He will again get it refinanced i guess. Also wont be surprised if he thinks of raising further debt by that time 
At present Rain ROIC is 15.66%
There US bond and Euro TLB is due in 2025
They have refinance from 8% to 5%
If they are earning more than cost of capital why they should pay early and loose opportunity to expand with same cashfow
Effectively they have reduced interest burden of ā¹ 1.7 billions per annum
All in all He has created
Number one global producer of Coal Tar
Number Two CPC company globally
And now probably good Advance carbon material asset
All from prudent capital allocation
We have to pass through some pain as he does some alternative arrangements for Indian plants raw material issue
Advanced materials plant in Germany will contribute probably from from Q3 CY 19
Thanks
Ashit
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Its interesting that he is number one in all these business but does not want to have a healthy balance sheet. Few who have followed that have had their head handed to them however good them might have been in their execution or however superior ROIC was. So that is a big concern! It will be interesting to track how and when he would make the repayments.
Disc : No investment
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Hi guys, thank you for previous replies. Mohnish pabrai has praised about Mr.Jagan a lot by calling him a great capital allocator. I tried to understand and validate this assumption by reading conference calls. It was evident that management has taken many steps to increase efficiency, margins and resiliency of the business. This has kept the earnings in black for the most part. There have been many capex plans for capacity expansions. However, I couldnāt see them being materialized into actual numbers i.e increased free cash flow except 2016-17. In 2016-17 change of cycle seems to have helped generate higher profits to the business with tailwinds from aluminium and CPC curtailment in China and high aluminium demand globally. With the global demand for aluminium increasing at 2-3% CAGR, I donāt see very high volumes being churned through Rainās factories. Moreover, anticipated winter cuts in china, restart of aluminium smelters in US has been delayed. Thereās always a risk of increased CPC production or exports from china which can affect Global CPC prices and volumes for Rain.
Overall, I couldnāt see the resilient nature of the business over external conditions. Given the capex of around $6500 cr in last 7 years, the incremental return on that capital has hardly been 500-600 Cr. I wonder if the business would have become more resilient if management had paid off the debt instead. I ran numbers to understand return on incremental capital. They arenāt very impressive. I understand that business can generate higher profits if it can generate more volumes, but it depends on the aluminium cycle.
| Year | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | Avg Return on incremental capital |
|---|---|---|---|---|---|---|---|---|
| EBIT (Cr) | 1055.6 | 1,009 | 669 | 1,088 | 1,104 | 1,671 | 1,443 | 500 |
| Fixed Assets (Cr) | 4425 | 9,648 | 8,972 | 8,949 | 9,146 | 9,107 | 10,024 | |
| Current Assets (Cr) | 6325 | 4,802 | 4,105 | 3,932 | 3,586 | 4,953 | 5,169 | |
| (Current Liabilities) (Cr) | -1523 | -2,623 | -2,155 | -2,067 | -1,799 | -1,745 | -2,567 | |
| (Cash) (Cr) | -3815 | -850 | -899 | -860 | -1,049 | -940 | -860 | |
| Invested Capital (Cr)= Fixed Assets + Net working capital - Cash | 5,412 | 10,977 | 10,023 | 9,954 | 9,884 | 11,375 | 11,766 | 6,354 |
| Return on invested capital = EBIT/Invested Capital | 20% | 9% | 7% | 11% | 11% | 15% | 12% | 8% |
Rain on avg seems to generate 10-11% of returns on capital employed. Mr.Jagan seems to have 2 options.
- Increase existing capacity or increase efficiency of existing facilities that are expected to provide 10% return on capital but dependent on aluminium cycle.
- Pay off the debt and reduce 5% interest and huge debt
PS - CPC business is expected to generate volumes of 1.4 millions this year which is understandable given the temporary pet coke ban in india so I am counting FY 2018-19 as exceptional one.
Valuation part
I read Mr.Pasrichaās report that Mohnish Pabrai used.
I personally donāt believe and understand EV/EBITDA multiple valuation but since Mohnish bought the stock after reading this, I reran the numbers with revised capacity with EV/EBITDA multiple of 6.
Please share your thoughts.
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in addition to above i have found an interesting article
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India rating Report
New Hydrogenated Hydrocarbon Resins Facility in Germany
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The Big Plants usally have build tested commissioned in phased manner . It does not say that it will start producing the final product . I had experinec in working in EPC in LNG PLANT in Australia in my opinion it will take another 2 quarters to have fully commercial production from this plant .TAKE the management saying as PINCH OF SALT ā¦ The CAPEX is putting aligators and sharks in the moats ditch but these eggs still in hatchery .
One thing which i like about the company is itās focus on the product mix and the capital allocation , Their are closing their plant in Netherlands which is not commercial viable
source: https://www.raincarbon.com/Upload/PDF/uithoorn-resins-plant-closure.pdf
I love the companyās ZERO programme on the construction plant at their various sites where they have more than 1,800 employees and hundreds of contractors at the sites around the world, and many of these people work with potentially hazardous materials and chemical-manufacturing processes. They want to be sure that all of their employees and contractors return home safely each day, and that requires everyone to fully understand the risks around them in the workplace and to take appropriate precautions and actions to minimize and eliminate those risks
disc ; invested
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results analysis
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From BSE announcement of company
Interesting disclosure about new raw material for CPC they where talking in last concall
"To address the shortfall of raw material for the Second Unit, RCCVL will be procuring anode-
grade GPC from domestic refineries, which is available in limited quantities. Further, there are
certain other raw material sources available in India that shall be upgraded by using proprietary
technologies to manufacture a finished product that is superior in quality to CPC. Hence
RCCVL and Rain Carbon Inc., U.S.A. (āRCIā) are currently installing plant & equipment to
manufacture this new proprietary raw material, Anhydrous Carbon Pellets (āACPā), in India
and U.S.A.
