ITC (ITC) M&A Presentation summary

Strategic acquisition announcement

• Announced acquisition of Century Pulp & Paper Undertaking (CPP) to expand scale and capabilities.

• CPP brings a strong presence in North India with 4.8 lakh MT annual capacity and robust fibre sourcing.

• Acquisition expected to be EPS accretive in the first full year and drive structural profitability improvements.

• Transaction valued at up to Rs 3,500 cr. on a cash-free, debt-free basis, expected to close in about 6 months.

• CPP will be integrated into the Paperboards, Paper & Packaging Segment.

Industry and business context

• Indian paper industry is growing at 6-7% annually, with over Rs 80,000 cr. in revenue and significant growth drivers like FMCG and e-commerce.

• Segment revenue for FY24 was Rs 8,344 cr. with an average EBITDA margin of 21% from FY19-24.

• Business model features backward integration, in-house pulp, and strong sustainability credentials.

• Recent challenges include increased low-priced imports and a surge in domestic wood prices, with strategic interventions underway.

• Cumulative free cash flow generation exceeded Rs 4,000 cr. from FY20-24.

Strategic fit and value creation

• Acquisition adds significant scale, economies, and locational advantage, complementing existing facilities in the South.

• Enables faster market access compared to greenfield expansion and de-risks operations through multi-site presence.

• Value unlock expected through quality improvement, efficiency gains, and supply chain optimization.

• Targeting 30-40% increase in EBITDA per ton over normalized levels within two years post-acquisition.

• High-teens ROCE anticipated in the medium term, with continued robust free cash flow generation.