Pabrai funds reduced stake to 7%
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Some of the debt was refinanced in August 2023. They issued $450m of bonds at 12.25%, rating from Moody’s is B3/B-. https://www.moodys.com/credit-ratings/Rain-Carbon-Inc-credit-rating-825478638?lang=en&cy=asia
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12…25% is pretty high. I hope they have a plan to pay down this debt…
But is this not kicking off after 2025 old maturing dates?? As per Jagan now onwards the focus is on only to reduce debts from cash flow generated…
@Srinidhi_Adiga and @Surinder_Singh, looking forward to your analysis of the quarterly results and comments on investor presentation.
The main take away is : Hon’ble Supreme Court of India
formally passed further action on the imports of petroleum coke into the
Country to the Committee for Air Quality Management (or CAQM), which
was established to address these areas of environmental regulations.
We await an official ruling from CAQM and are hopeful that there may
be some relaxation on import of GPC that will likely result in increased
capacity utilization of Indian CPC capacities. As a reminder, we are
currently limited to running our facilities in India at about 45% of capacity
because of the import restrictions.
Apart from this, there is price lag due to sudden dropped finish product. some debt reduction has happened. Interest rate have increased that is real pain, but as and when debt reduction will happen rerate of stock price might happen… I think min 1-2 year wait should give real good results. Its not quarterly story playing here.
I’m heavily invested in this stock up to 50% weightage and I prefer to wait.
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Hi, I am also invested meaningful portion of my portfolio in this company since Apr’18 and continue to hold on (have sold some share when it was 200-250. I like the company but below are few negative points.
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Management is not transparent as much as it should given it is company public company. E.g. company refinanced debt in Aug but they waited till quarter result. they do not update if EU plant restarted if you see in management commentary they mentioned about this (may be it is not full restart).
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company use “Adjusted EBITDA or PAT” almost every quarter (at least since I have invested)
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They reduced investor comms (no conall - i have reached out to them about this. Their view was that this is better way to do that but from view they are becoming judge, jury and executioner as they will pick the question they want to answer not what should be answered.)
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I have confidence in skill of management (most of it derived from Mohnish Pabrai sir) but they WILL never sell cement business though they are ready to pay 12.25% PA on debt.
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I am not sure why it taking so much time to list in USA or find investor for Rain CII (USA business) so they can reduce some burden of debt but I think our MD sir loves autonomy but they hold less than 50% of the business. I saw interview in 2011 where CFO was talking about listing USA business.
Disc. Holding it and may be biased.
Thanks!
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I will try to give my opinion, I may be slightly biased since I believe in the story.
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On refinancing it was already communicated in last presentation(Aug) that in next 2 weeks debt will be refinanced accordingly it has happened. Until last 2 years when interest rate where low it was better to focus on Capex so did they do, now they have ACP factories ready capacity in excess , we need to wait how ACP will be accepted from customers and additional coke requirements will be met or not after govt decision. its only sudden interest rate hikes changed scenario since 2021. that is exactly why stock is still hanging at 150’s.
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Regarding Investor friendly, I go because of Pabrai investment as he spoke to management, and he himself said that management is not keen to meet investors and it took him 4 years to meet them, Also Pabarai said he will be invested in Rain till current MD is alive and driving the business… he used these words. If you hear their presentation calls they never give hype and mostly are conservative about future prospects. never seemed they tried to manipulate prices in stock market. During Chinese Virus they raised their holding slightly but it was at marc 2020 itself… during peak of panic.
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Cement business will be emotional aspect as its his father or family business, no point in counting on it but they are not making losses anyway.
4.USA listing may not happen with so big debt… In coming 1-2 years, debt reduction, ACP acceptability, India Import restrictions etc… will give more clarity, they have started reducing debt since now rate increased to 12.5%.
EU business has started and that its capacity to reach optimum level will take up to 1 year, that was also mentioned in Aug presentation.
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Just on cement business, if you are paying interest rate 12.25% on half billion dollar and your business has ROE less than cost of capital. what’s point of doing business?
I am also biased as i am holding meaningful position in this company but wanted to bring some points (which I think new investor should give some thought to these points). At end of day - it is only entry and exit point on which we have control from retail investor’s point of view.
Thanks!
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The loan was taken for carbon business, however I understand your point that you expect Rain to sell Cement business to reduce debt sooner, Also the interest rate has increased form this quarter at 12.5%. we need to see how the company plan to reduce and what options they use. so far cement business was also earning profits. Since they have said there is no more capex and focus is on debt reduction that’s what we need to see in 1-2 years from now.
Jagan is a good capital allocator they have invested well when the debt had less interest rate, they should reap its benefits when market improves now… old investors should wait at least two more years to get clearer picture.
Thank you for bringing up these points,
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Pabrai fund has reduced stake in QE sep 23 by 1.87%. Can we assume that this the beginning of sale by Mr Pabrai . For him the buying price was substantially low.
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Not sure if he has fully sold all from fund IV or holding less than 1 %… however he has 7% in total as of now… further if he sells, then yes, need to watch… but nowadays even Pabrai is hopping from one stock to another frequently.
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Based on latest presentation CAQM is supposed to pass order on import restriction within thee months
Concall notes from Atulsingh Asan
From Concall notes of Rain ind
-Import restrictions on GPC & CPC into India and divestment of the Polymers business and closure of aromatic chemicals production are the primary reasons for the decrease in volumes
-Delayed shipments in the third quarter impacted profitability, but those volumes will be delivered in the fourth quarter
-Volumes across segments have stayed the same or decreased over the last 5-7 years
-Management is focused on debt reduction to drive value for shareholders
The company plans to reduce debt by at least 15 to 18% in the next 18 months
-The company is focusing on research and development of synthetic graphite anode materials for Lithium-ion Batteries
-The company may consider listing the carbon business in the USA once headwinds subside
-Margins for the advanced materials segment have been improving and are expected to return to normal levels in the first quarter of 2024
#rainind
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https://caqm.nic.in/WriteReadData/LINKS/Notice%20Pet%20Coke35842cca-6285-4d5a-ba50-f722691f24ad.pdf
CAQM notice for application till 21-11-2023
If any extra allocation these guys get, stock may show strength.
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https://caqm.nic.in/WriteReadData/LINKS/RCP2f4b7e21-b29c-44bf-b7d6-a1b1c2610f03.pdf
Update on 0.4 million ton allocation…
Thanks! Do you have any data regarding how much rain did get allocation and what is required for last few years? Just to gauge how much 0.4MT RPC is in scheme of things.
no idea about that… but so far this is usual matter, not sure if additional quantity decision will be taken up separately
Another selling from Pabrai Investment.
This sale has reduced their investment from 8% to 6%
Source : Notification from Rain industries today
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