Mangalore Refinery and Petrochemicals Limited analyst Q&A

No, these were all smaller size projects only.

Okay, sir. Secondly, you mentioned that 0.65 MMSCMD is the amount of RLNG that you can take or is that the amount you are taking right now?

That we can take, maximum.

Okay, and as of now what would be the intake of RLNG?

0.4 MMSCMD.

0.4 is the current intake. Okay, sir. Thirdly, any update on your green hydrogen tender that you have, Electrolyser tender that you have released probably a year back?

No, that was an EOI. I will let Mr. Prasad who is our ED, Projects, he will clarify on this issue.

Yes, the green hydrogen projects, earlier it was only expression of interest to know various technologies available and the suppliers. Now the board has approved the green hydrogen project and we will be implementing the green hydrogen projects within the refinery. Right, any capex number for that? It is about INR50 crores. INR50 crores, okay. And the specs will be similar to what the EOI document has said, right? Yes, something similar to that. Okay, sir. And last question, I don't know whether you would be able to answer that or not. Any update on merger with HPCL? No, we don't think we are not aware of anything that has been going on this issue. I believe that would be more for ONGC to take a view, ONGC HPCL. Right, sir. Thank you so much and all the best. Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead. Thank you, sir, for the opportunity. In terms of, you mentioned that you are currently undertaking around 0.4 mmscmd of LNG and you have the ability to go up to 0.65. At what level of prices you would be like to maximize this? How does the switching happen between the RLNG and the internal consumption of fuel?

On the RLNG front, yes, we do have capacity to go up to 0.65. This was more dependent upon the prices of RLNG, which were much higher earlier on. But now, yes, now that these prices nutaagthef have gone down, we are in the process of tying up RLNG and we'll be suitably increasing this quantum also. It's just a question of when it happens.

So whenever the LNG price is under $10, can we assume that it would be beneficial to operate at full capacity, 0.65 MMSCMD?

Yes.

And in terms of the Russian crude usage, what was the average usage during the quarter as well as during the year? And what were the discounts that we would measure related to the other basket? So as far as the Russian crudes are concerned, broadly, they would be in the levels of what you have for the industry as a whole, which is typically between 30% to 40% and discounts, we would not be able to put a figure on to it because these have been separate differently, but discounts are still there for Russian crudes. Right. And is the usage likely to continue at this rate for next one or two quarters? Do you have some visibility on the same? As we are always looking at crudes which give us most value. So if these crudes continue to give us value, then we would certainly be looking at them. Right. And in terms of the Venezuelan crude, have we been able to use that as well? And would it came at a discount to the other crude basket? We have not used Venezuelan crudes now. And we understand that they are not available so freely. I believe, again, some sanctions are coming up on the Venezuelan crudes. One more question, if I can squeeze on the margin. So in terms of the near-term market environment, are we seeing sort of the easing down of the spreads? And do we expect this easing to continue for next one or two quarters?

We have found the margins to have come down. As of now, we would not be in a position to hazard anything. But we believe that this should be the level at which they should continue.

Particularly the gasoline margins per se have started easing. And now I think the main support from diesel can probably come only towards November, December when European winter starts. So in the absence of both the drivers sort of narrowing down, is it fair to assume that margins may not sort of make, could also go down further from here? We are not anticipating too much a drastic fall on the margins as of now. Although these margins have come down, but they are a factor of a number of, they are also subject to geopolitical and other factors. So we are, we do not think that this would drop too much as of now. CAP earailettua-

Mangalore Refinery and Petrochemicals Limited May 06, 2024 Thanks for this clarification. The next question is from the line of Rwibhu Aon from UBS. Please go ahead. Thanks for the opportunity. First, I wanted to ask what was our distillate yield this year? How it differed, especially for the key products as compared to last year? And if any of our small scale projects is actually going to improve our distillate yield going forward?

Okay. For the quarter four last year, we had a total distillate yield of 79.27% out of which light distillates were 29.4% and middle were about 50%. Then for the previous year, '23-'24 fmancial year, it was 78.77%. Light distillates were about 28.45% and middle distillates were again around 20%-50%.

