MRPL set to post profit after Rs 290 cr tax sop

Mangalore Refinery and Petrochemicals Ltd (MRPL) is all set to report its maiden net profit during the post APM era, thanks to high capacity utilisation and sound financial engineering aided by strong backing of Oil and Natural Gas Corporation (ONGC).

The company, which reported a gross turnover of Rs 12,488 crore in 2003-4, up by 46 per cent over previous year, made a killing by prepaying the accumulated deferred CST credit to the Karnataka government.

MRPL, now a ONGC subsidiary, was collecting CST on the products sold from the refinery on behalf of the Karnataka government from 1997. The company was to pay Rs 551 crore to the government at the end of 14 years, i.e. 2011. However, MRPL management decided to pay Rs 261 crore in 2003-4 and the Karnataka government agreed to forego the balance amount. The CST of Rs 551 crore was shown as a liability on the company.

Experts pointed out MRPL would report a net profit driven mainly by gains coming from pre-payment of the accumulated deferred CST credit to the government. It also made substantial savings by swapping high cost borrowing.

ONGC granted long term loan of up to Rs 2600 crore to MRPL at the rate of 6 per cent which the later used to prepay the entire facilities 'A' & 'B' of rupee term lenders under debt restructuring package (DRP) aggregating to Rs 2380 crore.

Refinancing of these loans facilities will result into savings of approximately Rs 82 crore per annum for the company, as the facilities under DRP were at average interest rate of 9.15 per cent a year.

Incidentally, ONGC had raised Rs 2600 crore at the lowest interest rate (4.68 per cent) in the history of corporate India from the State Bank of India (SBI).

While finances were well managed by the ONGC led management, MRPL also achieved economy of scale in production, processing 10.05 million tonne crude which is 104 per cent of the rated capacity.

The company exported 4.26 million tonne to various countries with earning of Rs 4,470 crore, double of last year. MRPL is, however, trying to sell its entire production to domestic oil marketing companies (OMCs).

A formal agreement between OMCs and MRPL is yet to be signed. Going forward this year, the company intends to consolidate its position further while starting retail foray for the first time.