India Ratings & Research (Ind-Ra) has revised Rain Industries Outlook to Negative from Stable while affirming its Long-Term Issuer Rating at 'IND A-'00. Ind-Ra has also affirmed the Short-Term rating on the company's Rs 230 million (reduced from Rs 850 million) non-fund-based facility at IND A2+.

The Negative Outlook reflects the company's elevated credit metrics due to weaker than expected demand and narrow margins in the carbon and cement businesses. While the affirmation is based on the likelihood of a turnaround in the next four quarters and the understanding that the delay in deleveraging would not materially alter the Rain group's debt servicing ability. According to the group's repayment schedule, it has to make large repayments only in 2018 and Ind-Ra expects the company's profitability to turnaround over the next four quarters.

Ind-Ra expects Rain group's profitability to improve on the commissioning of the new Phthalic Anhydride facility in 2H2014 and the coal tar distillation plant in Russia under a joint venture in 1H2015. Ind-Ra expects a further increase in profitability with an improvement in CPC and cement realizations over the next four quarters resulting in EBITDA margins increasing to about 12%. The interest cover is also expected to improve in 2015 with expected recovery in operating performance.