CRISIL Equities assigns fundamental grade 3/5 to Confidence Petroleum India Ltd

 | December 22,2010 04:47 pm IST

CRISIL Equities has assigned a CRISIL IER fundamental grade of 3/5 (pronounced three on five) to Confidence Petroleum India Ltd (Confidence). The grade indicates that the company's fundamentals are ‘good’ relative to other listed equity securities in India.

CRISIL Equities has assigned a valuation grade of 3/5, indicating that the stock is ‘aligned’ with the current market price of Rs 19 (as on December 22, 2010).


Our one-year fair value of the stock is Rs 19. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.

The assigned fundamental grade reflects Confidence’s position as one of the fastest growing players in the auto LPG dispensing stations (ALDS) business with 56 ALDS in operation as of November 2010. Increasing demand for auto LPG is expected to bode well for Confidence which is targeting to set up 500 ALDS by March 2013. The grade also factors in Confidence’s established position in the LPG cylinder manufacturing and bottling businesses; it has a ~20% market share in domestic LPG cylinder manufacturing capacity and a 95-98% market share in the LPG bottling space which is outsourced by Indian oil marketing companies. The company’s LPG cylinder manufacturing and bottling businesses are expected to garner momentum from the government’s thrust to increase LPG penetration in the country.


The grade is moderated by the risks involved in the timely execution of Confidence’s expansion plans in the ALDS segment. It is imperative for Confidence to sustain its strategy and commission ALDS quickly in order to stay ahead of competition. The company is looking at the FCCB (foreign currency convertible bonds) route to raise funds to the tune of Rs 1.75 bn by the end of FY11 to be able to finance its various growth plans. Any delay in raising funds would adversely impact the company’s growth plans and its earnings.