Rain Industries’ prayer is misconceived & is dismissed: Supreme Court
It took Milords Justice Arun Mishra & Justice Deepak Gupta of the Supreme Court only a few seconds to seal the fate of Rain Industries.
“The order dated 09.10.2018 passed by this Court, is clear. This Court has set the outer limit for import of raw pet coke cannot exceed 1.4 MT per annum in total.
In view of the aforesaid, prayers made on the basis of expansion etc. are totally misconceived and cannot be entertained.
No further orders are required to be passed on these I.As. i.e. LA. Nos. 168847/2018, 1451/2019 & 1847/2019 [filed on behalf of Rain CII Carbon (Vizag) Ltd.], LA. No. 164303 (filed on behalf of Saket Agarwal), LA. No.12291/2019 (filed on behalf of Sanvira Industries Ltd.) and LA. No.13210/2019 (filed on behalf of Goa Carbon Ltd.). The same are hereby dismissed,” MiLords observed in a dry tone and without any emotion.
Harish Salve, the eminent advocate and legal luminary, was present in the Court room together with a battery of top lawyers. However, it is not known whether he was defending Rain Industries or opposing it.
The repercussions of the judgement were felt in Dalal Street.
The stock plunged like a stone, saved only by the lower circuit of 5%.
The YoY loss now stands at 70%.
Naturally, Punters at MMB, who have cloned Mohnish Pabrai and Dolly Khanna, and bought truckloads of Rain Industries for their own portfolios, are distraught at their tragic losses.
“heavily disappointed to see rain fall so much..had high hopes..still have..anyway i am thinking i lost my 2.3l capital on this..hope things turn good…,” one punter lamented, tears streaming down his face.
“how much further can it fall? zero ? this is so do bad,” another wept, mumbling incoherently.
However, some punters kept a brave face and refused to buckle down in the face of adversity.
“Simple logic to buy this company, generating a net profit of 1000 cr with depreciation add another 500 cr cash generation, stock available at Mcap of 3000 cr. stock price will go up again. great promoter, no controversies. just buy and check stock price after 10 yrs, no worry,” a Bronze member said in a soothing tone, trying to cheer up novice punters who were trembling with fear.
Other businesses are not affected
S. Venkat Ramana Reddy, the distinguished Company Secretary of Rain Industries, issued a communiqué in which he stated that the Company is seeking remedial measures to mitigate the impact of the Supreme Court’s order.
“The Company is discussing with its Advisors/ Legal Counsels on further course of action including the options of filing a Review Petition in the Hon’ble Court; approaching the Government considering that the Export Import Policy 2015 – 2020 and the SEZ Act provide certain reliefs for Exporters in regard to import of Restricted Goods such as GPC and CPC,” he stated.
The Learned Company Secretary made it clear that the restrictions imposed by the Supreme Court for importing of CPC and GPC has resulted in reduced capacity utilization of the Company’s calciner facilities and thereby negatively impacted the Company’s performance during the Quarter and Year ended December 31, 2018 as well as Quarter ending March 31, 2019.
Thankfully, he also clarified that except the calcination business, RAIN’s other businesses are not impacted.
Coup in Venezuela could result in bad debts of Rs. 78 crore for Rain Industries
Investors in Dalal Street are totally oblivious about the happenings in Venezuela, a Country thousands of miles away.
Yet, the tremors from Venezuela will affect us.
According to the latest news, President Trump is girding his loins and preparing to invade Venezuela so as to oust a politician named Nicolás Maduro, who has allegedly forcibly seized power.
Trump says use of military force in Venezuela is still on the table https://t.co/inWwQLDja2 pic.twitter.com/zkEJIQt9Yn
— CNN (@CNN) February 4, 2019
Nicolás Maduro is belligerent. he was warned Trump that the White House will be ‘stained with blood’ if Trump invades.
According to experts, the attack by the US will be a “disaster” and “incite civil war” in the poverty stricken country.
US military action in #Venezuela will cause disaster: Analyst https://t.co/sT3DaBlzKY pic.twitter.com/Hf5lcrgfbK
— Press TV (@PressTV) February 4, 2019
The US-backed rightwing coup in Venezuela is going to incite a civil war if the US gets its way. Here is everything the corporate media isn’t telling you about this socialist country of 30 million that the US is trying to destabilize and collapse pic.twitter.com/xMabspwZcP
— Rania Khalek (@RaniaKhalek) February 3, 2019
RT AbbyMartin: How many western news outlets showed the massive marches in Venezuela protesting the US-backed coup today? #HandsOffVenezuela pic.twitter.com/BjaFprRQjn
— RichoRosai (@richorosai) February 4, 2019
Unfortunately, Rain Industries is caught in the cross fire between the warring parties.
