Can MRPL pull it off… - Views on News from Equitymaster

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Can MRPL pull it off…

Jul 29, 2000

The company has reported a significant growth in turnover. However, its operating profit is inclusive of other income and therefore does not show a true picture. MRPL has been able to reduce its net loss largely on the ground of reduced interest outgo.

(Rs m) 1QFY00 1QFY01 Change
Sales 6,010 8,843 47.1%
Expenditure 5,853 8,520 45.6%
Operating Profit (EBDIT)** 157 323 105.3%
Operating Profit Margin (%) 2.6% 3.6%  
Interest 1,027 816 -20.6%
Depreciation 352 375 6.4%
Profit before Tax (1,223) (868) -29.0%
Tax - -  
Profit after Tax/(Loss) (1,223) (868) -29.0%
Net profit margin (%) -20.3% -9.8%  
No. of Shares (eoy) 795 795  
Diluted Earnings per share* -6.2 -4.4  
**(inclusive of other income)      

MRPL's woes are due to the increase in crude oil prices, which has resulted in reduced refining margins. Further, as per the deregulation schedule, net tariff protection for refineries was supposed to be 15% by FY01. This has not materialised and to that extent it has impacted refining companies.

The difficulties of MRPL are industry specific and should effect all other refineries. For FY00 all refineries reported a decline in operating margins and to that extent MRPL is not a blck sheep. However, MRPL is in greater financial difficulty at the PAT level due to the large fixed costs it has to incur for having a relatively new plant.

To become more competitive MRPL has increased its capacity from 3 m tonnes to 9 m tonnes. The new capacity should go onstream by 2HFY01. This capacity is to be augmented to 12 m tonnes through de-bottlenecking and as per latest reports MRPL plans to further augment capacity to 18 m tonnes.

MRPL roped in Andersen Consulting to chalk out a marketing plan for the post deregulation era. It has been advised to set up an independent marketing channel. For this initiative it has already applied for marketing rights of controlled products.

The company is in search of a strategic equity partner and has held talks with Kuwait Petroleum and TotalFina. Currently, it is holding discussions with AbuDhabi National Oil Company (Adnoc). The strategic sale is required for infusing funds to meet its capacity expansion and marketing foray. The sale of equity will also enable MRPL to leverage on the marketing expertise of its new partner.

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Apr 12, 2021 10:12 AM