Rain Commodities Limited (RCL), which owns the Priya brand of cement, is looking at increased revenue contributions from fuel-grade coke business to about 10 per cent in a year from the present 2 per cent. The total revenues of the company as of December 2009 stood at Rs 3,633 crore.
The company derives a major chunk of its revenues from the calcined petroleum coke (CPC) segment, largely concentrated in the US and Asia. The CPC segment contributed Rs 2,845.3 crore revenues in 2009 and Rs 3745.9 crore the year before.
Aluminium industry, which grew at five per cent a year, is the largest consumer of CPC. However, the global slowdown and subsequent decline in aluminium metal prices have resulted in substantial reduction of aluminium production. This resulted in the demand for CPC coming down. Following this, RCL curtailed CPC production and rationalised the overheads including closing down one of its seven units in the US.
“We will open the plant in the second half of this year,” said T Srinivas Rao, vice-president (finance).
According to Rao, the demand for aluminium from automotive and commercial transport segment is likely to go up. “The demand for CPC will be moderate this year but strong from 2011,” he said, adding that its operations would remain stable with improved availability of raw material.
The company is a major supplier of CPC to North America, South America, South Africa, West Asia and other regions.
In August 2009, it acquired a calcining plant at Zhenjiang Xin Tian Tansuin in China with 20,000-tonne per year capacity, to understand the market dynamics there. The company is looking at acquiring more such companies, he said.
Its other business segment, cement, contributed Rs 788.5 crore to the revenues in 2009. “The company will be in a position to induct a joint partner or an investor for the cement vertical next year once the corporate restructuring is over,” he said, adding that the company has been getting proposals from investors following the recent deals that happened in other cement companies.
As per the corporate restructuring plan, the cement business from RCL (holding company) would be transferred to Rain CII Carbon (India) Limited, a wholly-owned subsidiary. Also, the calcined petroleum coke and power business would be transferred from Rain CII Carbon (India) to Rain CII Carbon (Vizag), a wholly-owned step-down subsidiary company.
The board also approved merger of Moonglow Company Business Inc in British Islands, a wholly-owned subsidiary of Rain CII Carbon India, with RCL.
RCL decided to undertake the composite scheme of arrangement (CSA) to delineate and create a holding company for cement and calcined petroleum coke verticals as they were capable of attracting different set of investor and strategic partners. A global holding company would be created in the US for the CPC and would be able to raise funds through equity or debt and pursue growth opportunities.
The company has 3.16 million-tonne per year cement production capacity in two plants in Nalgonda and Kurnool districts of Andhra Pradesh and it sells about 50 per cent of the cement produced in Andhra Pradesh and the remaining in Tamil Nadu and other markets. Growth in housing and infra sectors will provide support to the cement prices and hedge against possible demand slowdown in the future, he said.
The cement supply will be higher than the demand resulting in lower capacity utlisation and reduced sales realisations due to increased capacity in the industry, he pointed out adding that Andhra Pradesh will be a cement manufacturing hub.
The company, to reduce costs, is now setting up a packing unit in Bellary in Karnataka with a capacity to pack 6,00,000 tonne of cement per year at a cost of Rs 10 crore. It is also focused on paying the debt faster to save on the interest costs. It made an acquisition two years ago and had a debt of $650 million as of December 2009. The debt would come down to $150 to 200 million in two years from the present $ 450 million as it was repaying about $50 to 75 million a year, Rao said.