This is for FY'24 or full year. FY'24. Okay. And any indicative number for the next year if we are planning to improve the distillate yield or any particular key product?

It could be on the similar levels or we may be slightly there could be whatever margins are there, we will exercise that. Maybe plus minus another 0.5%, plus 0.5%, not minus, 0.5% plus.

Understood. And, sir, we were, I think, producing more reformate given the spreads before. So, can you please tell us in what mode are we operating the plant currently? And how do you see it changing over the next few quarters? As of now, the aromatic complex is operating on the reformate mode and the outlook is also that we may continue at least for this quarter on the reformate mode. Going forward, we do analyze it very closely and depending on how the economics are moving, we will be switching over to Pam xylene mode if the economics looks healthy. Okay. And, sir, lastly on capex, of course, you mentioned our capex plans in terms of how you are looking at it, but broadly in FY '25 and FY '26, do you have any annual capex numbers that you can share with us? For this year and next year, as of now, the routine capex would be around INR1000 crores, which continue. And we have, as I have already mentioned earlier on, we have new projects lined up, which would be around INR8000 crores over a period of next five years. These projects are under conceptualization and finalization for DPR. Once they are ready, I think maybe after this, in the quarter three, we will be able to throw more light as far as the capex plans are concerned. So, but broadly, it should be around maybe 2000 crore odd maximum additionally for these capex projects. CAP riEft3DEIVa'

Mangalore Refinery and Petrochemicals Limited May 06, 2024 Okay, sir. Thank you, sir. I'll come back in the Q&A queue. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead. Yes, thank you for the opportunity. So, a couple of more questions. Firstly, on this KG 98/2 crude, So, this is, I mean, from, I mean, are you regularly taking it right now? Or was it just a testing cargo? Have you signed any, I mean, any kind of contract with ONGC for that?

No, we took first two cargos, which were there from ONGC. Now ONGC would also be going into that auction mode. That auction mode would be carried out by ONGC and depending upon who wins that cargo, it would be taken by that company.

Okay, and can you give us some idea on this crude? I mean, is it a, I mean, what could be the API and the sulfur content and all? Is it like, I mean, are you, is your refinery like getting benefit out of that crude or it is like any other crude?

It is a low sulfur crude and you can say, we can comparable say with Mumbai high levels kind of a thing. Maybe there could be some plus minus on the cut yields on the particular range, but it's a low sulfur crude and we can compare with Mumbai High.

Okay, but you are open to like taking this 12,000, 13,000 barrels per day, what they are producing right now?

Yes,

It's like fitting your refinery configuration overall?

Yes, yes.

Okay, sir. Yes, thanks. And secondly, on the marketing side, I mean, you are like expanding retail outlets, but the marketing outlook again is like little bit volatile. So we've got margins fluctuating significantly. So, and of course, you have made 1NR76 crores, which is like quite commendable, but last year has been like quite good for everyone.

So given the current circumstances, you're still fine with your like retail expansion plans or is there a relook into it? And you had like, I think 500 retail outlets sort of a permission. So are you going ahead with that number? Yes, I would say that we are continuing to look at marketing positively. We have a target of 1000 outlets by '26, '27, and also sales of 1 million metric tons products through these retail outlets. There could be small periods wherein retail outlets may not make money or there would be certain issues as far as the pricing is concerned. once S313iW

