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.
Rain Commodities: Rainmaker? - Outside View
 
 
Rain Commodities: Rainmaker?

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.

Disclaimer:
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

UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

Aug 11, 2017

UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

Aug 11, 2017

While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

Jul 20, 2017

Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

UltraTech: One of the Weakest Quarters in Years (Quarterly Results Update - Detailed)

May 18, 2017

Cement demand was weak because of subdued housing demand, volatile cement prices, and rising fuel costs.

Ambuja Cem: Net Profits zoom up 361% YoY During Jan-March Quarter (Quarterly Results Update - Detailed)

May 8, 2017

Stock price jumps up on Ambuja-ACC merger talks...

More Views on News

Most Popular

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.

The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

Aug 10, 2017

Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

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.

Bitcoin Continues Stellar Rise(Chart Of The Day)

Aug 10, 2017

Bitcoin hits an all-time high, is there more upside left?

5 Steps To Become Financially Independent(Outside View)

Aug 16, 2017

Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

More
 

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

RAIN INDUSTRIES SHARE PRICE


Aug 22, 2017 10:56 AM

TRACK RAIN INDUSTRIES

  • 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

MORE ON RAIN INDUSTRIES

RAIN INDUSTRIES - CHINA PETRO. COMPARISON

Compare Company With Charts

COMPARE RAIN INDUSTRIES WITH

MARKET STATS