Rain Calcining gets counted in global M&A club
Rain Calcining (RCL) joins a growing list of Indian companies that are becoming big globally, by acquiring large companies abroad.
By Ashish Agrawal, TNN |
Rain Calcining (RCL) joins a growing list of Indian companies that are becoming big globally, by acquiring large companies abroad. It has acquired the US-based CII Carbon, a company three times its size. The deal is valued at approximately Rs 2,500 crore, which is substantial, given Rain’s size. The merged entity would overtake the current largest producer in terms of total capacity. For Rain Calcining, it’s being second-time lucky: it was priced out in the previous attempt to acquire GLC Carbon — the largest CPC producer only a few months ago.
CII Carbon, a privately held company, is the second-largest manufacturer of calcined petroleum coke (CPC) in the world with production facilities across the US. CPC is obtained by heating refinery residue of crude oil at a high temperature, and is an important raw material for aluminum. Beside, these plants also generate electricity through waste heat, which is an important by-product and adds significantly to the bottomline.
For RCL, gains would come from better sourcing of its raw material which constitutes more than 80 per cent of the total cost. This would also provide support of an existing distribution network and help the company with improved logistics. However, an important concern would be the impact of the deal on its balance sheet. The concern becomes greater on account of the fact that it is also going through expansion to double its current capacity by 2009 and has a not-so-favourable debt-equity ratio of 1:20.
RCL has said that the acquisition finance is being provided by Citi and ICICI Bank. The impact on its consolidated financials will be significant, though it may raise equity funds to lower interest costs. At present, its performance is good with revenues growing 22 per cent to Rs 700 crore and profit jumping 70 per cent to Rs 70 crore. Its Indian operations will matter less when the acquisition is complete, as more than three-fourth of its revenues will come from its acquisition.
CII Carbon, a privately held company, is the second-largest manufacturer of calcined petroleum coke (CPC) in the world with production facilities across the US. CPC is obtained by heating refinery residue of crude oil at a high temperature, and is an important raw material for aluminum. Beside, these plants also generate electricity through waste heat, which is an important by-product and adds significantly to the bottomline.
For RCL, gains would come from better sourcing of its raw material which constitutes more than 80 per cent of the total cost. This would also provide support of an existing distribution network and help the company with improved logistics. However, an important concern would be the impact of the deal on its balance sheet. The concern becomes greater on account of the fact that it is also going through expansion to double its current capacity by 2009 and has a not-so-favourable debt-equity ratio of 1:20.
RCL has said that the acquisition finance is being provided by Citi and ICICI Bank. The impact on its consolidated financials will be significant, though it may raise equity funds to lower interest costs. At present, its performance is good with revenues growing 22 per cent to Rs 700 crore and profit jumping 70 per cent to Rs 70 crore. Its Indian operations will matter less when the acquisition is complete, as more than three-fourth of its revenues will come from its acquisition.
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