Mangalore Refinery and Petrochemicals Limited May 06, 2024 But on in the long run, we are sure that it is good to be in this retail outlet. If you see it gives us a better price than RTP also. So compared to exporting our products, if we have a retail outlet, we get the better margins in most of the periods. Right, so and sir, last question, any update on your 2G, ethanol and bio ETF plans? Yes, Mr. Prasad would be able to tell you. Yes, regarding bio ETF, the board has approved the project of the bio ETF and we are in the process of finalizing the consultant for the execution of the project. We'll be shortly, we'll be finalizing and moving ahead. This particular project is coming within the refinery complex. As regards to 2G ethanol, we are looking into various options to make the project more viable. As of now, the Board has asked us to look at various options to make the project more viable. As of now, the project is not viable. So we are not moving ahead unless the project becomes viable. Okay, sir. And on the Bio-ATF, how much could be the capex and do you have the confidence of airlines in terms of like offtake, because airline companies generally tell that it is almost like 3x, 4x the price of hydrocarbon-based ATFs. So I know they have got their own sustainability goals. So are you confident -- I mean, what could be the capacity, the capex and your confidence in placing them with domestic airlines? Capex is about INR350 crores. INR250 crores, okay. INR350 crores. And we are confident of selling this product at premium because internationally by 2027, it is mandatory that the -- SAF blending is mandatory. So we are confident of getting the margins. Even a lot of airlines as well as international airlines have shown interest. Okay. And what could be the capacity and what exactly is the capex for, would it be a new plant or it would be like a blending sort of a thing or is there some other process altogether for that? Yes, now this particular plant is what we are putting up is a demo plant, which is a 20 KLPD plant. We are also looking into the possibility of other modes of producing sustainable aviation fuel. They are also in advanced stage of study. So it's a facility, right? I mean, it's a unit that you have to set up. It's a unit which is coming up right now. The Board has approved one unit which is coming up, which is going to be constructed within the refinery. Okay. And the feedstock will not be crude oil, it will be something else? Feedstock will be vegetable oil, used oil, cooking oil, and which is available plenty in the region. once C)P, oat3rworrrer mRRL

Mangalore Refinery and Petrochemicals Limited May 06, 2024 Okay, sir, got it. Thank you so much. Thanks a lot.

Thank you. The next question is from the line of Avishek Datta from Anand Rati Share and Stock Brokers Limited. Please go ahead.

Sir, I just wanted to know what was the inventory gain for this quarter and for the full year.

Our inventory gain for this year was $0.58 per barrel. And what was the next question?

And for the quarter?

The quarter, it was around $1.

$1. Okay, sir. Okay, thank you so much.

Thank you. The next question is from the line of Amit Rustagi from UBS Securities. Please go ahead.

Yes, thanks, sir, for giving this opportunity. Sir, first question relating to the capital allocation. Now, we have seen that the company is making significant amount of profits. So, how are you going to utilize the profits? This year's money has gone into repayment of debt. But going forward, like how much repayment of debt we can consider? How much additional capex we can consider? And are we in for taking some big project for maybe four to five years going forward? So, can you give us slightly medium to longer term view that how we are looking at the situation? Okay. So, as far as I've already mentioned, we have got additional capex also lined up. We have a grid upgradation project coming up, which would -- grid power upgradation project coming up, which would help us to import power through the grid and reduce our own captive power. So, that is coming up in '25226. We already have an IBB plant, Iso Butyl Benzene plant, which I have already mentioned in the start. Bio-ATF plant is coming up. Green hydrogen plant is also there. We have got certain jetty infrastructure and pipelines, modifications and upgradations to be done. All these projects would come in '25-'26. Apart from this, as I've already mentioned, we have projects for enhancing our Petchem from 10% to 12%, which would be about INR8,000 crores over a period of five years. So, broadly, it would be another INR2,000 crores additionally from next year onwards. Starting with even from this year, we would have certain additional work going on, on these Petchem projects. So, that is how we are planning to spend for the future years. We do have approximately INR1,000 crores annually spend, which is a regular sort of a capex requirement for this refinery.

So, then it is fair to assume that our capex will move in the trajectory of about INR3,000 crores -INR4000 crores annually now from here onwards? onac qP Iwmedirea

INR3,000 crores plus, yes, next year onwards.

