Almost four years after the machinery fell silent at its more than 110-acre factory, the Nizam-era enterprise Sirpur Paper Mills (SPM), is set to throb back to life with the National Company Law Tribunal’s Hyderabad Bench approving a resolution plan submitted by JK Paper.
Making this happen for the integrated paper and pulp mill, established in 1936 by the Nizam of Hyderabad, is the modern-day Insolvency and Bankruptcy Code and the corporate debt resolution mechanism.
Relief for 1,000-plus staff
It is the first resolution plan approved by the Hyderabad Bench, says Ram Ratan Kanoongo, the Resolution Professional appointed by the NCLT in the matter. What matters more for SPM’s 1,000-plus employees is the revival that is on the cards.
The process, however, had not been easy ever since production at the facility in Kagaznagar, about 300 km from Hyderabad, came to a grinding halt. It came as a blow to the town that not only draws its name after the mill but also is spread across land belonging to the firm.
Once a part of the diversified C.K. Birla group and subsequently run by the Poddars, Sirpur Paper Mills owns about 650 acres. Of this, the factory occupies 111 acres, residential area for the workforce is spread over 150 acres and the rest is used for raw material plantations.
It was in February 2017 that the Committee of Creditors of SPM approached the NCLT, which took up the issue in September. With the Telangana government deciding to put its weight behind the revival and extending incentives for achieving such a goal, things started looking up.
The State government had assured JK Paper of concessions which could benefit the acquirer by ₹100 crore per year, with these concessions extending to 10 prospective years.
JK Paper had submitted its resolution plan to invest ₹782 crore in May. In a regulatory filing with the stock exchanges, it had said that ₹371 crore of the planned investment would be paid towards settlement of financial creditors, corporate insolvency resolution process cost, admitted operational creditors, workmen and employee dues. The Committee of Creditors voted 83% in favour of the resolution.
“The decision of the NCLT has come at a good time given the decreasing cost of raw material and the escalating cost of writing paper which we make here,” said factory manager Ramesh Rao.
Pricing trends in the market showed the cost of paper to be about ₹40,000 per tonne, an increase of about ₹7,000 per tonne, while the price of wood, a raw material, had declined by about ₹3,000 per tonne to ₹4,000 per tonne now, Mr. Rao explained.
“The factory could restart production in 5-6 months if things go as planned... has potential to employ 1,400 regular employees, workers and staff and 1,000 more on contract. Maintenance contractors have been finalised for all units associated with paper production,” he said.
Mr. Kanoongo said work at the unit could start as early as in three months as JK Paper had been working extensively on the revival measures ever since the bankers had approved its plan.
