World Bank arm to invest Rs 50 crore in JK paper

World Bank's private lending arm international finance corporation will invest Rs 50 crore in JK paper, which has embarked on a Rs 250 crore expansion plan.

Apart from IFC, promoters will also bring in a matching Rs 50 crore through preferential equity in JK paper at a price of Rs 65 per share.

Post allotment, the share of the Washington-based lending institution would be 10 per cent, while promoters share would go up to 43.9 per cent from 42.15 per cent.

"The expansion plan relates to setting up a 60,000 tonne capacity multilayer packaging board unit at our gujarat-based paper mill," managing director harsh pati singhania said.

The project, to be commissioned during the first quarter of next calender year, would be financed through a combination of debt equity, he added.

In due course, the promoters would bring in Rs 50 crore additional equity and raise Rs 100 crore debt. "We are in talks with banks and financial institution to raise the debt amount," he added.

The brown field expansion project will churn out high end paper packaging material that is growing at 15 per cent annual rate against 6-7 per cent growth for general paper industry.

After commissioning of the unit at cental pulp mills in Songadh in Gujarat, JK paper would compete with domestic paper major itc in the high-end packaging paper materials.

Demand for such material is growing very rapidly in tune with the emerging sectors like food processing sector, Vice-President Rajive Sheopuri said.

Size of paper based packaging industry stands at 12 lakh tonne, Sheopuri said and added that high-end segment demands four lakh tonne paper every year.

Meanwhile, the company posted a 19 per cent rise in net profit for half-year period ended on december 31, 2005 to Rs 17.55 crore as against Rs 14.73 crore a-year ago period.

Sales rose by 10.98 per cent to Rs 343.85 crore from Rs 309.83 crore in the half-yearly review period.

However, company's second quarter net profit declined by 11.15 per cent to Rs 9.48 crore from Rs 10.67 crore during the same quater of last fiscal.

"The dip in net profit during second quarter was due to higher tax incidence," Chief Financial Officer Satish Mandhana said.

In contrast, the second quarter sales rose by 12.79 per cent to Rs 174.12 crore from Rs 154.37 crore.