ACP is a new, specially engineered carbon raw material developed by RCI to manufacture
Calcined Carbon Pellets (āCCPā). RCI started development of ACP in 2011, and patents have
now been granted in multiple countries. Work on a pilot plant to produce ACP started in 2017,
and it is now operational. The manufacturing process is highly specialized and requires multiple
processing steps including mixing and forming of a carbon aggregate and binder material to
produce spherical, high-density, green carbon pellets. The pellets undergo shrinkage and
densification during high-temperature calcination to form an electrically conductive, high-
density CCP product. CCP offers a significant performance benefit over CPC for producers of
Carbon Anodes used in the electrolytic production of aluminium.
The process for making ACP is analogous to current industrial processes for making Green
Anodes and Soderberg Paste Briquettes. Green Anodes are made by forming a mixture of
petroleum coke aggregate material and liquid pitch binder into solid, rectangular carbon blocks.
The Green Anodes are then calcined in a high-temperature baking process to produce dense,
electrically conductive Carbon Anodes essential for making aluminium. Soderberg briquettes
use a similar mixing process but a different forming technology to produce green briquettes,
which are used as a feedstock for in-situ production of carbon electrodes used in the
manufacture of silicon and other metals including aluminium. Green Anodes and Soderberg
briquettes are currently exported / imported globally under HS codes 85451920 and 38013000
respectively.
While the Company is taking the necessary steps to alleviate the raw material shortage, this
will also delay the commissioning of the Second Unit till the First Quarter of CY 2020. From
an environmental perspective, the cogeneration of about 18 MW of power by the Second Unit
using the flue gases evolved during the calcination process makes it Carbon Neutral. Also,
the FGD installed at the Second Unit will remove 98% of any SO2 discharged during the
manufacturing process.
With the aforesaid orders issued by Honāble Court, except the calcination business, other
businesses are not impacted. This is for your information. "
Itās Positive news for company
Now negative news 
Supreme court said
We find no merit in the prayer(s) made in LA No. 77914/2019. All these applications are
dismissed
Let the Central Pollution Control Board and the Ministry of Environment and Forest
Finalize the standards and be pla&ed before this court, within six months from today.
Good to see company will be solving raw material problem by its own innovation
Thanks
Ashit
8 Likes
Sub: APPCB - CFE - M/s. Rain CII Carbon (Vizag) Ltd., Scindia Road, Naval Base Post, Sy.No. 67 (Part), Visakhapatnam District - Amendment to the CFE order ā Issued ā Reg.
The Board after careful scrutiny of the representation of the unit, report of the Regional Officer and recommendations of the CFE Committee, hereby issues amendment to the CFE order issued vide reference 1st cited as following:
In the reference 2nd cited, the industry has requested for the following amendment:
The industry is proposing to use Anhydrous Carbon Pellets (ACP) as an alternate to Green Petroleum Coke (GPC) as raw material without change in process technology, production capacity, water consumption, waste water generation, solid waste generation but marginal decrease in emission load.
Permission provided Andhra Pradesh Pollution Control Board (Synopsis)
ļ The industry is permitted to use Anhydrous Carbon Pellets (ACP) as an alternate to Green Petroleum Coke (GPC) as raw material for production of CPC i.e., either GPC or ACP or a blend of both as raw material for production of CPC.
For more, read
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Are they going to import ACP into india to manufacture CPC (apart from manufacturing in India)?? [from what I understand from above post, Rain got permission to use ACP from AP Pollution control Board(??)]
Disc: Invested
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From what I understood after reading the thread is as follows
ACP is now allowed as a raw material to meet the deficit of GPC.
However for APC to be effectively used as a Raw material and convert to CPC would take upto Q1 CY 2020 (the plant located in Vizag), is that a right interpretation.
Disclamier : Invested
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Hi, does anyone knows if rain industry has released annual report for FY2019? I am not able to find on screener and rain industry website.
Rain Industries follows January to December calendar. So, 2019 annual report will be released in 2020.
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Does anyone know why rain industry is available at low valuation. Market cap of the company is around 2900 cr. But sale is sale is 14000 cr and profit is around 2000cr. So market cap is 1.5 time of profit. Also price is around 0.63 of book value. Stock has fallen in last one year or so as there was ban by supreme court on pet coke import. But company recently came up with alternate raw material. Only risk i see is high debt to equity ratio(1.54). This was asked in recent con call. Mr Reddy mentioned that he is getting loan at very low rate of interest and hence doesnāt want to pay off from free cash flow. Instead he wants to invest that money in growing business.
So i want to know feedback from senior member who are closely tracking the company.
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Rain Industries revenue comes mainly from CPC and CTP. Price of CTP is mostly stable but CPC prices are cyclical in nature.
Rain is viewed as cyclical stock so the valuations are low. Current supreme Court order played spoilsport however Rain management came up with alternatives.
Rain moves closely with aluminum cycle. If the aluminum is in up cycle Rain will move higher vice versa is also true.
Debt, Cyclicality and uncertainty is the main reason for low valuation. If they reduce dependencies on CPC and become more of advanced material company( they are working on it) markets will give reasonable valuation.
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