Profits to be upwards of Rs 100cr each quarter: Rain Comm

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Rain Commodities announced its third quarter CY11 results . The company's total revenue was up 25% at Rs 1,296 crore versus Rs 1,035.33 crore (YoY) and profit after tax (PAT) was up 25% at Rs 117.6 crore versus Rs 93.95 crore.

After the results, the company's board approved buyback of Rs 1 crore fully paid up equity shares, subjected to a price not exceeding Rs 41 per equity share.

Chief financial officer T Srinivasa Rao plans to list its calcine petroleum coke (CPC) business by second half of FY12. The company is looking for an inorganic growth in the CPC business.

The company's cement business has been working at 65% capacity utilisation currently. "We do not have any plans to divest our cement business at this point," he added.

Moreover, Rao expects the profits to be upwards of Rs 100 crore each quarter.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: Why are you doing buyback in such a small quantity? You are deploying Rs 35 crore on that buyback, which is barely 3% of your equity or market cap.

A: The company's performance for the nine months index September 2011, we declared the revenues of Rs 4000 crore and profit after tax of Rs 485 crore on an accumulative basis.

The buyback as per the Indian regulations is possible only on a stand alone basis at 10% of the net worth of the company within the director's power. On the consolidated basis, it is not allowed in India though we have a very strong balance sheet.

On a standalone basis, we have a net worth of about Rs 310 crore and 10% of that has been allowed as per the regulations in India. This is the reason why our buyback amount is only Rs 31 crore.

Q: For this quarter, you have seen a bit of pressure on your margins. Your profit after tax has been hit primarily because your interest costs are quite high. What do you hope to recover into the next quarter?

A: This quarter, we announced a profit after tax of about Rs 118 crore. We have had an exchange loss of about Rs 31 crore because the rupee has depreciated against dollar by about 9% in this quarter. If you exclude that, we are about Rs 150 crore of profit, which is inline with the performance delivered in the previous quarters.

Q: What kind of recovery do you expect to see in the next quarter? What can you do in terms of sales and profits margins by Q3 and Q4?

A: We follow a calendar year. Fourth quarter of December is our last quarter for the year. We have been delivering on a consolidated basis profit in access of Rs 100 crore per quarter for the last four years of performance.

We depend on the aluminium industry to a large extend. As much as 80% of our revenues come from aluminium industry. Aluminium being cyclical, the prices will go up and down. Despite of that, we are more focused on the volumes.

Our critical product CPC is a key consumable item in aluminium. We expect to deliver a similar performance in future as well. In excess of Rs 100 crore of profits, we will deliver on a continuous basis.

Q: Can you throw some light on the plans to list the CPC business?

A: Right now, the markets are very favourable for listing. The corporate structure is ready and we are geared up internally for a listing. I don't think we'll be listed in next six-nine months. In the second half of 2011, we can consider listing.

Q: Do you intend to hold on to your cement business or is it a peripheral business that you would want to exit or diverse at some point?

A: At this point of time, we are engaged only in two businesses - CPC and cement. We do not have any plans to diverse the cement business. We are doing reasonably well. We have delivered profit of about Rs 100 crore per year in the last four years.

We don't have any debt in the cement balance sheet. Through green field expansion after two-five years, we might expand our cement business further. Currently, we are operating at 65% capacity utilisation. We do not have any plans to diverse the cement business.

Q: You indicated earlier that before listing your CPC business, you would look for an MNA opportunity. Is there any progress on that front? How soon can the listing take place?

A: They may not be linked to each other. Listing and acquisitions are independent. We look for inorganic growth opportunities in the CPC business depending on the price term. There isn't any plan now, but we are keeping our options open for an acquisition.