Rain

Group-9
Saunak kundu-18PGP171
Rohan Roy-18PGP159

industries
Saptarishi Basak-18PGP167
Himadri nag-18PGP064
Ranjith Kumar-18PGP231

QIP- Pitch book

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 ABOUT US
Axis Capital Limited (Erstwhile ENAM Securities Private Limited)
is one of India’s leading financial expert with the sole aim of
providing focused and customized solutions in the areas of
Investment Banking and Institutional Equities.
We are a wholly owned subsidiary of Axis Bank, one of India’s
largest private sector banks. Axis Capital offers investors,
companies and government entities with the spectrum of financial
needs in the areas of Equity Capital Markets, M&A, Private Equity,
Structured Finance and Institutional Equities.

Corporate office
Mumbai

Dealing office
Mumbai
Pune
Vadodara
Chennai
New Delhi
Baroda
2
 TIMELINE

1984 1993 1997 2012 Present

Enam securities was Some of the marquee Enam securities Axis bank acquires the Axis capital is the
incorporated. Started as IPOs of Indian capital establishes a dedicated investment banking & leading investment
underwriting house markets- Infosys institutional equities institutional equities bank & equity house in
primarily known for IPO technologies, Zee hit Desk catering to FIIs & business of Enam India, catering to Blue
research & distribution the market. Enam DIIs securities. chip Indian corporates
1992 securities acts as the and global & domestic
BRLM investors.
Enam formally registers
with SEBI

3
 OUR DIRECTORS

Rajiv anand Chirag Sutapa Banerjee

Director Negandhi
Wholetime director Director

Salil Bharat Amitabh Samirkumar

Pitale
Wholetime director Chaudhry
Director Barua
Director

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Specialisation-Related
Competency
Competencies
OFS, IPO, QIP
Companies served recently
OFS: L&T TECHNOLOGY SERVICES (INR 2499 Million)
IPO: HDFC ASSET MANAGEMENT COMPANY (INR 28,003
Million)
QIP: JINDAL STEEL & POWER LTD. (INR 12000 Million)
‘We Have Done QIP worth INR 2,34,643 million in the last four
and a half years including those of huge corporations such as
hindalco worth INR 33500 Mn. and HDFC Ltd. Worth INR
1,04,350 MN. We are the best fit to help you with the QIP
process.’
Service lines-product offering
Equity capital market
Assist various companies in fundraising from the equity markets while
ensuring efficient delivery of services through our versatile & strong
understanding of different sectors
Handling complex regulatory & compliance related matters for varied
offerings including IPO, QIP, Rights, Buybacks, Offer for Sales, Open Offers
& Delisting.
Merger & Acquisitions
Representing clients on both sell and buy side situations, involving
domestic and international transaction opportunities, helping them to
arrive at innovative structuring solutions for their diverse needs.
Structured finance
Helps clients for capital-raising through tailor made structured debt
products customized as per client requirements and with a variety of
flexibility in terms of maturity, repayment structure, collateral amongst
others
Institutional equities
Institutional sales
Institutional Research
Regulatory documents
5
 2014 2015 2016 2017 2018

Financials & Industry Sales

1,920.87 10,204.79 9,258.18 11,303.19 14,048.99
Expenses
10,725.46 8,868.17 7,736.09 9,040.82 12,092.67
Operating Profit
• Aluminum industry is a key driver as RAIN’s primary customers are the aluminum 1,195.41 1,336.62 1,522.09 2,262.37 1,956.32
manufactures of the carbon division; Aluminum industry has seen growth due increase Other income
(179.28) 79.64 100.46 (65.45) 41.66
in its usage and demand out striping supply
Depreciation
• The key drivers of the Advanced material business are the prices of oil and oil 346.98 327.82 518.97 525.63 555.09

derivatives, and by products from the Carbon division Interest

619.87 596.45 630.85 594.67 456.51
• Cement industry is reliant on the prices of CPC and CPT, which are raw materials for Profit before tax
57.69 498.48 480.04 1,083.93 995.65
its production, but the performance of the segment is not correlated with the other
segments TAX
12.06 196.21 179.20 291.80 364.32
Net Profit
88.53 323.34 290.94 763.59 581.63
EPS
2.63 9.61 8.65 22.70 17.29

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 Revenue
15,000.00

10,000.00

Current State
5,000.00

-
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Poor revenues and Sliding Margins

 Poor demand from the Metal industry due to the stressed Automobile sector has stunted the
growth of the RAIN as it supplies Calcified Petroleum Coke(CPC) to these industries
 Carbon division which accounts for 65% is largely impacted by lower volumes and higher
raw material costs, because company has had to use high cost inventory (GPC) for production
of carbon products which was purchased earlier. Also the Supreme court has placed a cap on
the import of Petroleum Coke (GPC) which also brings uncertainty in revenues from the
carbon segment
 The Advanced materials division is flat and lower demands due to weakness in the graphite
and adhesive industries has prevented growth of revenue in this segment
 The cement division has performed well both in terms of margin and revenue. The segment
increased by 25.4% and 17.3% in volume of good sold
 RAIN with these 3 divisions has achieved vertical integration where the products and
byproduct of the carbon division are used in the Cement and Advanced material segments

MM.DD.20XX
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ADD A FOOTER
SOLUTION
 The company is facing low growth in its top line and its major revenue generating carbon segment
is stressed due regulatory restrictions
REVENUE BREAKUP (LAST 5 QUARTERS)  The restrictions have placed a cap on the amount of pet coke the company can import, and
100.00% unavailability of viable local suppliers prevent it from producing carbon products profitably
9.01% 8.73% 6.49% 6.31% 6.25%
80.00% 23.19% 24.66%
 Hence the company has a need to diversify and find an alternate source of revenue to have stable
26.10% 24.16% 28.13% growth and mitigate consequence of carbon market volatility
60.00%  Since the already has competence in the cement business, it can increase its cement production
capacity and expand in core markets i.e. South India where its brand ‘Priya cement’ has a strong
40.00% hold
65.01% 67.11% 70.32% 65.56% 69.09%
20.00%  Cement segment has been continuously growing due to RAIN’s strong dealer network and the
industry demand provides good opportunity for RAIN
0.00%
Q2-19 Q1-18 Q4-18 Q3-18 Q2-18  The Revenue has from this business has consistently increased in the last 4 Quarters along with an
increase of revenue contribution and above average growth in the EBITA margin from this
Carbon Advanced Material Cement segment
 The company also has high debt on its balance sheet with DE ratio of 1.54 and cannot raise new
debt to fund the expansion
Cement Revenue (Last 5 Quarters)  The company is also trading below its book value and FPO to raise capital would not be fruitful,
QIP will help the company get better value for its equity
3500
2995
3000 2773
Cement EBITA Margin
2500 2357 18.8
2225 2191 20
15.2
2000
15 12.3
1500
10
1000 5.8 5
500 5

0 0
8
Q2-19 Q1-18 Q4-18 Q3-18 Q2-18 Q2-19 Q1-18 Q4-18 Q3-18 Q2-18
 QIP - Proceeds
Inorganic Growth - Cement
• RAIN can use the funds generated to acquire companies which
can strengthen its position in the cement market
• Organic growth is not feasible because of the time lag between
the investment and revenue generation, whereas RAIN requires
to find an alternate source of revenue generation as quickly as
Target Value (in Rs. mil) Capacity(mtpa) EV/tonne(Rs mil/mtpa) possible
• If the company intends to expand by 25% of its present cement
manufacturing capacity, the company will have to make an
JPAssociates Residual 52000 5.5 9454.545455
estimated investments of Rs. 2857 Million, which has been
computed by taking historical acquisitions in the industry
Binani Cement 7840 11.3 693.8053097
Kalyanpur Cement 3530 1.1 3209.090909 • If the company makes the same acquisition using debt, its DE
Murli Associates 7520 3 2506.666667
ratio will become approximately 2.3

Average 3966.027085
Median 2857.878788 Debt Repayment
For 25% increase
in capacity 2857.878788
RAIN can also use the QIP proceeds to clear its debt which is close
to Rs 77790 Million. Though full repayment is not feasible but part
repayment can bring down leverage and reduce the risk of default
when the company’s revenues are dropping and industry is stressed.

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QIP – Post money, Dilution & Fees
Pre-Issue Information Column1 No. shares Price/share Amount

Paid up Capital (shares of Rs. 10 each) 336,345,679 2 672,691,358

Post money dilution expected Reserves & Surplus
General Reserve 60470000
• QIP process will be carried out by book building process
P&L Account 5,816,260,000 5,876,730,000
• The price assumed in the model is the floor price of 101.8 Pre-Issue Networth 6,549,421,358
• The number of shares to be floated in the QIP is Net Asset Value of Share (NAV) 137
approximately 28 million, which is close to 8.35% of the EPS 21.7
present number of equity shares Proposed Public Offer 28,073,465 101.8 2,857,878,788
Post-Issue Networth 9,407,300,146
Post-Issue EPS 16
PAT required to maintain pre-issue EPS 7,907,895,436
Expansion in Post-Issue Networth (times) 1.44

Payable by the Merchant Bank Estimated Expenses

Transaction charges and fees Fee payable to Credit Rating Agency ₹ 6,25,000.00
Fee payable to Investment Managers ₹ 30,00,000.00
Fee payable to Project Manager ₹ 18,75,000.00
Fee payable to Registrar ₹ 1,12,500.00
Fee payable to Stock Exchange ₹ 91,250.00
Fee payable to Depositories ₹ 18,750.00
Fee payable to the Auditor ₹ 2,12,500.00
Fee payable to the Valuer ₹ 2,00,000.00
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Total Fee payable ₹ 61,35,000.00
QIP – The SEBI Price

Aggregated funds should not exceed more than five times the net-worth
• Net-worth of Rain Industries Limited = Rs. 4622.74 crore, Maximum aggregated funds = Rs. 23113.70 crore
• An issue of securities made under a QIP shall be made at a price not less than the higher of the following (floor price):
• The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the
relevant date (current value of this is Rs. 101.80)
• The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the
relevant date (current value of this is Rs. 90.43)
• "relevant date" for the purpose of this clause means the day which is thirty days prior to the date on which the meeting of general body of shareholders
is held
• "stock exchange" for the purpose of this clause means any of the recognised stock exchanges in which the equity shares of the issuer of the same class
are listed and in which the highest trading volume in such shares has been recorded during the six months immediately preceding the relevant date (in
this case NSE)
Pricing of shares on conversion
• Where securities which are convertible into or exchangeable with equity shares later are issued, the issuer shall determine the price of the resultant
shares in terms of above regulations
• The specified securities allotted shall be made fully paid up at the time of their allotment
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QIP – The SEBI Mandate

Adjustments in price
The prices considered for determination of issue price of specified securities shall be subject
to appropriate adjustments if the issuer company:
 Makes an issue of shares by way of capitalization of profits or reserves (other than by way of a dividend on shares);
 Makes an issue of shares on rights basis
 Consolidates its outstanding shares into a smaller number of shares;
 Divides its outstanding shares (including by way of stock split);
 Re-classifies any of its shares into other securities of the company;
 Is involved in such other similar events or circumstances, which in the opinion of the concerned Stock Exchange, requires
adjustments.

Currency of the security

In case of a security which is convertible into or exchangeable with equity shares later, the
same may be converted/ exchanged into equity shares at any time after the date of allotment
of the security, no later than sixty months from the date of allotment

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Marketing
Strategy
Rain Industries Ltd
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Timeline of QIP-process layout

Week Event Week Starting Event

Starting
October 7 • Preliminary calls to board members November 11 • Special committee process
• Engage legal counsel • Closure of bid acceptance
• Conduct legal and accounting review • Confirmatory legal diligence
based on public documents
• Preliminary discussion on QIP and
investor’s stake
• Draft Commitment papers sent to Axis
Capitals
October 21 • QIP special committee formed November 25 • Allotment to the buyers
• Axis Capitals conducts business • Sign definitive documents
diligence • Announce the transaction with
• Finalize commitment papers quarterly earnings
• Issue of Placement document

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Transaction Process – Strategic Review

Negotiating
Due diligence of the Evaluate and analyze
Review options Respond to proposal transaction and Close transaction
business proposals
market check

• Assessment of current • Detailed valuation • Go ahead with • Agree initial response to • Negotiate definitive • Allotment to investors
situation review placement/status quo proposal and key agreement • Coordinate day-to-day
• In-depth due diligence • Deal feasibility • Assess depth and messages • Focus on critical terms details to bring the
review to understand interest from other • Negotiate with bidders • Financing transaction to a closure
value and business potential and strategic and advisors (if commitment/deal
momentum buyers appropriate) certainty
• Evaluate other options • Further special • Termination/fiduciary
to maximize value committee review post out
discussions • Conduct market check
(limited or broad
process pre/post
placement

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Proposed Buyers for the Placement

• Mutual Fund Houses

Popular names would include Oppenheimer, UBS, HSBC, Marshall & Wace, Myriad, Key Square, Goldman Sachs,
Indus and Eastbridge
• Asset Management Companies
Popular Top investors include ICICI Prudential Mutual Fund, HDFC Mutual Fund, Reliance Mutual Fund, Aditya
Birla Sun Life Mutual Fund, SBI Mutual Fund, UTI Mutual Fund, Franklin Templeton Mutual Fund, Kotak
Mahindra Mutual Fund and IDFC Mutual Fund
• Commercial Banks and Financial Institutions
National Investment Fund, Life Insurance Corporation of India Limited
• Foreign Institutional Buyers
• Other Qualified Institutional Buyers
• High Net Worth Individuals

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Assumptions and Valuation

Assumptions Valuation
WACC Computation

Equity
Risk Free Rate 6.68%
Debt
ERP 4.77% ₹ 197.77
Pre-Tax COD 7.25%
CRP 1.41%
Beta 1.33
After-Tax COD 4.74%
-45.41%
COE 14.43%

₹ 105.95

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Relative Pricing

Assumptions Valuation

5 companies chosen from 3 sectors  Undervalued Stock

Advanced Materials
Carbon ₹ 118.17
Cement
-10.34%
Production of Advanced Materials is done in Europe, so 5 Specialty
Chemicals producing companies from Europe considered for the pricing,
which are listed on the Deutsche Borśe

₹ 105.95

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Conclusion

The carbon segment is the major revenue generator for the company which is highly stressed due to the industry and
the regulatory environment. Therefore the company has few options other than diversification into segments which
will reliable generate revenue for the company until the industrial environment improves.
The company is unique situation considering it already has a cement business which is highly profitable and growing.
Hence diversifying in this segment by increasing capacity is the best way the company can ensure future growth and
stable revenues.

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