Chennai Petro plans debt recast

Chennai Petroleum Corporation (CPCL), the subsidiary of Indian Oil Corporation (IOC), is pursuing a debt restructuring to bring its debt-equity ratio below 1:1 by 2006.

Speaking on the sidelines of a press conference to announce the company's annual results, S V Narasimhan, managing director, said the company has brought down its debt-equity (D/E) ratio to 1.4:1 and is striving to push it down further through foreign currency loans.

During 2003-04, CPCL brought down its interest liability on long-term loans from 8.25 per cent to 6.3 per cent. "We want to bring this down to 4-4.5 per cent this year", he added. In the process, the company is likely to raise $50 million as foreign currency loans.

Earlier addressing the conference, IOC chairman, M S Ramachandran said, "We had some loans carrying interest burden as heavy as 10-12 per cent."

During the year, the company availed of $88.75 million foreign currency loans at 2.9 per cent. The reduction of the D/E ratio is crucial for the company is gearing to pursue big ticket investments from 2007.

On its cards are a Rs 400 crore polypropelene project and another equally big hydrocracker for LOBs from naphtha.

Narasimhan is spearheading the feasibility report on future investments of the company. The financial structuring of the projects will hinge on the compression of the D/E ratio, he informed.

CPCL saw a crude throughput of 7.04 million metric tonne (6.82 mmt in the previous year) during 2003-04. The company's turnover rose by 10 per cent to Rs 9,477 crore (Rs 8,630 crore).

Besides the increased throughput, higher prices fetched for the product, based on import parity, helped boost CPCL turnover. Net profit after tax moved up by over 32 per cent to Rs 400.05 crore (Rs 302.89 crore). The board has recommended a 50 per cent dividend pay-out.

The year saw the commissioning of 3 mmtpa expansion-cum-modernisation project. Of this the visbreaker unit was commissioned in April and the hydrocracker will be operational in July.

The LPG bulk storage and despatch facilities were commissioned. For now, the company is contending itself with smaller projects such as the sewage reclamation, desalination and the new crude oil pipeline, until it gets is debt situation cleared.

Ramachandran denied that there has been any formal proposition to merge CPCL with IOC, to a query if the hold-up was owing to objections being raised by the National Iranian Oil Company that has a stake in Chennai company.

However, he admitted that the merger will require some negotiations as it would not only involve two companies but also two countries.

Petro industry poorer by Rs 500 cr

Holding petroleum prices at current levels while the international crude prices have been climbing has already cost Indian industry Rs 500 crore, M S Ramachandran, chairman, IOC, told media persons here today. This pinch is being felt largely at the marketing level.

However, for refiners such as CPCL, margins have been good. CPCL's refining margin has climbed from $3.99 per barrel in 2002-03, to $ 4.4 per barrel in 2003-04 and is likely to cross $ 5 a barrel in the current fiscal.

On the other hand, the loss to the industry on account of holding petroleum price since January is around Rs 500 crore, he estimates.