CALS Refineries - Small Cap Stock & Penny Stock - Analysis

Cals Refineries is one stock in my small cap stock list and making rounds nowadays in circle of people who buy penny stocks. It was first suggested to me by Mr. Sreenivas. Sreenivas is from Bank of Oman and is an avid growth stock investor for long term investment horizon. He even called me up to discuss the same passionately. :) There were few others after this who asked me about Cals Refineries so I decided to research a bit about this and here is the stock research report with my opinion.

Cals Refineries Limited was incorporated on the 25th of July, 1984 as a private limited company. On 22nd September, 1992 the company was converted into a public limited company and is now listed on the Bombay Stock Exchange (BSE) under the Scrip Code 526652.
CALS Refineries - Multibagger Penny Stock To Buy .. Is It
With the energy sector playing a pivotal role in global economies, the company aims to actively participate in it's growth in India as well as in international markets.

Cals Refineries Limited, in the first phase of a mega project, is establishing a 4.8 MMTPA (100,000 BPD) refinery at Haldia, India.

Comparison with existing refineries in India
* Reliance Industries (33 million tonne)
* Essar Oil (7.5 million tonne)
* Reliance Petroleum setting up 29 million tonne
* MRPL (10.5 million tonnes)
* Chennai Petroleum (9.5 million tonnes)
* Bongaigaon Refinery (2 million tonnes)

Management of CALS Refineries
Chairman of Cals Refineries, Mr. M.S. Ramachandran, was Chairman of Indian Oil Corporation (I.O.C.), India’s largest Oil & Gas company. Mr. M. S. Ramachandran has over 38 years of experience in the Oil and Gas industry. He was Chairman of Indian Oil Corporation (I.O.C.), India’s largest Oil & Gas company. He helped the government to implement various policies that would attract private players into the Oil & Gas sector.

At I.O.C., he redirected the organization around key business lines with greater commercial focus and market facing capabilities. During his tenure, Mr. Ramachandran increased sales growth from USD 25 Billion to USD 34 Billion, which increased the net profit of company from USD 0.65 Billion to USD 1.2 Billion, raising the company’s Fortune ranking from 223 to 189.

Crude Oil supply
Cals Refineries Ltd has signed a deal with oil major BP for up to 5 million tonnes of crude a year for a refinery. So the supply of crude is already guarenteed.

Upstream Integration
Spice Energy, the parent company of CALS has another subsidiary, Spice Exploration, which has operations in Africa and Indonesia from where crude could be made available.

Signed with customers for finished products
Cals Refineries has signed a deal with oil major BP to buy up to 100,000 bpd crude for its refinery. As per the deal, 60,000 bpd is confirmed, the balance of 40,000 is optional.

Additionally, Cals Refineries Ltd has signed a memorandum of understanding (MoU) with Bharat Petroleum Corporation (BPCL) for petro products off-take from CALS. The MoU has been signed in order to off-take the part of petroleum products by BPCL from CALS in its first phase which is a 100,000 BPSD crude oil refinery after accounting for the products committed to British Petroleum (BP) and the entire petro products from CALS in the second phase of expansion which is another 100,000 BPSD refinery at Haldia, West Bengal.

Some calculations and stock price estimation
CAPACITY OF REFINERY = 4.8 MMTPA (Million Metric Tonnes Per Annum)= 100000 Barrels Per Day (Approximately) = 36500000 Barrels Per Annum

Gross Refining Margin (GRM) Per Barrel is 10$ = 500Rs Approx.

Approx. Annual Profit = 36500000 * 500 RS = 1825 Crores

EPS at above nis. = 1824/794 = 2.3 **794 crores is total Equity of CALS Refineries

Average P/E ratio of Indian Refining Sector would be 15

Share Price = 15 *2.3 = 34.50 Rs.

So if everything goes as per calculation in phase 1 and company manages to produce as estimated, around Rs. 30 - 40 could be the stock price range.

They have plans of capacity expansion for second and third phase as well. I am not sure about the numbers.

CMP of the stock: 0.68 Rs.

If you are investing in stock markets and not in Bank FD's/bonds/Kisan Vikas Patra, you have the appetite to take risks in your investments. ;)

So you decide how much money you can loose comfortably by investing in penny stock and invest that amount in CALS Refineries. !@##@$%^%&^%$#@ this must have been your immediate reaction after reading this statement but this is what my true opinion is!

A negative note to make
Cals refineries promoters hold only 0.11 percent share in this company and Shares held by Custodians and against which Depository Receipts have been issued 83.98 percent (custodian name is The Bank of Newyork Mellon DR) so public share holding is 99.89 percent and there are a huge equity capital of cals refineries.

Total 7,931,300,000 shares of Cals refineries held by general public.

As I have read in Business Standard news article, promoters do hold a big chunk of equity (almost >70%) which is held by custodians for issue of depository receipts at the moment. This might be a positive note to make on promoter's holdings.

I am not recommending you to buy stocks to invest in CALS refineries but I am asking you to take a bet in this counter. If it goes well, you would gain a lot, if you loose, never mind.

Few of the penny stocks that made such magic are:
ABAN OFFSHORE - 6.00 Rs to 5393 Rs
KS OILS - 0.50 paise to 142 Rs
MERCATOR LINES - 0.40 paise to 184 Rs.
COUNTRY CLUB- 0.42 paise to 222 Rs
JAI CORPORATION- 16 Rs to 1079 Rs

You never know.....

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