Shares of Rain Industries (NSE: RAIN) surged by 32% in the last 5 trading sessions. The stock managed to cross its previous resistance of ₹206. RAIN was trading in a small parallel channel for almost the last two years.
RAIN has now given breakout from this level making a new small term high of ₹219.60. Last few years have been really tough for the company as their business is dependent on imports of Raw materials, which we will talk about further in this post.
However, RAIN has performed relatively well in the last three months as the stock continues to make higher highs each month. Its share price went from ₹143 in December 2023, to ₹219 in February 2024 soaring a little over 50%. Lets understand what factors are contributing to the rise in share price of RAIN Industries.
Rain Industries core business
Rain Industries is a multinational company that produces valuable carbon-based products, advanced carbon materials, and cement. Their key products include calcined petroleum coke (CPC) which are used in aluminium and graphite production.
The company also makes coal tar pitch for electrodes and roofing and specialised binders for lithium-ion batteries, and construction materials.
Construction sector is one of the trendist sectors in the Indian Stock Market right now as the Indian government is betting high on infrastructure developments. Infrastructure and PSU stock have given multiple fold returns in a stock span of time. While Rain Industries does not directly work in the construction sector, their products are majorly used in constructions.
Reasons behind rise in share price of RAIN
One major reason behind the surge in share price of RAIN is the ease of the Supreme court for import of raw petroleum coke (RPC). The Supreme Court allowed Rain Carbon SEZ, a unit of Rain Industries, to import more RPC.
Due to environmental concerns, restrictions were placed on import of RPC in the year 2018 which affected profitability for RAIN Industries. The reaction – Share Price of RAIN declined from ₹474 to ₹45 by mid 2020, giving 90% of its value.
However, since the restrictions are now loosened, RAIN can produce more of their product and increase its profitability and margins. The annual limit has been raised for manufacturers from 1.4 million metric tonnes to 1.9 million metric tonnes.
The court’s ruling secures RPC supply and supports Rain’s ability to meet demand for their high-value carbon products across industries.
RAIN Shareholders Details
| Category | Percentage |
|---|---|
| Promoters | 41.14% |
| FIIs | 12.09% |
| DIIs | 0.34% |
| Government | 0.34% |
| Public | 46.08% |
| No. of Shareholders | 2,30,604 |
RAIN Sales Growth data
| Period | Compounded Sales Growth |
|---|---|
| 10 Years | 15% |
| 5 Years | 13% |
| 3 Years | 19% |
RAIN's stock price return over the year
| Period | Stock Price CAGR |
|---|---|
| 10 Years | 18% |
| 5 Years | 17% |
| 3 Years | 14% |
| 1 Year | 29% |
Words to end with
RAIN’s strong performance in the last few days can be attributed to the Supreme Court’s ruling. I personally don’t like to invest in businesses which are dependent on such policy changes. Such businesses tend to perform in an irregular cyclic manner.
With results around the corner, it will be interesting to see how RAIN performs. As the court’s decision was made just a couple of days back, it won’t have any effects on the company’s financial position. That being said, there is nothing wrong in riding the bull wave until we can.
