Quarterly interst outgo is 250 Crs,with no plan for debt reduction in site. Mr. Pabarai’s dream money manager has been an empire builder running high on debt with no end plan in sight. Debt doesn’t care whether you have holidays,Mr. Trump ,wars or anything. The interest and depriciation outgo eats majority of earnings. What the company or its management has been betting on is exponential rise on comodity prices for aluminium which will soar its profit in one particular year and then they will pay off their debt. Basically if we need aluminium prices to be higher we need a demand boom. I do not think that is coming anywhere in the near future. This company is run like a pvt enterprise. They haven’t asked us to come onboard. We acted on the tune of the pide piper( Mr. Pabarai). Disc- Sold off at 25% loss after holding on for 3 years. Was 10% of pf,lost a lot on oppurtunity cost.
I sold my holding after reading this post. It helped me get rid of my bias and also made me realize that we should avoid Godfication of star investors(Mr. Pabarai) in this case. what is going on in their mind,or what facade they are wearing ,it may bever be known. I often thought when Mr. Pabarai was constantly parading his closeness to Mr. Munger,he would have ran the idea of Rain Industries and what a great manager Mr. Jagan Mohan Reddy is with Mr. Munger. If further strengthened my resolve in holding Rain Industries. This blog is much nuanced and I came to realize that turnarounds seldom turnaround.
There have been 3 announcements so far -
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The Original JDA (Oct 2024): Rain + Northern Graphite
Goal: To prove that Rain’s LIONCOAT® coating technology can be applied to natural mined graphite to make it perform as well as (or better than) the more expensive, less-green synthetic graphite.
This was the “proof of concept” to establish their technology in the traditional supply chain. -
The First Grant (Oct 2025): Rain + Green Graphite Technologies (GGT)
Goal: To create a circular economy for batteries by using GGT’s proprietary technology to recycle graphite from end-of-life batteries.
This was the “recycling” pillar, tackling the end of the battery’s life. -
This New Grant (Nov 2025): Rain + Northern Graphite
Goal: To create value from mining waste. This 24-month, 2.2 million project(aided with government grant money) is specifically designed to take a waste byproduct from the graphite milling process—called “low-value natural graphite fine fractions” and “upcycle” it into high-performance, battery-grade material.
Impact -
- Will help with the ESG Narrative. This project, which is explicitly focused on reducing waste, minimizing mining, and lowering the carbon footprint of battery production, is a powerful counter-narrative against their “polluting” character of business.
- But otherwise its not going to move the needle. Market is completely focussed on its debt and return to profitability and margin improvements. Nothing else matters at this point.
- IMO, I see all these initiatives and validations as an intelligent strategic play to move up the vlaue chain in the circle of their competence.
Disc - Part of my biggest holding. Invested and biased.
Rain industries again at a crucial juncture.
They showed signs of recovery.
Posted good Q3 numbers and price has been into downstream since then
So many whys and hows to answer
My understanding about the same ( I could be completely wrong )
Probable reason 1:
757 crore capex for cement business
Market might not have liked it.
Expected IRR is between 14%-16%, commercialisation starts in second half CY2027.
Rain will raise another debt to fund this capex (1/3rd)
Did I like it or not?
No clear yes or no, Telangana and AP is undergoing heavy infrastructure boom with big names like Google Brookfield. Cement consumption will grow, Rain wants to have a pie of it.
" Industry forecasts suggest a 20% growth in cement demand over the next 2–3 years"
Also WHR system that will significantly reduce reliance on grid power will improve the margins further. So if Andhra + Telangana + South India infra boom turns out the way it is being perceived now, adds some sense to diversify where the tailwinds whisper.
Should add to topline and bottom.
Probable reason 2:
Rainind is getting removed from MSCI small cap index so all the passive inflows (FII) would like to sell before Nov 24 but I don’t think this number is high(number of passive funds holding Rain)
DII passive funds might continue to hold, no pressure of selling to them.
Probable reason 3:
During the QnA when asked : " Net debt/ebitda : is 2.5x achievable by end of FY27?"
Not so clear and confident answer from Srini : “We expect the same levels in the near future.”. So, was the answer to above question a clear No that 2.5x is not achievable.
