Rating Rationale
June 23, 2023 | Mumbai
Mangalore Refinery and Petrochemicals Limited
Ratings reaffirmed at 'CRISIL AAA/Stable/CRISIL A1+'; Rated amount enhanced for Commercial Paper
 
Rating Action
Total Bank Loan Facilities RatedRs.1000 Crore
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.2060 Crore (Reduced from Rs.2560 Crore) Non Convertible DebenturesCRISIL AAA/Stable (Reaffirmed)
Corporate Credit RatingCRISIL AAA/Stable (Reaffirmed)
Rs.5000 Crore (Enhanced from Rs.3500 Crore) Commercial PaperCRISIL A1+ (Reaffirmed)
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+'rating to the bank loan facilities and debt instruments of Mangalore Refinery and Petrochemicals Limited (MRPL). The corporate credit rating (CCR) is also reaffirmed at 'CRISIL AAA/Stable’. Further, the rating on Rs 500 crore non-convertible debentures has been withdrawn upon maturity and redemption confirmation from debenture trustee. The withdrawal is in line with CRISIL Ratings’ withdrawal policy.

 

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 remain strategically important 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 improved in fiscal 2023 owing to revival in demand in both domestic and international markets resulting in high product cracks. Earnings before interest, tax, depreciation and amortisation (Ebitda) for the company rose ~30% to Rs 6,497 crore from Rs 4,975 crore in fiscal 2022. Company achieved throughput of 17.14 MMT (114% capacity utilisation) during fiscal 2023. Gross refinery margins (GRMs) for the company also improved to $9.88 per barrel during fiscal 2023 as against $8.72 per barrel during fiscal 2022.

 

While debt protection metrics improved during the fiscal 2023. Consolidated gearing strengthened for the company to around 1.76 times as on March 31, 2023, from 3.09 times as on March 31, 2022 as working capital requirements of the company reduced significantly owing to softening of crude oil prices. Similarly, interest coverage ratio increased to 5.23 times as against 4.21 times during previous fiscal. Further, the company continues to derive financial flexibility being part of the ONGC group and from its ability to access capital markets enabling funds being raised at a short notice as well as at fine 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:

  • 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 has increased the strategic importance of the latter to ONGC, which aims to be the leader in the oil, gas and petrochemicals value chain.

 

  • Adequate business risk profile:

MRPL has a high Nelson complexity index (NCI) of 9.78 (refineries with high NCI have the necessary flexibility to process a variety of crude oils and can record high value addition). High operating efficiency enables processing of sour crude and optimises distillation yield.

 

The refinery has operated at an optimum utilisation of more than 100% in past fiscals. However, during Covid-19 pandemic the average throughput levels of the refinery were left impacted owing to fall in demand and MRPL being a buffer refinery without offtake certainty. However, with revival in demand the company was able to achieve its highest ever throughput of 17.14 MMT during fiscal 23 resulting in capacity utilisation levels of 114% as against 100% during fiscal 22.

 

The company is also improving its exposure in retail segments. During fiscal 23, the company successfully added 31 Retail outlets taking the total number of Retail Outlets to 63.

 

Weaknesses:

  • Moderate, though improving, financial risk profile:

Debt protection metrics remain moderate (though improving) despite improvement in operating performance during fiscal 2022 and further in 2023. Consolidated gearing strengthened for the company to around 1.76 times as on March 31, 2023, from earlier 3.09 times as on March 31, 2022 due to working capital requirements of the company reducing significantly by ~38% owing to lower crude prices. Similarly, net debt to Ebitda improved to 2.6 in FY23 from 4.2 in FY22. Interest coverage ratio increased to 5.23 times as against 4.21 times during previous fiscal.

 

  • Susceptibility to volatility in crude oil prices and product cracks:

Crude oil prices have been volatile over the past few years. For instance, 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 Russia-Ukraine conflict resulted in crude oil prices soaring to more than $120/bbl, however, prices fell to $75 in May 2023 as demand is expected to be muted. 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 2500 crores in fiscal 2024, which will be funded through a mix of cash accruals and refinancing.

Outlook: Stable

CRISIL Ratings believes 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

  • Deterioration in credit profile of ONGC
  • Sustained deterioration in the GRMs reported to below $4/bbl

About the Company

MRPL, a standalone refinery, is a 71.6% subsidiary of ONGC. The refinery is located near Mangalore port, on the west coast of India. It 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 MRPL's refinery adjacent to the plant.

Key Financial Indicators

Particulars Unit 2023* 2022
Revenue  Rs crore  108,856 69,836
Profit after tax (PAT) Rs crore  2,655 2,958
PAT margin  % 2.4 4.2
Adjusted debt/adjusted networth  Times  1.76 3.09
Interest coverage  Times  5.23 4.21

*Based on abridged financials

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
INE103A08019 Non-Convertible Debentures 13-Jan-20 7.40% 12-Apr-30 1000 Simple CRISIL AAA/Stable
INE103A08035 Non-Convertible Debentures 29-Jan-20 7.75% 29-Jan-30 1060 Simple CRISIL AAA/Stable
NA Commercial Paper NA NA 7-365 days 5000 Simple CRISIL A1+
NA Proposed short term bank loan facility NA NA NA 1000 NA CRISIL A1+

 

Annexure – Details of Instrument withdrawn

ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
INE103A08027 Non-Convertible Debentures 13-Jan-20 6.64% 14-Apr-23 500 Simple Withdrawn
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST 1000.0 CRISIL A1+   -- 12-12-22 CRISIL A1+   --   -- --
      --   -- 22-07-22 CRISIL A1+   --   -- --
Corporate Credit Rating LT 0.0 CRISIL AAA/Stable   -- 12-12-22 CRISIL AAA/Stable 12-01-21 CCR AAA/Stable 30-11-20 CCR AAA/Stable CCR AAA/Stable
      --   -- 22-07-22 CCR AAA/Stable   --   -- --
      --   -- 31-01-22 CCR AAA/Stable   --   -- --
Commercial Paper ST 5000.0 CRISIL A1+   -- 12-12-22 CRISIL A1+   --   -- --
      --   -- 22-07-22 CRISIL A1+   --   -- --
Non Convertible Debentures LT 2060.0 CRISIL AAA/Stable   -- 12-12-22 CRISIL AAA/Stable 12-01-21 CRISIL AAA/Stable 30-11-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   -- 22-07-22 CRISIL AAA/Stable   --   -- --
      --   -- 31-01-22 CRISIL AAA/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Short Term Bank Loan Facility 1000 Not Applicable CRISIL A1+
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Petrochemical Industry
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Understanding CRISILs Ratings and Rating Scales

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