Mangalore Refinery & Petrochemicals (MRPL), the joint venture refining company of the AV Birla group with Hindustan Petroleum Corporation (HPCL), has mandated Chem Systems, a UK-based subsidiary of IBM Inc, for providing predictions and future trends in the oil refining and marketing sectors.
This is in line with financial institutions' suggestions to derive the demand-supply position of the company's products for the next 10 years. Finalisation of the ongoing financial revamp will be based on the report from Chem Systems. MRPL currently has a debt portion of Rs 5,400 crore from institutions and banks.
MRPL will be able to derive its business plans based on the Chem Systems report. The assessment of the demand-supply position is critical as refinery firms in the dismantled administered price mechanism (APM) regime may take a beating, according to MRPL sources.
MRPL, as part of its ongoing debt restructuring process, is likely to ask its lenders, led by ICICI, for a reprieve in repayments by linking the interest and the loan repayments with the gross refinery margins (GRM) of the refinery.
If accepted by the steering committee of its lenders, this will mean that the company will be paying more during a good year when refining margins are higher, and conversely, will be paying less when the margins are low.
An eight member steering committee including ICICI, IDBI, State Bank of India, Canara Bank, Corporation Bank, Punjab National Bank, Bank of Baroda and Bank of India is closely working with the promoters of MRPL to finalise the debt rejig package.
The main idea is not to take additional burden during a bad period. "We may link our interest repayments to GRM. This means we will be able to complete the restructuring in a single package. There could be a period of 12-18 months at a stretch when GRM could be negative," sources added.
According to analysts, linking interest payment to production is a novel scheme developed by institutions. With this institutions and the company will not face any hurdles such as non-payment of funds, asking for more time, etc. Several domestic steel companies have already adopted this scheme to get rid of dismal repayment conditions.
MRPL has a capacity of nine million tonne which is proposed to be enhanced to 12 million tonne per annum. MRPL has been going through hard times because of wafer-thin refining margins and a skewed import duty structure on crude and products. The only way it can set right the balance is to gain for direct marketing of products by the time APM is completely dismantled in April 2002, analysts said.
