India’s economic engine roars on a diet of fossil fuels. Fossil fuels provided the energy backbone for India’s rapid industrialization. They powered factories, manufacturing units, and construction projects.

MRPL has been the premier pit crew, keeping the wheels turning with their high-performance refinery. MRPL, a major refinery in India has played a crucial role in meeting the nation’s growing demand for refined petroleum products. 

Their focus on high-value fuels like premium diesel has kept India’s transportation and industrial sectors humming. But can it reclaim its glory days? By the time of April 2021, MRPL was trading at roughly 40 rupees, but if you look at the price of MRPL today it is roughly trading at 224 rupees with an increase of 560%. 

MRPL stands at a critical juncture in the Indian energy sector. Their expertise in refining has established them as a significant player. Can MRPL, the master of traditional methods, adapt its recipe for success in this new era?  Let’s delve deep into the concept and see if there is any investment opportunity available in the market.

Industry Overview of MRPL

We all know that the demand for energy in India is expected to rise due to rapid economic development and increasing population growth. By this, we can understand that there will be an increase in demand for refined petroleum products. 

The Indian government to reduce its dependence on imported fuels is actively increasing its domestic refining capacity which could benefit MRPL. However, the trend towards renewable energy may eventually lead to a decrease in demand for petroleum products.

India relies on oil for 24% of its energy consumption (2022 data). The trend towards oil consumption may fluctuate depending on the global crude oil prices. As per the International Energy Agency (IEA), India will emerge as the world’s largest source of oil demand growth with an expected growth rate of around 3.5% until 2030. 

The pace of growth is expected to be moderate due to the increasing focus on renewable energy. The long-term future of oil demand will depend on the speed of India’s transition to cleaner energy sources.

Corporate and business overview of MRPL

Mangalore Refinery Petrochemical Limited was established in 1988 and is located near Mangalore, Karnataka. MRPL is owned by ONGC, a government enterprise that comes under the Ministry of Petroleum and Natural Gas. 

MRPL refines crude oil into various petroleum products like diesel, gas, and aviation fuels. MRPL also produces polypropylene, a plastic material that can be used in textiles and automotive parts. MRPL focuses on producing high-quality products like premium diesel and high-octane gasoline with the shortest thermodynamics pathway.

MRPL has designed its refineries with higher flexibility to process the crudes of various APIs (American Petroleum Institute Gravities). MRPL is the only refinery in India that produces premium diesel with two hydrocrackers. During this year MRPL was also able to open 31 new retail outlets 

During the financial year 2022-2023, MRPL was able to make a record production of  MS (2422 TMT), LPG (1153 TMT), HSD (6581 TMT), and ATF (1921).

Financials Of MRPL

In FY 2023, MRPL saw a substantial increase in revenue, surging by 56% to reach 1,08,856 crore rupees as opposed to 69,757 crore rupees in FY 2022. Analyzing a span of three years, encompassing FY 2021 to FY 2023, MRPL displayed a compounded annual growth rate (CAGR) of 29.4 %.

While looking at the net profit MRPL profit decreased by 10.23% because of increased payment of taxes so it came down from 2958.25 crore rupees to 2655.41 crore rupees. 

In FY 23, MRPL maintained a favourable financial metrics with a return on equity (ROE) of 31.10% and return on capital employed (ROCE) of 19.69%.

Future plans of MRPL

Expansion Plans

In 2023, MRPL shelved its plan to expand its refining capacity from 15 million tonnes to 18/21 million tonnes per annum with lowest cost revamp.

In June 07 2023, Sanjay Varma the managing director of MRPL said they are planning to construct a new petrochemical plant in Karnataka. Which implies the company is strategically moving towards diversifying their revenue stream beyond traditional refined products.MRPL has planned to purchase the 850 acres of land, mostly in the villages of Kuthethur and Permude, to the north of the current refinery in order to build new facilities and a green belt. 

MRPL has also made plans to set up a Raw Petroleum Coke Gasification complex so that they can produce SYNgas and other chemicals like urea and acetic acid. 

Government support

Government of Karnataka has also approved a land acquisition of 1,050 acres for MRPL’s future projects. But many of the landowners regret giving their land. In future  the Government, MRPL and the landowners may come into an agreeable agreement and resolve the issue.

Conclusion

MRPL stands at a crossroads, facing a confluence of both opportunities and challenges. Their core business of refining crude oil into fuels has been the lifeblood of their success. However, the winds of change are swirling. The trend towards renewable energy started to increase every year and the government has set plans to increase renewable to 500 GW by 2030.

MRPL’s future will be shaped by its ability to adapt to the evolving energy landscape. MRPL needs to effectively manage price fluctuations and competition, at the same time expanding its petrochemical portfolio offers some diversification. At the same time, they might also need to explore ways to integrate renewable energy sources into their long-term strategy. What do you think about the future of MRPL? Share your thoughts in the comments below.

Written by Pavunkumar V M

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