Joined: 08/Jun/2007
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Topic: Confidence Petroleum Posted: 16/Jul/2007 at 12:37pm
Confidence Petroleum India Ltd.
CMP – Rs. 15.00 BSE Code –526829
(Face Value – Re. 1)
First of all, some words of caution –
Ø
one, the stock of Confidence Petroleum currently trades in the ‘Z’
group on BSE and thus carries high risk;
Ø
two it is a penny stock which generally carry high risk;
Ø
and third, as of now the company has very little revenues and the company will be a much bigger entity in terms of its Revenues and profits, by virtue of its merger with Confidence Cylinders and Petrochem Pvt. Ltd., a private company of the promoters; recent business received from various oil majors and anticipated
business in the future.
THE STOCK IS THEREFORE RECOMMENDED FOR INVESTORS WITH AN APPETITE FOR HIGH RISK.
Background
Confidence Petroleum India Ltd. (Confidence Petroleum) was earlier called Devarsa Gas Chem Ltd.. The company was incorporated in Jul.'94 as a private limited company, and converted into a limited company in Sep.'94. The company was promoted by Ashok Jain and Narendra Mohnot.
The company came out with a public issue in Feb.'95 to set up two LPG bottling plants near Pali and Udaipur in Rajasthan.
The company saw a change in management in 2003-04 when it was taken over by Nagpur based Khara group, a large player in the LPG business. Khara Group has interests in the manufacture of cylinders and bottling of LPG cylinders.
Business
After the takeover of the company from its originals promoters, the Khara group is trying to infuse new life into the company by taking various steps – these include aggressively adding new businesses by setting up more bottling plants and amalgamation of a private company of the promoters with Confidence Petroleum.
Amalgamation of Confidence Cylinders and Petrochem Pvt. Ltd. with the company
The company is amalgamating its private company, Confidence
Cylinders and Petrochem Pvt. Ltd. (Confidence Cylinders). After the amalgamation, Equity Capital of the company will increase to Rs.15.75 crores from Rs.5.25 crores currently and post merger equity stake of the promoters will go up to 75%. As per the Annual report of the company for FY 04-05, Confidence Cylinders and Petrochem Pvt. Ltd. is having Asia's single largest cylinder manufacturing Plant near Mumbai and five LPG bottling Plants. These plants cater to the demands of public sector oil majors namely BPCL, HPCL & IOCL. The financials of Confidence Cylinders are not available in public domain, however the very fact that the company owns Asia’s single largest cylinders manufacturing facility, it should have a decent topline.
New Business Initiatives
In a communication to BSE, the company had informed that M/s. Confidence Cylinders & Petrochem (P) Ltd
received orders worth Rs 45 crores from Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Ltd (BPCL) for supply of 14.2 Kg. LPG Cylinders. Also, HPCL has conferred on the Company an order for providing LPG Cylinder bottling assistance in Himachal State for which the Company is putting up a new bottling plant at Baddi, Himachal Pradesh. The company has also informed that it is putting up bottling plants for providing LPG bottling assistance to HPCL at Coimbatore, Roorkee and Chindwara. (MP) At present the company has 42 bottling plants spread across various locations in the country and has plans to aggressively establish more bottling plants.
Other Business Opportunities
The management of Khara group claim to be one of the largest players in manufacture and bottling of LPG cylinders in the country. In view of the leadership position of the group in the business – the company will have a great edge whenever sale of LPG is thrown open to the private players. Currently, for private players it would be an unviable business in view of subsidies provided by the government on sale of LPG for domestic use. However, in the current economic scenario where we are witnessing a gradual removal of subsidies and everything becoming market determined, integrated players like Confidence Petroleum would be thrown open big business opportunity in the event of removal of subsidy on LPG. Also, given the increased demand for CNG cylinders in India & overseas, the possibility of
the company’s entry into the high margin business of manufacture of CNG cylinders cannot be totally ruled out.
Conclusion
Confidence Petroleum, by virtue of its merger with the group company is expected to report substantial Topline and bottomline for the year ended March 06. Also, in view of the new business added in the current year, we may see a substantial growth in its topline and bottomline in the years to come.
The group has several other companies involved in the manufacture of LPG cylinders and in bottling operations and in future, consolidation of these businesses with Confidence Petroleum cannot be totally ruled out. Incase of that happening, it would be a big trigger for upward rerating of the stock.