Now some good (green flags) from the QnA
• “We continue to see strong momentum in global aluminium demand throughout 2025, and current market indicators suggest that LME prices will remain elevated well into the first half of 2026”
• Advanced Material segment, Rain has entered new markets and expect new market initiatives to contribute to the segment’s top-line growth. But they don’t want to disclose much as they want to preserve their competitive edge and ensure successful execution. Will trust this only when numbers start flowing or more materialistic info is shared
• ELYSIS carbon-free aluminium technology : “we do not foresee any material near to medium-term impact on the demand for carbon-based products”
• Effective Tax Rate should be in the range of 32-36%.
What I am doing(This is personal, might change with how you look at your finances, no buy or sell recommendation)
Last buy transaction was done next day after results at 135 (avg in 140s)
I didn’t buy more (averaged ) further during last week’s fall.
It looked concerning(technically). 52W low has been breached, that too after a good quarter so there’s definitely something that I don’t know.
My limited experience says the selling came from institutions this time, there has been some exchange of hands, The price dipped continuously last week on good volumes.
I am cautious and felt like avoiding the falling knife.
I feel 115-117 should act as a good resistance (For long term PF stocks I look at monthly closing).
So any monthly closing below these levels will be the first alarm for me.
Next alarm will be 100-105 range (M closing) where I pull my triggers.
Rain is a low risk, good reward opportunity but it do posses “low” risk.
So risk is defined,
Now reward : 2018 peak it offered 3x BV, thats the reward I am looking for 2-3xBV
How does the future Quarters look like?
I will definitely follow the business more mindfully(which I havent done yet), will closely follow FII/DII holding.
Please don’t consider any of these as buy/sell recommendation.
Plan to be more active and add more to this thread.
Also before I sign off on a Sunday evening, I will present my optimism about the business
- Net Debt/Ebitda improves further, down to 3.3 currently. Debt repayment and higher EBITDA will help this to come down further
- Absolute demand of Aluminium keeps growing.
- Telangana + AP infra boom, RAIN grabs a pie of it. (Cemet capex might play out well)
- The Advanced Materials segment’s growth accelerates, EV adoption drives demand for specialized carbon materials in batteries. Early investments in these markets will pay off as volumes scale.
- And finally the rerating happens,
New to this thread, want to learn what RAIN does, please read this, brilliant explanation about RAIN https://empor.top/india/RAIN
As someone who held this company for a couple of years and sold at a heavy loss, I think ultimately there is some concern on main business. For bad results, the market keeps heavily selling and even for good news or results, the market keeps discounting it. So the fundamental trigger is missing.
I hold this stock/business for last few year and for me - it is BIG NO for cement capex. Earlier UltraTech and Adani were looking add capacity inorganically as these player did not have comparable market share in south India (note that cement is regional business as logistic cost matter a lot) so they did acquire some business like Penna, India cement etc.. I am assuming they might have also got offer but this business (being first one) - has emotional value from promoter perspective. It has been long time since investor asking/requesting promoter to sell this business to repay debt as it does not have any moat + not great ROCE business compared to other (overall!) but they have ignored.
Now, they are saying as they are not able to compete to other players (read major) on this subscale - let’s invest more money so they can just complete/survive (not thriving) - it is excepted to have IRR of 15-17 but i really doubt it if you see history. Now they have high cost debt and they want to borrow more for this - classic case of throwing good money after bad money. Now they just repaid this 750 crs - calculate interest saving. If this would have done - when other 2 business (carbon and advanced chemical) thriving - I would have been given benefit of doubt.
Disc- invested so may be biased.
I agree with the sentiment. When the return ratios are so poor and when the company is finally returning to profitability with 2 consequent quarters of positive PAT, doing capex now makes little sense to me as well. Rerating of this company is highly linked to the Aluminum cycle and the debt structure - I was really looking forward to both the levers working for me.
On the other hand, it also gives me some positive signs. This capex plan is the ultimate “tell” that the turnaround is real, the cash flow is back, and the future is bright they are already building the next phase of growth. Think about it. Here is a company that the market views as being on the brink, with a high debt load. A company in that position hoards cash. It doesn’t commit to a massive 750 Crore expansion… unless it is so ridiculously confident in its core business’s cash-generating ability that it knows it can do both.
