Why did the stock of Rain Industries gain so sharply on 01 January?

Hyderabad based Rain Industries rallied by over 15% on Friday after it announced the complete sale of its non-strategic subsidiaries. The two subsidiaries of Rain Industries were Rutgers Polymers Canada and Handy Chemicals of the US. The two subsidiaries were sold for a total consideration of Rs.638 crore.

The funds generated by this sale will be used by the company to repayment of debt of the main holding company and for general corporate purposes. This led to the company stock surging to a yearly high. The idea was to create sustainable growth for the company and also to simultaneously create value for the shareholders.

The two companies that Rain Industries divested were into the business of manufacture and distribution of poly naphthalene sulfonates, which don’t fall under the core business focus of the company at this point of time. The trading volumes also jumped to record levels during the day.