Khara group has a past track record of taking over sick units, and turning them around into profitable units. The group had taken over sick cylinder manufacturing units in Andhra Pradesh and Maharashtra, a few years back and has managed to successfully turn them around. However, in the absence of the latest balance sheet of Confidence Petroleum and Confidence Cylinders, it is difficult to comment on the Revenues and profitability of the merged entity and hence the risk in buying at this juncture. However, given the businesses added by the company in the recent past and orders received, the company should report healthy Topline and bottomline in the years to come.
The stock which was lackluster till about a month back has been witnessing heightened activity of late, signifying interest of investors in the company. Investors with an appetite for HIGH RISK may choose to buy the stock at the current levels and on declines.
Joined: 24/Oct/2006
Location: India
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Posts: 1615
Posted: 17/Jul/2007 at 2:26pm
i think we have discussed this stock somewhere on this forum..it started from 0.50 and rose to 15 in about 2 months or so....everyday it used to hit 5% circuit...i followed it very closely...and u said right that revenues will increase post its merger with cylinder company....company itself doesn't have a great busines model...guj gas is better i think...
If you aren't fired with enthusiasm, you will be fired with enthusiasm.
Joined: 01/Jan/2006
Location: India
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Posts: 18403
Posted: 17/Jul/2007 at 9:16am
I think that that hidden gems guy who comes on Tv with his new picks each month recommended confidence petro! But these are dangerous vehicles to ride.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
Joined: 08/Jun/2007
Location: India
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Posts: 54
Posted: 18/Jul/2007 at 3:33pm
Basant Ji and Tyler Ji,
This is the recommendation report of the hidden gems guy-Ashish Chugh. What i like about this company is its management. And heres the latest update on this firm:
Confidence Petroleum India Ltd has informed that a meeting of the Board of Directors of the Company will be held on July 16, 2007, inter alia, to consider the following:
1. To call an Extra Ordinary General Meeting (EGM) for considering following proposals : -
a. To increase the borrowing powers of the Company to Rs 250 Crs.
b. To increase the authorized capital of the Company to Rs 26 Crs.
c. To issue, offer and allot in international offerings, in one or more foreign markets, Foreign Currency Convertible Bonds (FCCBs) and / or Global Depository Receipts (GDRs) and / or American Depository Receipts (ADRs) and / or any securities convertible into equity shares at the option of the Company and / or holder of the securities and / or securities linked to equity shares and / or any other instruments or securities through the QIB route under chapter XIII A of SEBI Regulations / Equity Shares / preference shares / convertible notes / securities / zero interest, fully convert debentures (FCDs) or any securities convertible into Equity Shares whether optionally or otherwise ("Securities"), subscribed to in foreign currency(ies) for cash or stock swap or for other valuable consideration including strategic alliances, business(es) or a combination thereof, to Financial Institutions and / or Mutual Funds and / or Foreign Institutional Investors and / or Foreign Investors (whether Institutions and / or Incorporated Bodies and / or Individuals or otherwise) Non-Resident Indians and / or other entities and / or to such other persons whether or not such entities or persons or members of the Company, through Public Issue(s), Right Issue (s) / QIP Placements (one or more trenches), which upon conversion of all Securities so issued or allotted could give rise to the issue of an amount (inclusive of such premium as may be determined) up to US $ 30 million as decided by the Company / Underwriters, and such issue and allotment to be made at such time or times, in one or more trenches, at such price or prices, on such terms and conditions including security, rate of interest and in such manner as the Board may, in its absolute discretion think fit or deemed appropriate, wherever necessary in consultation with the Lead Manager(s) / Investment Banker(s) / Advisers and / or the Underwriters, subject to guidelines of the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Ministry of Finance, and otherwise on such terms and conditions as may be decided and deemed appropriate by the Board at the time of issue or allotment and to obtain listing of the securities in the overseas stock exchanges.
d. To discuss / deliberate on the feasibility of setting up of HIGH PRESSURE/CNG cylinders manufacturing on the basis of the report submitted by the technical evaluation committee of the aforesaid project.
Joined: 08/Jun/2007
Location: India
Online Status: Offline
Posts: 54
Posted: 18/Jul/2007 at 7:26pm
Sir,
Can you please help me advise how I can buy this stock. Both ICICI Demat and Relaince Demat accounts dont have this stock . I mean i cant buy this stock through these two accounts. How do i buy Confidence?
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