UltraTech Cement back in 2018, easing off nearly ₹3,000 crore in debt.
• Textiles (Yarn & Denim): Sold off operational units, though minor labor litigations remain.
• Non-operating Textile Plant: In early 2025, they cleared out the defunct Birla Century plant in Gujarat.
• And now, Pulp & Paper: The ₹3,498 crore sale to ITC marks the final, decisive exit.

But while real estate remains the primary focus, it’s also clear that this sale plays a key role in the group’s broader strategy of balance sheet repair.

The company’s net debt stood at ₹4,300 crore as of 9MFY25, with the debt-to-equity ratio climbing to 1.06x from 0.61x in FY24. The proceeds from the sale will not only fund growth but also help in de-leveraging, freeing up capital to support future investments in real estate.

This isn't just about shifting focus; it's about strengthening their financial foundation for sustainable growth.

R. K. Dalmia, Managing Director, Aditya Birla Real Estate Ltd, said, “The divestment of the Pulp and Paper undertaking by ABREL is a strategic portfolio choice and unlocks value for the shareholders of ABREL. The company has embarked on a transformational growth phase, and this move will further sharpen its focus on real estate to drive sustained value creation.”

In corporate speak, they call this a “value-unlocking exercise.” In plain English, it means: this asset has matured, doesn’t align with future plans, and the capital tied up here could work harder elsewhere.

A pulp and paper business—however stable—feels like a relic. It’s capital-intensive, cyclical, and low-margin compared to the growth and return profiles of real estate or financial services.

If you see the image below, although the revenue is increasing, the EBITDA margin isn't. This trend signals that rising costs are eating into profitability—especially in an industry where margins are already thin.

But why were the margins so thin? Here's why: 

1. Rising Input Costs
A major challenge here is the sharp increase in key input costs, particularly wood fibre/pulp and energy. Raw material expenses alone can constitute 45-50% of revenue for Indian paper players, and this is where the pressure is building. 

India faces a unique set of constraints due to a shortage of domestically available wood fibre, compounded by regulations that restrict industrial plantations. As a result, Indian manufacturers are forced to rely more heavily on expensive imports, further pushing up costs.

2. Margin Pressure from Import Flooding
But input costs aren’t the only problem. The Indian paper industry is also battling an influx of low-cost imports, particularly from China and ASEAN countries. 

These regions benefit from government subsidies and large-scale operations, which allow them to offer paper at prices 10–15% lower than domestic manufacturers, even in premium segments like printing and writing paper. This relentless price competition is eroding margins for Indian producers.

3. The Import Surge and Its Impact
This issue has only worsened recently. According to data from DGCI&S, paper imports surged to 19.3 lakh tonnes in FY24, marking a sharp 34% increase from 14.3 lakh tonnes in FY23.

With global players flooding the market with cheaper paper, domestic manufacturers, including Century Pulp & Paper, are struggling to maintain pricing power. Even legacy players with decades of operational scale are finding it challenging to protect their margins in this environment.

But then, why Did ITC Invest ₹3,498 Crore in Century Pulp and Paper?

Because for ITC, this isn’t just about paper—it’s about power. And positioning.

1. A Quiet Giant in Packaging
Most people know ITC for its cigarettes and consumer brands. But behind the shelves lies a ₹8300+ crore engine—Paperboards and Specialty Papers Division (PSPD).

From cartons to wrappers, this unit supports both ITC’s internal FMCG demand and external clients across pharma and retail. Century Pulp and Paper fits in like a missing puzzle piece—offering immediate backward integration, capacity expansion, and geographic reach. With this acquisition, ITC strengthens its grip across the packaging supply chain:

• More control over raw material sourcing
• Reduced input costs
• Enhanced margins on finished products
• Strategic expansion in North India

The Lalkuan plant in Uttarakhand gives ITC a critical presence in a region where it lacked manufacturing scale—reducing freight costs, improving delivery times, and diversifying production risk.

2. Growth + Sustainability = Strategic Fit
This is not a sunset industry—it’s a sunrise in disguise. Paper demand in India is rising, thanks to policy tailwinds and evolving consumer behaviour. The July 2022 ban on single-use plastics has nudged industries toward paper-based alternatives. FMCG, healthcare, e-commerce, and QSR players are shifting to sustainable packaging, driving higher usage of corrugated boxes, paperboard, and wrapping paper.

In FY24, India’s paperboard and packaging segment—which makes up 55% of the overall industry—grew 8.2%. Tissue papers, fueled by hygiene awareness, led the charts with 13.3% growth, followed by Cupstock at 10.5%. While these segments are still small, they’re growing fast.

ITC's move is well-timed—not just to meet internal demand, but to ride this external wave.

3. The Education Tailwind
Even in the Printing & Writing Paper (PWP) segment—which contributed 30% of industry revenue—growth is coming back. The National Education Policy (NEP) 2020, rolled out in 2023–24, has spurred textbook demand across states.

In Budget 2025–26, the Ministry of Education’s allocation jumped to ₹1.28 lakh crore, a 6.2% hike. This fuels both literacy growth and paper demand—especially in school and professional printing.

So while digital adoption moderates growth, the sheer size of India’s youth and workforce still gives this segment a long runway.

4. FMCG Needs Infrastructure
ITC’s ambition is clear: reduce reliance on cigarettes and scale up in FMCG, which now contributes ~28% of revenue. However, winning in FMCG requires more than product launches. It needs:

• Raw material access
• In-house packaging control
• Cost-efficient distribution

The Century acquisition reinforces all three.

5. Cash-Rich Buyer, Asset-Rich Seller
ITC is a cash machine. With healthy reserves and strong margins, it can afford to invest without overleveraging. Meanwhile, Century Pulp and Paper is:

• Debt-light
• Operationally efficient
• Plug-and-play ready for ITC’s supply chain

So the ₹3,498 crore price tag isn’t aggressive—it’s calculated.

6. Capacity Boost
The acquisition adds 4.8 lakh tonnes per annum to ITC’s portfolio—boosting its total paper capacity by nearly 50%. In a competitive bid that saw interest from West Coast Paper Mills, ITC emerged as the winner, reinforcing its leadership in the paper and packaging sector.

So, What Looks Old to One Group... Looks like a supply chain moat to another.

This isn’t a growth bet in the traditional sense. It’s a moat-building move. ITC isn’t chasing new customers—it’s strengthening its core to serve the ones it already has.
Smart, quiet, and very ITC.

The Bottom Line

Aditya Birla’s decision to divest Century Pulp and Paper may seem like a retreat from the paper industry, but in reality, it's a calculated move to refocus its capital on high-growth, high-return sectors like real estate and financial services.

With a strategic eye on scalability and margin improvements, the group has shifted its portfolio toward industries with better future potential, leaving behind capital-intensive, low-margin businesses like paper.

For ITC, the ₹3,498 crore acquisition of Century Pulp and Paper is not about chasing a fading sector—it’s about building a stronger, more resilient packaging ecosystem that complements its FMCG business.

By adding manufacturing capacity and gaining more control over raw materials, ITC strengthens its supply chain, reduces dependence on external suppliers, and increases margins. It’s a smart, synergistic move that ensures the company can serve its growing product lines more efficiently.