So while this does impact the immediate sentiment(and sadly our portfolios - I’m down by almost 25%), I see it as a sign of management confidence in their business.
Disc - Still one of my top holdings and biased.
PS. - I really hope the management restarts proper concalls so that we get to ask the tough questions to the management instead of speculating.
if you go by that logic, when i invested in this company there were 2 prominent project which is yet to shows any promise - ACP (carbon) and HHCR (advance chemical) + India expansion ( you can give this to luck as it was impacted due to ban of GCP in 2018).
Now coming to cement expansion again - this is not driven as if they are leader in specific region and have utilized all capacity (current capacity is at 70%) so this is saying “I am not able to compete with competition given my subscale plant (cost-structure) so I want to make it big to JUST compete” - this type of project - generally - do not involve great return. if they have done any expansion in any other 2 business - would make sense given you are in down cycle.
Given they are paying anywhere between 11-15% interest on debt- does it really make sense to do project where you expect 15% IRR - consider all risk and effort. Thanks!
After going through the recent conversations on Rain Industries Ltd, here’s my consolidated perspective.
- Stock Price Decline
The recent correction despite strong results surprised many of us. However, the nature of the fall, steady 1–3% declines with above-average volumes and high deliveries, looks more like structured or technical selling rather than a panic-driven dump.
If the market disliked the earnings, we would have seen sharper declines (7–15% in a couple of sessions).
The most likely reasons are:
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MSCI rebalancing-related forced outflows
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ICICI MF trimming its stake (as they reduced in last quarter, guessing the same trend is continuing)
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Retail panic selling, triggered by continuous price decline despite good numbers.
These are just POSSIBILITIES, just assuming, so can be wrong.
So the fall appears flow-driven, not fundamentally driven.
- Cement Expansion Is Not the Cause
Many attribute the fall of stock prices to the cement expansion plan, but that doesn’t align with the facts.
Management has clearly stated over the last 2–3 concalls that they have no intention of selling the cement business. Instead, they have detailed plans to revive and expand it.
The cement division provides stable domestic cash flows to management, while the carbon business carries non-recourse debt.
This means:
Even if the global carbon business faces financial stress, the Indian cement assets remain unaffected.
The cement business offers security and consistent cash generation, hence using internal cash to expand cement capacity is therefore strategically sound. It strengthens the business and enhances future flexibility for dividends or buybacks.
They were never going to use cement cash flows to repay carbon debt anyway based on my understanding.
- Carbon & Advanced Materials
The last 2–3 years were extremely challenging due to:
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A weak commodity cycle
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Geopolitical disruptions
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Supply chain issues
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Raw material constraints
The company even reported losses, historically rare for them.
But based on recent management commentary, things appear to be stabilizing. They even seem to be strengthening their competitive positioning through:
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Alternative raw material sourcing
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Strategic plant locations
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Their own logistics fleet
Battery Anode Materials (BAM) is still in its nascent stage and will take 2–3 years to meaningfully contribute, so I personally treat it as “optionality” rather than part of the core valuation today.
- Key Risk: Carbon Debt Refinancing
The major red flag remains the high-cost debt in the carbon segment:
Average interest rate: 10–12.5%
Refinancing expected in the current quarter (possibly before February end)
Debt maturity in 2028–2029, with early repayment allowed without penalties
Management seems to be waiting for the next cycle upturn to bring debt down substantially. The refinancing interest rates outcome will be a key trigger in the near term.
- Valuation
Rain’s cement capacity:
Current: 4.0 MT
Ongoing expansion: +2.3 MT
Future capacity: 6.3 MT
Even using a very conservative EV/ton of $70–80 (lower than peers like Deccan Cement in the same region), the cement business alone would be valued at around:
→ ₹3,500–₹4,000 crore EV
This almost matches Rain’s current market cap of ₹3,700–₹4,000 crore, which includes all businesses- cement, carbon, advanced materials, BAM, and subsidiaries.
This suggests that:
The market is valuing Rain almost entirely based on the cement division alone
Carbon, Advanced Materials, and BAM are being assigned near-zero equity value after adjusting for debt
Even in a worst-case scenario where the carbon business fails, the cement assets would still be worth ₹3,700–₹4,000 crore, with only about ₹250–300 crore of debt attached after the expansion (as the cement division was recently debt-free).
