orient paper and industries demerger

1. Orient Paper and Industries demerges its
cement business into Orient Cement

2.  An arm of premier and most dynamic business houses of India
G P Birla/C K Birla Group, which was incorporated on 25th
July 1936 with a single paper machine and now a multi-
product with a wide range of home appliances.
 The name of the company was changed from Orient Paper
Mills Limited to Orient Paper & Industries Limited in 1978. In
1982, a cement plant was commissioned with an annual
capacity of 9 lakh tonnes.

4.  The Board of Directors of Orient Paper & Industries Limited (OPIL) approved a proposal to
demerge the cement business of OPIL into Orient Cement Limited by way of a classical
demerger with mirror shareholding.
 Orient Cement Limited will constitute the cement business of OPIL.
 OPIL will continue to carry on the non cement business (paper and electricals and other
investments).
 The shareholders of OPIL will get 1 (one) new equity share of Orient Cement for each
equity share that they hold in OPIL, in addition to their existing OPIL shares. The
Appointed Date for the Scheme is April 1, 2012 but approved on 27th July 2012
 The demerger will be compliant with section 2(19AA) of the Income Tax Act, 1961
 The scheme is conditional to approval of shareholders and creditors as required by law and
the requisite order of the Hon’ble High Court.

6.  Creation of a pure-play cement company and to provide
existing shareholders an opportunity to participate directly in
the cement business.
 Enable both entities to explore various options to augment their
growth plans.
 Sharpen management focus and assign greater accountability
for each of the businesses.
 Unlock shareholder value as the demerger allows both
companies to find their true value which is currently hidden by
the two other business.

7.  As per the OPIL's 2011 Annual Report, the cement business contributed 52% to its total
revenues and 90.4% at the EBIT level. On the other hand, its core paper business has
contributed 13.43% to the topline, and is currently under losses amounting to Rs 33.19 cr. The
electricals business has contributed 32% to the total business revenue, with 22% contribution
to the operating profits.
 The company's overall performance has been largely impacted by the paper and electricals
business. The cement business has done well, but has been offset by the poor performance of
the other 2 businesses. Therefore, the value created by the cement company was not reflected
in the overall price of the company.
 Cement is the best performing unit of the company with the capacity of 5 MTPA and a 50 MW
captive power plant Cement industry being cyclical in nature; it is difficult to value cement
stocks on the basis of conventional methods.

8.  The paper business is not doing well as the sector itself is dealing with 3 major issues. One of
the concerns is the availability of power which is facing problems due to the shortage of coal.
Next is the availability of water. Water is required in huge quantities for the business, but is
not available in the summer season, because of which the plant has to remain shut. Thirdly,
pulp, which is the major raw material required to manufacture paper, is scarce, and only
available at very high prices.
 The proposed demerger plan will create a focussed cement play for OPIL shareholders, and
may elicit the expected value unlocking process. Apart from this, it will create a separate
platform for each business to trace its own growth opportunities. Also, the demerger of the
cement business into a new wholly-owned sub-Orient Cement will unlock the true value of the
company.

10. 2012(pre
Demerger)
2013(post
Demerger)
Net Sales Turn Over 2490.64 Cr 1269.52 Cr
Total Income 2512.93 Cr 1287.19 Cr
Total Expenses 2063.85 Cr 1276.61 Cr
Balance Sheet at 223,023.37 110,609.73

11. 2013
Net Sales Turn Over 1501.52 Cr
Total Income 1506.28 Cr
Total Expenses 1182.88 Cr
Balance Sheet at 802.99 Cr

12. OPIL Orient
Cement
Net Sales Turn Over 1668.85
1547.00
Total Income
1689.00
1552.95
Total Expenses 1643.66 1240.31
Balance Sheet at 751.88 2080.09