Aditya Birla’s Bold Exit: 5 Shocking Reasons It Ditched Its ₹3,500 Cr Paper Business for Real Estate Glory

Aditya Birla Real Estate (ABREL) has sold its pulp and paper division, Century Pulp and Paper (CPP), to ITC for ₹3,500 crore in a strategic shift to focus solely on real estate. Despite CPP contributing over 75% of ABREL’s revenue, the paper business faced challenges like rising raw material costs, stiff global competition, and tighter margins compared to rivals like JK Paper. After failed deals in 2015 and 2017, ABREL found the right moment to exit as paper valuations dipped.

The sale proceeds will help reduce its ₹4,300 crore debt and fund expansion in the real estate sector, where long-term margins are expected to soar. Real estate may have lower current margins, but ABREL is playing the long game, betting on high returns by FY27. Meanwhile, ITC sees the acquisition as an opportunity to boost its paper capacity by 60% and expand geographically into North India. With increasing demand from FMCG, packaging, and education sectors, ITC is positioning itself for future growth. This deal reflects two companies making sharply focused strategic moves in line with their long-term visions.

Aditya Birla’s Bold Exit: 5 Shocking Reasons It Ditched Its ₹3,500 Cr Paper Business for Real Estate Glory

Aditya Birla Real Estate (ABREL) recently announced the sale of its pulp and paper division, Century Pulp and Paper (CPP), to ITC for ₹3,500 crore. This move marks a significant shift in ABREL’s strategy, as the company pivots entirely toward real estate. Let’s explore the reasons behind this decision and what it means for both companies.

A Legacy of Diversification

ABREL’s roots trace back to the 19th century, when it began as Century Spinning and Manufacturing Company during a global cotton shortage. After the Birla Group took over in 1951, the company expanded into textiles, cement, paper, and real estate. However, over time, managing such diverse industries became increasingly challenging. ABREL realized that spreading resources across sectors diluted its ability to excel. By 2023, it had shed most of its non-core businesses, leaving only real estate and paper. Renaming itself Aditya Birla Real Estate in 2024 signaled its intent to focus solely on property development, making the exit from paper inevitable.

The Challenges of the Paper Business

Despite contributing 75% of ABREL’s revenue, the paper division struggled with profitability. Paper manufacturing is capital-intensive, relying heavily on raw materials like wood pulp, which face supply constraints in India. Only 4% of the required pulpwood plantation area is available—a gap worsened by COVID-19 disruptions that delayed tree planting. With trees taking 5–6 years to mature, pulp prices remain high. Recycled paper and imported pulp costs have also surged, squeezing margins.

Competition further compounded these issues. Cheaper imports from China and ASEAN nations—supported by subsidies and low import duties—flooded the Indian market. Western export restrictions redirected surplus paper to India, putting additional pressure on domestic manufacturers. While competitors like JK Paper adapted by raising prices and maintaining 20–25% profit margins, CPP lagged behind, with margins stuck between 12–17% since 2021. Despite efforts to use eco-friendly materials like bagasse (a sugarcane residue) and renewable energy, CPP couldn’t offset the rising input costs.

Why ABREL Chose Real Estate Over Paper

ABREL’s decision comes down to focus and future potential. Managing two capital-heavy sectors—real estate and paper—strained the company’s resources. Real estate, though currently in a low-margin phase (6.2% in FY25), promises much higher returns. The company is investing in land acquisition and development, with projects expected to yield margins of 25–35% by FY27—and potentially up to 45% in premium markets like Mumbai.

The ₹3,500 crore sale will help reduce ABREL’s ₹4,300 crore debt, bringing down its debt-to-equity ratio from 1.06 to healthier levels. Lower debt is critical in real estate, where financial flexibility directly impacts project scalability and risk management. By exiting the paper business, ABREL can channel capital and attention into property development, aligning with its long-term growth vision over short-term revenue.

ITC’s Strategic Play in Paper

For ITC, acquiring CPP is a clear growth accelerator. Already a major player in paper with an annual capacity of 8 lakh metric tonnes, ITC gains an additional 4.8 lakh metric tonnes through CPP—a 60% capacity boost without the time, risk, or cost of building new plants. Geographically, CPP’s Uttarakhand facility strengthens ITC’s presence in North India, complementing its existing southern operations and expanding its reach.

The timing also works in ITC’s favor. India’s FMCG sector is projected to grow 7% annually until 2027, driving demand for paper-based packaging. Bans on single-use plastics have boosted the need for paper alternatives like cups and straws. The National Education Policy 2020 is expected to increase textbook and stationery demand, while e-commerce growth fuels the need for kraft paper and boxes. By acquiring CPP during a down cycle, ITC is making a cost-effective move that aligns with long-term trends.

A Win-Win for Both Sides

ABREL and ITC are making strategic bets tailored to their respective strengths. ABREL is letting go of a volatile, low-margin business to focus on the long-term promise of real estate, using the sale to strengthen its financial position. ITC, meanwhile, is expanding its paper division strategically, tapping into emerging demand and diversifying its footprint.

While the ultimate success of the deal depends on execution, it reflects well-calculated foresight. ABREL is gearing up to dominate real estate with a cleaner balance sheet, while ITC reinforces its position in a resilient and evolving industry. For now, both sides have turned the page toward promising new chapters.