X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BILT vs International Paper: Where growth lies? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 27, 2011

    BILT vs International Paper: Where growth lies?

    International Paper, an American pulp and paper company is the world's largest paper manufacturing entity. It made news in India sometime back because of its acquisition of Andhra Pradesh Paper Mills. This has made for a case to study the differences that exist between paper companies in India and abroad. In this article and subsequent ones, we will study the basic business models of International Paper (IP) and Ballarpur Industries (BILT), the way these companies are run, along with the regulatory environment they function in.

    To start with let us remind ourselves that while International Paper of North America is the largest paper company in the world, BILT too is the biggest in India. This fact will make it even more interesting to analyze these two paper giants and decide which is better.

    How the business model differ...

    International Paper is a leading player in the paper, packaging and distribution industry. Its operations expand across 24 countries with a working force of 59,500 employees. Through xpedx, International Paper serves the requirements of printers, manufacturers and retailers. Its efficient supply chain and intelligent e-commerce solution help customers meet their needs. The paper company is also involved in recycling of paper and is North America's largest in this category.

    BILT is largely into production of paper manufacturing itself. It also sells office stationery and has recently acquired "Premier Tissues" that sells paper tissues. Both these paper companies do not operate in the newsprint segment.

    Products

    International Paper manufactures all varieties of both coated and un-coated paper. The company also produces pulp used in paper industry and elsewhere. Under the packaging segment, International Paper produces coated paperboard, food service products, packaging for consumer and tobacco markets. BILT on the other hand is into producing coated wood-free, uncoated wood-free, copier paper, business stationery and cream-wove. It is involved in paper tissue business too. The Indian company's focus is on adding new value added products that will be margin additive in nature.

    Reliance on exports

    In the wake of recent economic turmoil, it is essential to know which countries consume maximum production of these paper companies. How the sales would be impacted, if a few of these countries get into any economic trouble?

    International Paper's exports comprise around 30% of the total sales for the company. The products are supplied to a large number of countries including those in United States, Europe, Pacific region and Americas other than the US. It also serves growing markets of Brazil, China and Russia. However, majority sales is in the US making International Paper susceptible to downturns in the volatile US economy. Also, with a stagnant US economy, the company is constantly looking for newer markets to sell its produce.

    BILT exports just 14% of its total production. The Indian company exports to around 80 countries globally. Thus while BILT's sales are largely domestic driven, the company is susceptible to global economic headwinds.

    Regulatory and competitive scene

    Paper industry in India is highly fragmented with a number of unorganized players too in this business. Thus, for BILT the competition is intense and the company has to keep thinking of strategies to deal with it. For International Paper, the scene is not very different. The paper company faces stiff competition from companies producing similar products as well as others who manufacture substitutes of paper like wood and wood fibre products.

    Since trees have to be cut to manufacture paper, the sector is highly regulated. Companies operating in the paper segment have to comply with many environmental norms. Although the industry is highly regulated in India as well as the Americas, it is slightly more difficult in India to obtain licenses because of bureaucracy and red tape.

    Raw material sourcing

    International Paper owns and manages a million acres of forest land. The company takes care of the planting and harvesting of trees and ensuring that these are not put to non-forest uses. The North America based company has a policy of not using wood from endangered forests. In comparison, the Indian government does not allow domestic paper companies to own wood plantations. BILT has an arrangement with the farming community for sourcing of industrial wood. For this, a series of exposure visits of farmers are conducted along with a few training programs to educate them on techniques of raising plantations and yielding maximum productivity.

    To conclude

    Although International Paper is the largest paper company at present, a stagnant US economy (home country), is forcing it to look outwards for revenues. With the same objective in mind, it acquired Andhra Pradesh Paper Mills. While the international company has all its systems and processes in place, it may well turn out to be a challenge to compete with the local companies in the newer markets that it wants to explore.

    BILT on the other hand seems to be in the right place at the right time. A growing Indian economy will demand more paper and paper products and help the company grow its revenues faster over the years. In the next article, we will analyse the financials of both the companies to decide which of the two is a better run and more profitable company.

    BILT Vs International Paper - Next article

     

     

    Equitymaster requests your view! Post a comment on "BILT vs International Paper: Where growth lies?". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    COMPARE COMPANY

    MARKET STATS