| Mangalore Refinery and Petrochemicals Limited | ||||||
| 'CRISIL A1+' assigned to Bank Debt and Commercial Paper | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A1+' rating to the Rs 1,000 crore short-term bank facilities and Rs 3,500 crore commercial paper (CP) programme of Mangalore Refinery and Petrochemicals Ltd (MRPL). CRISIL Ratings has migrated its rating on these facilities and debt instrument from ONGC Mangalore Petrochemical Ltd (OMPL), following its amalgamation with MRPL and on receipt of the letter of novation.
Following the amalgamation of OMPL with MRPL and at the company’s request, CRISIL Ratings has withdrawn its ratings on the debt instruments and bank facilities of OMPL. The withdrawal is in line with CRISIL's policy on withdrawal of ratings.
This amalgamation would not have any major impact on the credit risk profile of MRPL, since OMPL (being a subsidiary earlier) was always consolidated with the former while assessing the credit risk profile, considering the operational synergies, common management control and commonality in operations of these entities. Further, CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable’ rating on the non-convertible debentures of MRPL. The corporate credit rating (CCR) is also reaffirmed at 'CCR AAA/Stable'. . The ratings continue to take comfort from the strong operational, financial, and managerial support that the company receives from its parent, Oil and Natural Gas Corporation Ltd (ONGC). MRPL continues to be strategically importance to its parent, in the latter’s strategy of being an integrated oil and gas entity with presence established across the entire oil and gas value chain.
MRPL's operating performance was weak in fiscal 2021, owing to impact of Covid-19 pandemic. The profitability of the company remained weak in fiscal 2021 as well as in the first half of fiscal 2022 due to fluctuations in plant throughput levels due to lower consumption of petroleum products and an overall subdued GRM environment. However, the position has significantly improved in second half of fiscal 2022 led by improved GRM and higher throughput levels with revival of industrial activities. This has reduced the dependence on external funding to meet its working capital and capex requirements, which has improved its debt coverage indicators. |
Analytical Approach The ratings factor in the strategic importance of MRPL to, and strong support from, its parent – ONGC. |
Key Rating Drivers & Detailed Description Strengths Strong support from parent MRPL benefits significantly from the operational, financial, and managerial support of the parent, ONGC, which owns an effective 80% stake in the company. The company is critical to ONGC's strategy of being an integrated oil and gas entity with presence across exploration & production, refining, and marketing. Business integration of OMPL with MRPL increases the strategic importance of the latter to ONGC, which aims to be the leader in the oil, gas and petrochemicals value chain.
Moderate business risk profile MRPL has a high Nelson complexity index (NCI) of 9.78 (refineries with high NCI have the flexibility to process a variety of crude oils and can record high value addition). Optimum operating efficiency enables processing of sour crude and optimises distillation yield.
The refinery has operated at an optimum utilisation of 100% in past fiscals. However, disruption in consumption of petroleum products caused by the Covid-19 pandemic has impacted the average throughput levels of the refinery. Subsequently, the refinery operated at an average throughput of 77% in fiscal 2021; however, throughput has revived to an average 100% utilisation during fiscal 2022.
Low utilisation and subdued GRM weakened the operating profitability in fiscal 2021. However, with revival of industrial activities and improvement in GRMs, the position has improved in fiscal 2022. Overall GRMs including inventory gain rose to $8.72/bbl (per barrel) in fiscal 2022 from $3.71/bbl in fiscal 2021.
Weaknesses Modest financial risk profile Weak operating performance over the years constrained debt coverage indicators, with repayment obligation being met majorly through debt. However, financial risk profile recovered in fiscal 2022 due to better GRM. Consolidated gearing improved to 3.09 times as on March 31, 2022, from 4.70 times as on March 31, 2021. Further, capex of Rs 945 crore (towards upgradation of refinery capacity) is planned in fiscal 2023.
Exposure to volatility in crude oil prices Crude oil prices have been volatile over the past few years. Prices fell sharply to around USD 20/bbl towards end of March 2020, but subsequently recovered to its pre-pandemic levels wherein it averaged at about USD 64/bbl by end of fiscal 2021. The ongoing geopolitical tensions have again elevated crude oil prices to more than $100/bbl. As MRPL imports around 80% of its crude oil requirement, any volatility in oil prices impacts operating performance while also exposing it to fluctuations in foreign exchange rates. |
Liquidity: Superior The parental support received from ONGC strongly benefits MRPL’s financial flexibility, enabling it to access funding sources at attractive rates. MRPL also has access to fund-based limits of Rs. 900 crores, with minimal utilisation. The company at a consolidated level has repayment obligations of around Rs 2400 crores in fiscal 2023, which would majorly be funded through refinancing. |
Outlook: Stable MRPL will remain strategically important to, and will continue to receive the required operational, managerial, and financial support from, its parent -- ONGC. |
Rating Sensitivity Factors Downward Factors
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About the Company MRPL, a standalone refinery, is a 71.6% subsidiary of ONGC. The refinery is near the Mangaluru port, on the west coast of India. It has a nameplate capacity of 15 million tonne per annum.
Aromatic Complex’s (Erstwhile OMPL) plant, commissioned in fiscal 2015, has capacity to produce around 920 kilo tonne per annum (KTPA) of paraxylene and around 280 KTPA of benzene, along with other by-products. The plant has one of the largest paraxylene manufacturing capacities in India. It utilises feedstock (naphtha and aromatic streams) from MRPL's refinery adjacent to the plant.
With a majority stake acquired in January 2021, MRPL’s stake in OMPL had increased to 99.99%; with the balance acquisition completed in May 2021. Effective May 01, 2022, OMPL has been amalgamated with MRPL. |
Key Financial Indicators
#Provisional figures |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 22-Jul-2022 in line with the lender-wise facility details as on 22-Jul-2022 received from the rated entity.
Criteria Details
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