Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable’ rating on the bank facilities of Numaligarh Refinery Limited (NRL).

 

The rating continues to factor in the stable operating performance and financial risk profile of the company. NRL continues to remain strategically important to the Government of India (GoI) and had been setup as part of the Assam Accord. These rating strengths are, however, partially offset by the location of the facilities in a product-surplus region.

 

NRL is in the process of expanding its refining capacity by 6 million tonne per annum (mmtpa), at an approved project cost of Rs. 28,026 crores, wherein some cost escalation is expected. The project implementation is currently ongoing with 74% physical progress already achieved by January 2025, wherein mechanical completion is expected by December 2025. The company has also budgeted an additional investment of Rs. 7,231 crores for setting up a petrochemical plant of 360 KTPA (kilo-tonne per annum), to manufacture poly propylene which would be integrated to this expanded facility. Execution here is at initial stages, with financial tie-up to be undertaken.

 

Despite these substantial investments, the company’s overall financial risk profile should remain comfortable, owing to the healthy accruals it would earn both from the existing as well as the expanded capacity. Execution of the project within the timelines and any severe escalation of costs would however be a key rating monitorable.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of NRL and its joint venture (JV) and associates. The JV and associates are strategically important to NRL as they reduce external dependence for operations.

 

Furthermore, the ratings factor in support received from GoI, with managerial control and majority ownership held through Oil India Limited (OIL, rated ‘Crisil AAA/Stable/Crisil A1+’), a public sector undertaking of GoI.

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Continued governmental support through OIL and offtake support from BPCL to continue:

NRL is of strategic importance to the GoI and had been setup as part of the Assam Accord. The company is also entitled to a 50% exemption on the excise duty payable, which has largely contributed to the strong accruals the company generates. This exemption would be extendable even to the expanded capacity, with no sunset clause.

 

While BPCL has sold its equity stake in NRL, it continues to offtake the petroleum products produced, to be sold in the retail market. For the existing 3 mmtpa capacity, NRL has an offtake agreement with BPCL for a tenure of 15 years till year 2034, wherein the latter has agreed to offtake majority of NRL’s products.

 

The company would also be entering into offtake agreements with oil marketing companies for marketing incremental production once the expansion is nearing completion. Although BPCL has first right of refusal from incremental production, offtake is not entirely dependent on BPCL given the healthy demand growth in the north-eastern region, improved prospects for evacuation of products in other nearby states and planned retail network expansion by OMCs.

 

• Stable operating performance

NRL’s operating performance has continued to remain stable, supported by the high gross refining margins (GRM) the company receives. The company also benefits from exemption on 50% excise duty payable, as it is located in North-East India. The company is also amongst the most efficient refineries in India having a high distillate yield and energy efficiency along with a Nelson Complexity Index of 9.20.

 

Plant throughput has remained comfortable at 100% in the nine months of fiscal 2025. The operating performance moderated in fiscal 2025 but remained healthy given moderation in core GRM’s to 3.61 $/barrel in the first nine months of fiscal 2025 relative to full year GRM’s of around $13.17 per bbl during fiscal 2024 primarily due to moderation of product cracks as well as inventory losses seen in the second quarter of fiscal 2025 due to sharp volatility seen in crude prices during the year.

 

Capacity utilization has improved over the previous fiscal wherein operations were impacted severely during the first half of fiscal 2024 owing to planned refinery shutdown for 2 months for maintenance and inspection which was followed by additional shutdown for 1 month owing to a fire incident in the hydrocracker unit of refinery. Capacity utilization has however revived, with ~100% utilization expected during fiscal 2025. Operating performance is expected to be strong and stable during second half of current fiscal and beyond.

 

• Strong financial risk profile

Low debt and ample liquidity has kept the financial risk profile strong. The gearing was moderate at 0.60 time as on March 31, 2024. The company has access to fund-based limits of Rs. 1296 crore, with minimal utilization.

 

NRL is in the process of expanding its refining capacity by 6 mmtpa, with an expected capital outlay of Rs 28,026 crore, wherein some cost escalation is expected. It also plans to set-up a petrochemical plant having a capacity of 360 KTPA, with a budgeted capital outlay of Rs. 7,231 crores. While the execution of the Petchem project is at its initial stage, Crisil Ratings expects the financial risk profile to continue to remain comfortable, supported by the company’s healthy operating performance and financial flexibility.

 

Weakness:

• Located in a product-surplus region

Presence in the North-East, a product - surplus region, presents logistical disadvantages given the need to transport products to oil marketing companies in other regions. However, the challenges have been mitigated with OIL commissioning a 660-kilometre product pipeline from Numaligarh to Siliguri in West Bengal. Further, augmentation of existing product pipeline from 1.7 mmtpa to 5.5 mmtpa is being undertaken by OIL, which shall ensure product offtake even for the expanded capacity.

Liquidity: Superior

Liquidity position continues to remain comfortable, supported by the healthy accruals the company generates. It has access to fund-based limits of Rs. 1249 crores, with minimal utilisation. Since the project is still under execution, there are no debt repayment obligations in fiscal 2025 or fiscal 2026. Repayments are scheduled to commence from fiscal 2027 onwards, post commissioning of the refinery operations.

Outlook: Stable

Crisil Ratings expects the company’s business and financial risk profile to continue to remain comfortable, supported by the required support to continue from GoI.

Rating sensitivity factors

Downward factors:

• Significant reduction in support philosophy from GoI
• Sustained decline in the GRM (including excise) to below USD 20 per barrel
• Significant delays in project execution leading to severe cost overruns

About the Company

NRL’s existing refinery was commissioned in the year 2000 and has a 3 MMTPA capacity, located near Jorhat in the Golaghat district of Assam. The company is further expanding its refinery to 9 mmtpa, alongwith integrating it with a petrochemical plant to be set up of 360 KTPA. Currently OIL holds 69.63% shareholding in the company while Engineers India Limited (EIL) and Government of Assam (GoA) hold 4.37% and 26.00% shareholding respectively as on December 31, 2024.

 

During the first 9 months of fiscal 2025, operating income increased to 18,217 crores (not adjusted for excise duty) as against Rs. 16,264 crores earned during corresponding period of previous fiscal. However, operating profit and PAT also shrunk to Rs. 1,789 crores and Rs. 991 crores, respectively, during first 9 months  of fiscal 2025 from earlier Rs. 2,298 crores and Rs. 1517 crores recorded in first nine months of the previous fiscal.

Key Financial Indicators

Particulars*	Unit	2024	2023
Operating income	Rs crore	21123	26502
Profit after tax (PAT)	Rs crore	1950	3707
PAT margin	%	9.23	13.99
Adjusted debt/adjusted networth	Times	0.60	0.28
Interest coverage	Times	66.66	409.8

*Above numbers reflect analytical adjustments made by Crisil Ratings

Any other information: Not applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Joint Venture
Assam Bio Refinery Private Limited	Equity method	Strong operational and business linkages
Indradhanush Gas Grid Limited	Equity method	Strong operational and business linkages
DNP Limited	Equity method	Strong operational and business linkages
Associate
Brahmaputra Cracker and Polymer Ltd	Equity method	Strong operational and business linkages