Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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.
Rain Commodities: Rainmaker? - Outside View

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Rain Commodities: Rainmaker?
Jun 23, 2010

For the benefit of the uninitiated who might be fooled into thinking that Rain Commodities (RC) is a 'rainmaker' please banish the thought. It manufactures and sells cement and buys and sells green petroleum coke and pet coke (sourced from its subsidiaries)but more for show it appears. Originally called Rain Calcining it metamorphosed into its present name. It has a capacity to make about 3 m tonnes of cement per annum, after the recent capacity expansion, but produced a little over 2.3 m tonnes in 2009. Its many subsidiary units make Calcined Petroleum Coke and also generate and sell power, with the largest CPC producer in the group, the American subsidiary, operating 7 plants in the US of A. For the matter of record, CPC is one of the key inputs in the manufacture of aluminium. The ultimate holding company of the group may well be Sujala Investments Pvt Ltd. 'Rain' appears to be the group trademark or some such. RC appears to be the hub of a complex, interlinked web of companies, operating out of base station -India - and extending to the USA, Mauritius, Hongkong and China. The Mauritius and Hongkong entities appear basically to be shell holding companies. RC has 3 wholly owned subsidiaries, one of which, RCCIL, its principal investment outlet, has wholly owned and majority owned subsidiaries of its own and, its subsidiaries in turn, are the holding companies of yet other subsidiaries or something to that effect. RCCIL operates a 100% EOU making CPC at Vizag. As the group expands, stay tuned for even more fine - tuning. RC also holds shares, in a wholly owned wisp of a subsidiary called Rain Calciner Ltd, which does not even exist. With so many companies to be monitored, the accountants can be pardoned for this apparent goof up. If the objective is to confuse, the management has succeeded admirably.

To make the overall feel good factor a little more alluring to the management, RC is busy implementing a buyback of shares while it simultaneously issued shares at a premium in 2008. In 2008 it also implemented a buyback of shares and, in 2009, it got the general-body shareholder approval to implement a further buyback. At end 2009 the group shareholding in RC was officially a little over 42%, and in all possibility, along with some of the NRI holdings and, holdings by other pvt bodies corporate, the group holding may well have touched the half century mark. And, with the implementation of the new buyback, the management holding may well exceed the crucial cutoff mark. It may be noted that the buyback is basically to increase the NRI shareholding in the company. Needless to add these buybacks are being executed with the help of the company's cash flow.

There is plenty of high octane action in the cash flow department alright. With interest free loans extended to its subsidiaries and other inter-se revenue and capital account transactions with other group companies and large dollops of corporate guarantees given on behalf of loans availed of by subsidiary companies, and purchase, sale and redemption of investments, the accounts and treasury departments may well have burned the midnight lamp. The group balance sheet shows that at end December 2009, the group borrowings were in excess of Rs 30 bn against a gross block of Rs 37 bn. Loans to subsidiaries are given as 'baksheesh' and it earned a princely Rs 8 m on its investment portfolio of Rs 2.4 bn, with no dividends accruing from its subsidiaries. The larger subsidiaries are meanwhile shown as earning a fair return on their investments. Besides what income RC earned on the purchase / sale of securities, done in abundant measure, is not shown separately. In 2008, RC even sold its produce to one of its subsidiaries, RCCIL Ltd and RCCIL was allowed to run up a part of its trade debtor dues, in excess of 6 months! All systems go it appears.

Another point of note is that the consumption pattern of raw materials in 2009 has undergone a noticeable shift as compared to the preceding year. It still made the same productócement.

One hopes that the merrymaking will continue in the same free spirit and abandon, if not more, as the company grows in stature in the years to come.

Disclosure: Please note that I am not a shareholder of this company

This column "Cool Hand Luke" is written by Luke Verghese. Luke has been a business journalist, financial analyst and knowledge management head with a professional experience of more than 20 years. An avid watcher of the stock market, he has written extensively on stock market trends. His articles have featured in Business Standard, Financial Express and Fortune India amongst others. He has also been the Deputy Editor, Fortune India and the Financial Editor of The Business and Political Observer.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.
© Equitymaster Agora Research Private Limited

Equitymaster requests your view! Post a comment on "Rain Commodities: Rainmaker?". Click here!


More Views on News

RAIN INDUSTRIES Announces Quarterly Results (4QFY18); Net Profit Up 310.8% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, RAIN INDUSTRIES has posted a net profit of Rs 3 bn (up 310.8% YoY). Sales on the other hand came in at Rs 33 bn (up 30.4% YoY). Read on for a complete analysis of RAIN INDUSTRIES's quarterly results.

More Views on News

Most Popular

Sintex's Auditor Resigns. How You Can Protect Yourself from Such Stocks(The 5 Minute Wrapup)

Jul 20, 2018

While the attack on the bad corporate governance is an overhang in the near term...this can be a game-changer in the years to come.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

The Multiple Problems with the Minimum Support Price (MSP) System(Vivek Kaul's Diary)

Jul 11, 2018

The price signals that MSP sends out, creates its own set of problems.

PPF v/s Mutual Funds: Which Is Better?(Outside View)

Jul 10, 2018

PersonalFN highlights the key points of distinction between PPF and mutual funds.

ICICI Pru Mutual Fund Tarakki Karega! - The Unethical Way?(Outside View)

Jul 11, 2018

PersonalFN explains how ICICI Prudential Mutual Fund flouted the norms of related party transactions while subscribing to the IPO of ICICI Securities.


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Jul 20, 2018 (Close)


  • Track your investment in RAIN INDUSTRIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks