Fitch rates Rain Commodities at 'Fitch A-(ind)'; outlook stable

Fitch Ratings has assigned India's Rain Commodities Limited (RCOL) a National Long-Term rating of 'Fitch A-(ind)'. The Outlook is Stable. However, ratings are constrained by volatility in cement prices and sector overcapacity.

Fitch has taken a consolidated view of RCOL's cement and calcining businesses, both operated by its subsidiaries, for the rating purpose. While India's Rain Cement Ltd ('Fitch A-(ind)'/ Stable) holds the cement operations, RCOL's calcining business is operated in India and the US by Rain CII Carbon Vizag Ltd (RCCVL, 'Fitch A-(ind)'/ Stable) and Rain CII Carbon LLC (RCCUS), respectively.

The ratings partly reflect the improvement in the performance of RCOL's cement business. In 2011, RCL earned total revenue of INR8.68bn (2010: INR7.16bn).

The ratings are, however, constrained by the cyclical volatility in cement prices due to overcapacity in the southern region of India, which is likely to increase to around 136.2Mta until FY13 from 101Mta in FY10. This may exert pressure on cement prices along with increasing prices of coal and other inputs.