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RPL: Silencing its critics - Views on News from Equitymaster
 
 
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  • Jul 15, 1999

    RPL: Silencing its critics

    Reliance Petroleum Limited (RPL) has commissioned its 27 mn tpa refinery six months ahead of its scheduled commissioning date. The company is expecting to start deliveries next week. The phase-wise commissioning of the entire refinery is likely to be completed within the next two months.

    RPL has set up the world's largest single location refinery having a capacity of 27 mn tpa, at a cost of Rs 142.5 bn. One third of the output from the refinery will be for internal consumption by other Reliance Group companies. The company has entered in to an agreement with Indian Oil Corporation to market its products, which are in favour of light distillate, LPG, and diesel. The company has plans to enter into retail distribution of its products in the near future.

    The commissioning of the refinery has put to rest the speculation that the company would have to delay commissioning due to problems with its single buoy mooring and its crude pipeline.

    At full capacity, the refinery will command a 24.7% market share in the domestic refining industry. With is product mix skewed towards LPG and diesel, and given the size of its operations which will help the company derive economies of scale, RPL is likely to earn above industry level gross margins.

    Market View:
    RPL's advantage of size, product mix and marketing ability has led the analysts to rate the stock as a 'BUY'. The product mix is in favor of light distillate, LPG and diesel, all of which have high demand growth. The company plans to market a third of its production to group companies, thus providing it with a ready market.

     

     

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