According to newspaper reports,Mangalore Refineries and Petrochemicals Ltd. (MRPL) has decided to securitise a part of its future receivables for Rs 3 bn.
Mangalore Refinery & Petrochemicals Limited (MRPL) (FY99 Sales Rs 14.2 bn) has been jointly promoted by the Aditya Birla Group and Hindustan Petroleum Corporation Ltd. (HPCL). The company operates a 3 mn tonnes per annum refinery and is planning to increase it to 9 mn tonnes per annum at a cost of Rs 37 bn. The company's output is currently sold via the HPCL distribution network.
MRPL is in the midst of an expansion for which it has been looking for funding. The company was in talks with international oil majors to pick up a stake in MRPL, as the promoters were unable to meet the entire funding required for the expansion. The dull conditions prevailing in the domestic primary markets had diluted the option of a primary market issue to raise funds.
The securitisation of a part of the receivables will ease the cash flows of the company and help meet the funding requirements for the expansion. The increased size of the company's refining capacity would help it to realise economies, which would help ease the competitive pressure from the smaller stand alone refineries.
However, given the increasing competition in the oil sector, the company's relatively small size and lack of its own distribution network has put it at a disadvantage to the public sector oil companies. The company would have to consider roping in a partner, which has access to large resources, if it wishes to become a significant player in the deregulated oil sector in the future.
The stock has been rated as a 'SELL' mainly on account of excess refining capacity in India which will lead to thin margins. Moreover, given the imminent decontrol of the sector the company could be at a competitive disadvantage given its relatively lower capacities vis-a-vis its competitors.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407