| Mangalore Refinery and Petrochemicals Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities and debt instruments of Mangalore Refinery and Petrochemicals Limited (MRPL). The corporate credit rating is also reaffirmed at 'CRISIL AAA/Stable’.
The ratings continue to take comfort from the strong operational, financial, and managerial support the company receives from its parent, Oil and Natural Gas Corporation Limited (ONGC). MRPL continues to remain strategically important to its parent’s strategy of being an integrated oil and gas entity with presence established across the entire oil and gas value chain.
Robust physical performance with strong utilisation and healthy GRM (Gross Refining Margin) has translated into healthy financial performance in fiscal 2024. The company reported second best year of throughput of 16.6 MMT at 111% utilisation, moderating only marginally from fiscal 2023 while GRM (including inventory gains and losses) improved to $10.36 per barrel from $9.88 per barrel last fiscal. Earnings before interest, tax, depreciation and amortisation (Ebitda) rose ~20% to Rs 7,901 crore in fiscal 2024. Over the medium term, company’s GRM is expected to be healthy and in-line with product crack spread in the international markets.
Strong cash generation also supported debt repayment of Rs 5,135 crore, which reduced gross debt to Rs 12,452 crore as on March 31, 2024. Resultantly, gearing improved to 0.97 time as on March 31, 2024, from 1.77 times as on March 31, 2023; while adjusted interest coverage ratio improved to ~7.1 times for fiscal 2024 from 5.17 times previous fiscal. The company incurred capital expenditure (capex) about Rs 1,600 crore on various small projects during the fiscal. Over the medium term, healthy operating performance and cash accrual should be sufficient to fund capex needs, upcoming debt as well as planned investments; with successive moderation in debt levels keeping financial risk profile healthy. The company continues to derive financial flexibility from being a part of the ONGC group and its ability to access capital markets, which enables it to raise funds at a short notice on favourable rates. |
Analytical Approach The ratings centrally factor in the strategic importance of the company to, and strong support from, its parent, ONGC. |
Key Rating Drivers & Detailed Description Strengths:
MRPL benefits significantly from the operational, financial, and managerial support of ONGC, which owns an effective 80% stake in the company, 71.63% held directly and the remaining indirectly through its shareholding in Hindustan Petroleum Corporation Ltd. The company is critical to the parent strategy of being an integrated oil and gas entity with presence across exploration and production, refining, and marketing. Business integration of the wholly owned petrochemical entity with MRPL has increased the strategic importance of the latter to ONGC, which aims to be the leader in the oil, gas and petrochemicals value chain.
Better operating performance has significantly benefited balance sheet, with aggregate debt reducing consistently to Rs 12,452 crore as on March 31, 2024, from Rs 21,985 crore as on March 31, 2022; which strengthened gearing to around 0.97 time as on March 31, 2024, from 3.09 times as on March 31, 2022. Adjusted interest coverage ratio improved to 7.1 times in fiscal 2024 from 4.21 times in fiscal 2022. Over the medium term, healthy operating performance and cash accrual should be sufficient to fund capex as well as planned investments, while successive moderation in debt levels will keep financial risk profile stable. This will be a monitorable.
Weakness
Crude oil prices have been volatile over the past few years. For instance, prices fell sharply to around $ 20 per barrel towards end of March 2020, but subsequently recovered to its pre-pandemic levels wherein it averaged at about $ 64 per barrel by end of fiscal 2021. The Russia-Ukraine conflict resulted in crude oil prices soaring to more than $120 per barrel, which subsequently fell to $75 per barrel by May-2023 but rose sharply again to $87 per barrel owing to geopolitical uncertainties in April-2024 before moderating again. 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.
Being a standalone refinery, operating performance has high earnings sensitivity to GRM. Overall GRM was impacted in fiscal 2020 and fell to $2.5 per barrel but has recovered strongly since and remained healthy at $8-11 per barrel over the past years on the back of healthy crack spreads and support from inventory gains. The improvement in operating performance in fiscal 2023 was mainly driven by the spike seen in core GRM given the impact of the geopolitical event; which has moderated this fiscal with moderation in the realised product crack spreads, albeit supported by inventory gains versus losses last fiscal. Over the medium term, GRM is expected to be healthy, albeit moderated from the fiscal 2023 levels.
ESG Profile CRISIL Ratings believes the environment, social, and governance (ESG) profile of MRPL supports its strong credit risk profile.
The oil and gas sector has a moderate environmental and social impact, primarily driven by its raw material sourcing strategies, waste intensive process, and its direct impact on the health of the environment. The company has continuously focused on mitigating its environmental and social risks.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. The commitment of MRPL to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in overall debt and access to both domestic and foreign capital markets. |
Liquidity: Superior The support received from ONGC strongly benefits the company’s financial flexibility, enabling it to access funding sources at attractive rates. MRPL also has access to fund-based limit of Rs 900 crore, with nominal utilisation. Combined debt obligation of around Rs 1,200 crore in fiscal 2025 will be funded through internal accrual. |
Outlook: Stable CRISIL Ratings believes the company 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 A standalone refinery, MRPL is ~80% held by ONGC, 71.63% held directly and the remaining indirectly through its shareholding in Hindustan Petroleum Corporation Ltd. It is located near Mangaluru port in Karnataka, and has a nameplate capacity of 15 million tonne per annum.
Its aromatic complex, 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 the company’s refinery adjacent to the plant.
MRPL’s refinery configuration has a Nelson Complexity Index of 11.67, and Petchem intensity of ~9.5%. |
Key Financial Indicators
*Based on abridged financials |
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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Criteria Details
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