Rain Commodities arm may list in US
Hyderabad-based Rain Commodities is looking at listing its wholly-owned subsidiary, Rain CII Carbon LLC on any of the US bourses.
By Apurv Gupta, TNN |
MUMBAI: Hyderabad-based Rain Commodities, the world���s largest producer of calcined petroleum coke (CPC), is looking at listing its wholly-owned subsidiary, Rain CII Carbon LLC on any of the US bourses. Post listing, Rain CII Carbon is expected to be valued at about $1.5 billion. Rain Commodities had acquired the company in July last year for $595 million in an all-cash deal.
According to sources, Rain has begun to initiate the process of listing its subsidiary which was put on hold for some
time due to the weak sentiment in the US markets.
When contacted, T. Srinivasa Rao, vice president, finance, Rain CII Carbon (India) said there is no immediate plan for a foreign listing. ���However, we may go for an overseas listing in the medium to long term,��� he said.
In a parallel development, Rain Commodities is in talks with several domestic and foreign players to raise funds through preferential offer. The offer is aimed at raising funds for further acquisition and meeting capacity expansions of the company, sources said.
Though company denied any such move, sources said senior officials of the company were in Mumbai last week for road shows. ���We are not looking at any equity placement, as there is no need for funds at this time. The proposed capacity expansions will be implemented using internal accruals and project debt,��� said Mr Rao.
The acquisition of CII Carbon and the subsequent merger of Rain Calcining with itself, Rain Commodities emerged as the world���s largest producer of CPC with an annual capacity of 2.5 million tonnes (MT) and 49 MW co-generation power plant. Rain Commodities acquired CII Carbon in a leveraged buy-out. It means, Rain Commodities used the target company���s balance sheet to fund the purchase. CPC is a critical raw material for aluminium industry. In 2007, Rain CII produced roughly 2.2 MT of CPC.
Rain Commodities also holds 11.5% stake in PCIC, Kuwait which is setting up a 0.35 MT plant. The facility is expected to be operational in the first half of 2008. Rain Commodities also has a 1.5 MT cement plant having a capacity of 3.2 MT.
Analysts expected CPC market to remain strong for next 2-3 years, riding on the increasing demand from aluminium industry. No one wants to set up new CPC plants due to scarcity of green petroleum coke (GPC), the raw material for CPC. However, Rain CII is not affected as it has long-term contracts to procure GPC, which is by-product of refineries.
���Though CPC is a commodity, we believe that it is less susceptible to cyclicality. This is because it is not highly critical for the aluminium industry in terms of cost but extremely critical in terms of quality. Moreover, given the industry dynamics ��� steady increase in demand, limited supply growth, and increasing consolidation ��� we believe that the industry will continue to report strong numbers, going forward,��� said an IL&FS analyst in its latest research report on the company. He added that in view of the sharp increase in CPC prices, CPC business is expected to generate strong revenues in 2008.
According to sources, Rain has begun to initiate the process of listing its subsidiary which was put on hold for some
time due to the weak sentiment in the US markets.
When contacted, T. Srinivasa Rao, vice president, finance, Rain CII Carbon (India) said there is no immediate plan for a foreign listing. ���However, we may go for an overseas listing in the medium to long term,��� he said.
In a parallel development, Rain Commodities is in talks with several domestic and foreign players to raise funds through preferential offer. The offer is aimed at raising funds for further acquisition and meeting capacity expansions of the company, sources said.
Though company denied any such move, sources said senior officials of the company were in Mumbai last week for road shows. ���We are not looking at any equity placement, as there is no need for funds at this time. The proposed capacity expansions will be implemented using internal accruals and project debt,��� said Mr Rao.
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According to sources, the proposed foreign listing would help the company to unlock shareholders��� value besides helping in retiring some portion of debt. It is expected to offer about 20% of its equity at the time of listing. As of December 2007, the gearing of the company stood at 5.9 times.The acquisition of CII Carbon and the subsequent merger of Rain Calcining with itself, Rain Commodities emerged as the world���s largest producer of CPC with an annual capacity of 2.5 million tonnes (MT) and 49 MW co-generation power plant. Rain Commodities acquired CII Carbon in a leveraged buy-out. It means, Rain Commodities used the target company���s balance sheet to fund the purchase. CPC is a critical raw material for aluminium industry. In 2007, Rain CII produced roughly 2.2 MT of CPC.
Rain Commodities also holds 11.5% stake in PCIC, Kuwait which is setting up a 0.35 MT plant. The facility is expected to be operational in the first half of 2008. Rain Commodities also has a 1.5 MT cement plant having a capacity of 3.2 MT.
Analysts expected CPC market to remain strong for next 2-3 years, riding on the increasing demand from aluminium industry. No one wants to set up new CPC plants due to scarcity of green petroleum coke (GPC), the raw material for CPC. However, Rain CII is not affected as it has long-term contracts to procure GPC, which is by-product of refineries.
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CPC prices have gone up due to increase in raw material cost. It is currently sold at about $500/tonne as compared to about $250/tonne last year. ���Though CPC is a commodity, we believe that it is less susceptible to cyclicality. This is because it is not highly critical for the aluminium industry in terms of cost but extremely critical in terms of quality. Moreover, given the industry dynamics ��� steady increase in demand, limited supply growth, and increasing consolidation ��� we believe that the industry will continue to report strong numbers, going forward,��� said an IL&FS analyst in its latest research report on the company. He added that in view of the sharp increase in CPC prices, CPC business is expected to generate strong revenues in 2008.
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