- Final View
At today’s valuation, you are essentially buying Rain at the EV of its future cement business (post-expansion in 2–3 years).
The carbon and advanced materials segments effectively come as free optionality.
If these segments recover, it becomes significant upside. If they don’t, investors haven’t really paid for them at current prices.
Note: The carbon debt is fully non-recourse, which means the cement business remains intact even in the event of distress or bankruptcy in the carbon segment.
The business is available at relatively reasonable valuations, Am I missing something? Feel free to correct me if you feel I’m wrong somewhere 
Note: invested & can be biased, kindly don’t take this as a buy/sell recommendation , DYOR
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Market cap: ~₹3,663 cr
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Net debt ( Total debt - cash and cash equivalents ) ₹6,650 cr (approx)
So enterprise value (EV) ≈ Market cap + Net debt
≈ 3,663 + 6,650 ≈ ₹10,300+ cr
- Cement EV (@ US$70/t) ≈ ₹2,500 cr
- Rest of business EV = Total EV – Cement EV
≈ 10,300 – 2,500 ≈ ₹7,800 cr
So actually, the market is not valuing Carbon + Advanced Materials at ₹1,100 cr, but at something like ₹7,800 cr EV (before splitting between equity and debt). Once you bring debt into the picture, the “cheapness” is not as extreme as looking only at the equity.
Your original “other business = NEAR ZERO VALUE was effectively treating cement value as equity value, ignoring that most of the enterprise value sits in debt.
disclaimer - holding and current price is 35 % lesser then my buying price .
Not worth the wait even if a bull cycle comes in this sector still it may not be worth of waiting for long years.. inflation will not slow in US for sure, buying power of western nations seems will decrease going forward
There’s Another Side to This
1. Deleveraging + Cash Flow Can Still Drive Value
Even in weak macro cycles, if Rain manages to:
- Control costs
- Reduce debt through free cash flow (₹1,900+ Cr CFO last year)
- Improve margins from efficiency / specialty products
→ The company can re-rate modestly even without a massive global demand recovery.
2. Emerging Market Demand (India, Middle East, SE Asia)
Western demand may stagnate, but:
- India is entering heavy infrastructure and EV manufacturing phase.
- Aluminum demand in India & SE Asia is rising 6–8% annually.
Rain can redirect supply chains regionally — especially if domestic smelters (like Hindalco, Vedanta) expand.
3. Valuation Already Discounts the Worst
At P/B 0.63 and ROE -8%, the market is already assuming years of pain.
That means even small improvements (like EBITDA margin expansion or debt cut) can create 50–80% upside from current depressed price levels.
First Water Fund, of First Water Capital, recently bought a stake through a bulk deal in the company at the time of the commodity cycle reversal.
Excellent piece by Rahul Rao @First_Principles on the business and the historical context of Rain Industries.
The core thesis is roughly based on the historical correlation between the price of the stock and that of aluminium. (I am perhaps being a bit unfair because there is a relation - and not just correlation - between aluminium prices and the performance of the business.)
As Rahul says: “You hope for the occasional spike in Aluminium prices & therefore carbon Anode demand & therefore a spike in CPC & CTP prices to support your operating performance.”
Beyond that ray of hope, the story is quite bearish: declining demand & margins; and a high cost of debt.
I am reminded of Warren Buffett: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
The tough part of the Rain story is that it is not a long term compounding play but one that requires me to get out at the right time. And I find it hard to get that timing right.
I used to be be a shareholder but am no longer one. I wanted to believe in the business and the management, but never got to the level of conviction to build a sizeable position.
I enjoyed this piece as Rain continues to be on the list of stocks I keep one eye on.
Thanks Rahul.
Rain Industries FY25 Results: Seems turnaround confirmed, swung from consolidated net loss of 4,499Mn in FY24 to net profit of 1,359Mn in FY25, driven by strong Carbon segment revenue growth of 16% YoY.
They have improvement on YOY basis, then why they have compared results with QoQ basis on their PPT?
did the concall happened? I am lokking for management commentary