A colossal sum of $10.85 million, equal to Rs. 78 crore, stands risk of turning into a NPA.
This was revealed by S. Venkat Ramana Reddy in a grim tone:
“In the 4th Quarter 2018, the Company has determined that there will be considerable delay in collecting the receivable from its long standing customer (Aluminum Company) in Venezuela due to the various political developments. Consequently, the company has decided to make an allowance for doubtful receivables of $10.85 million during the December 2018 Quarter”.
Margins will plunge as prices of finished products have slumped
As if the tale of woes is not sufficient, S. Venkat Ramana Reddy further revealed that the margins have come under pressure owing to lower prices of finished products.
“Prices for certain of the Company’s finished products have been moderating.
To ensure uninterrupted operation of its plants, the Company typically maintains approximately 60 – 90 day supply of raw material inventory.
Consequently, it is anticipated that the decline in the price of finished product will outpace the decline in our cost of inventory, which resulted in margin pressure during the December 2018 Quarter.
Operating margins were also affected by the revaluing of inventory due to the pricing environment,” he said.
Prima facie, it appears that all that could go wrong for Rain Industries has already done so. This means that the worst is already in the price and further downside could be limited. However, we will have to wait for authoritative advice from Mohnish Pabrai and/ or Dolly Khanna before we decide what to do with the stock!
Thanks for the update. With lot of moving factor i would not like to buy this stock now.I was contemplating of buying this. But now that things have turned against this companies and its time to wait and watch. Hopefully will get better price , as it went up with lot of optimism it might come down with same amount of pessimism. Thou shall not catch a falling knife.
If circuit braker was not imposed, Rain stock price could be Rs.4 by this time. Don’t know why the article says, worst is factored. Due to circuit braker, I don’t think it is factored. I really can’t understand how a 3K Cr company can service 6K Cr debt. Huge debt burden coupled with other negatives, don’t see light at the end of tunnel.
Fallen heroes of yore.
Would be interesting to watch whether Dolly Khanna et al are still holding the stock or exited smartly.
Exiting a 2% stake may not be hard for Dolly and for all like you said he might have already exited. What would be interesting is to see how Mohnish would sell his 10% stake and who would buy it.
I still don’t understand how warrenbuffet bhakt Mohnish could invest in Rain Industries, I mean with what logic he got a 10% stake in this company..he forgot the rules? The Dhando Investor needs to reread his own book
Dhando Author wished to buy more of Rain and wanted its price to come down. He will get an opportunity to buy 100% stake at throw away valuation soon.
He should now take tip from his friend Guy spier and his 9 rules on investing: Avoid talking about your current investments
Experience is the best teacher, and Spier said he’s learned it is “a bad idea to speak publicly about stocks that I own. Once we’ve made a public statement, it’s psychologically difficult to back away from what we’ve said—even if we’ve come to regret that opinion.”
Only when the tide goes down do you know who has been swimming naked. This comment is apt for a lot of so called “gurus” that this page has been peddling.
It’s hard to understand how is company making 1000 cr profit.Remember,Satyam was also making making a lot of profit.And we all know the rest of the story.I think lemon has been sold to Pabrai or now pabrai is selling lemon to lay investors.Best to keep away.There are a lot of other stocks.
Also don’t know why they went for expansion when there was oversupply in the market and foray into dubious Venezuelan market.
Please revisit this page after 5 years. You will come to know why people was buying it
I think it would be worthwhile to ‘tag’ this article/post for next 5 years and by track it. I am at least highly curious to find out what happens after 5 years. This will prove whether these so called pundits are any day better than we ordinary people and make money at the end of the game or they are just tempting us and hoodwinking us for their gains.
Why don’t you purchase more of this stock if you are that confident.
I think the use of word “you” was misunderstood in my comments. I referred “you” as “we” with absolute right intent and understanding.
I am actually curious to find out what happens to these pundits’ analysis/purchase/investment after a long period of 5/10 years. Do they still hold on or exited/vanished after a first sign of trouble with the stock/promoters.
Dont know what to do.. i still hold it with 50% down