Rain Commodities to raise $100 million by selling tax-free bonds

Rain Commodities to raise $100 million by selling tax-free bonds

Hyderabad: Rain Commodities Ltd, the world’s largest maker of calcined petroleum coke (CPC), used in the aluminium industry, plans to raise $100 million (Rs456 crore) by selling tax-free bonds in two US states.

The Hyderabad-based company, which also produces cement and power, wants to deploy the proceeds to set up two power projects of 30MW each at its CPC facilities in the US, vice-president (finance) T. Srinivasa Rao said.

Rao said the new global holding company will raise equity funds in the US market through an initial public offering (IPO) whose size and timing were yet to be decided.

The two proposed power projects using waste heat will come up at Robinson in Illinois and at Lake Charles in Louisiana. “Both the states of Illinois and Louisiana have given us approvals to raise $50 million each through issue of tax-free bonds," Rao told Mint.

The long-tenured bonds, carrying low interest, will be offered by the year-end while it would take two years for the power projects to take off.

Also by the year-end, Rain Commodities will also hive off cement operations into a subsidiary and create a global holding entity in the US for its CPC business as part of a corporate restructuring drive.

“The proposed hiving off of cement business into a wholly owned subsidiary will not only facilitate induction of strategic joint venture partners into the cement business but also facilitate any value accretive acquisitions in the cement business," managing director N. Jagan Mohan Reddy said.

With signs of revival in the global aluminium industry and expectations that global aluminium capacities would double over the next 10 years, the company is weighing options to expand CPC capacities in India, China and West Asia.

The company now has a CPC capacity of 2.5 million tonnes a year and holds over 20% share as the global market leader. “We would like to maintain our market share by setting up greenfield CPC plants in India and China," said Reddy.

The company plans to set up a 300,000 tonne CPC facility in China at $50 million and is currently studying market conditions and regulations there as well as the issues of integration, said Rao. It recently acquired a small CPC plant in China that enabled its entry into the country.

“We believe Rain would benefit immensely from the improved CPC demand outlook with aluminium smelting capacities coming on stream (greenfield/restarts) across the world and tightness in the GPC (green petroleum coke) availability," Achal Lohade, an analyst at JM Financial Institutional Securities Pvt. Ltd, wrote in a 22 March report.

In July 2007, the company had acquired CPC producer CII Carbon Llc for $619 million, which was largely funded through debt. The debt in the company’s books is mostly from CPC operations in the US, and there is no debt liability in the Indian CPC and cement operations, said Rao