Yes, after '26 onwards. So then in that situation, how do we see the dividend payout? Because I think PSEs are supposed to pay 30% dividend annually. And I think this year, we have not paid around 30%. So how do we see dividends from here, basically? Yes. So, normally, DIPAM guidelines specify that 30% of PAT or 5% of network should be the amount that is paid off. You would have seen if you have been following the company that earlier on we had a lot of capex and loans which were there, and we were not in a position to pay dividends. When our cash position has improved, we have given out a 10% interim dividend. For this year also, now fmal dividend of 20% has been declared by the Board, subject to the shareholder's approval. And this is considering the various factors which could affect the profitability of the company and the cash flow of the company. If there are any sudden spikes in crude prices or otherwise, which could affect the cash position of this company, we do not want that we should have a variable dividend — volatile dividend policy. So, in line with that, the company has considered 30% for the previous year. As cash positions improve and our loan positions also go down, we are looking at rewarding our shareholders on a regular basis, rather than giving it in one lump sum. So, we would again take a view post our quarter Hl results, the company would again take a view on distribution of dividend or otherwise, considering all the factors at that time. Okay. And how much debt repayment we can expect in the next two years? And what is the comfortable level of debt you are looking at that where you will think that, okay, now we are happy with the current level of debts? What is that level, basically? So as far as the debt levels are concerned, we are already below one. We were last year 1.70, we have gone down to below 1 debt equity ratio. We have repaid INR5,000-odd crores. So, we are quite comfortable as far as the debt repayments are coming. We do not have too much of debt balance. Our normal working capital loan requirement is about INR7,500 crores. So that amount of debt would continue on a short-term basis. As far as the term loans are concerned, we have got NCDs -- four number of NCDs, which are for 4,477 crore. And they would be continued till about '30 and '32. The interest rates are also quite benign. So, we are not in a hurry to repay those loans as such. And for the year '24-'25, the loans repayable are INR1,174 crores, which we are sure that we would able to do it through our own internal approvals. There are no other major loans which require repayment as of now. And whatever loans that are there are like OIDB loans, which are at very good interest rates. The interest rates have been between 6% to about 7%, 7.5%. qP .119f3112litIZT

Mangalore Refinery and Petrochemicals Limited May 06, 2024 So we can consider INR10,000 crores of debt level broadly, you are happy with?

As the network goes up, we would be in a position to have better debt levels also. And if need be, for any major capex, we are ready to be able to obtain a debt for those projects also.

Okay, great sir. So, thanks for taking my question. I will hand over to the operator.

Thank you.

Thank you. The next question is from the line of Neerav Jimudia from Anvil Reseach. Please go ahead. Yes, thanks for the opportunity, sir. Sir, you mentioned one of the products which we are under the feasibility stage which is isobutylbenzene. So, this predominantly I guess finds application in the production of ibuprofen if I'm not wrong. So, if you can just share your views in terms of what could be the capacity of IBB which we are coming up with and if I'm not wrong I think the raw materials required here would be toluene and propylene. So, if you can just share your thought process about our venturing into this product, what is the demand here in India and what are the imports coming to India. So, if you can just share your views on that would be helpful?

The IBB project right now we are on a pilot scale and the feedstock as you rightly mentioned they are toluene and propylene which are available within the complex. So, that's the advantage that we gain and the technology is based on our patent.

Secondly, we are confident that whatever demand which is there in the country, this will be a kind of around 10,000 tons to 15,000 tons per year capacity which will be a kind of a mega scale plant for that product and we are confident with our pilot we will be able to establish the market for that to start with. Because I think one of the largest chemical players is like Vinati Organics is into the production of IBB and the purity levels of which they've been producing for a long period of time. So, they have achieved the cost economics and the economies of scale. So, I just wanted to check with you in terms of our venturing into that because initially the capacity is what you mentioned 10,000 to 15,000 tons of the plant would be quite sufficient enough in order to cater to the domestic market. So, I was just wondering on that. And secondly, on the OMPL, how are the utilization rates currently because there also, we produce paraxylene and benzene. And paraxylene cracks have been dilate not doing well. So, if you can just share your thought process on both the paraxylene as well as the benzene production for FY24 and how we are looking for FY25?

The complex the aromatic complex as you mentioned the paraxylene market is not very economical at this point of time. So, we have been operating the complex on the reformate mode MR le

Mangalore Refinery and Petrochemicals Limited May 06, 2024 and we have consistently now operating at around 110% of the capacity utilization. During the last financial year we have produced around 800,000 tons of reformate and we have exported it. Benzene also we have been producing from the complex. We have produced about 130,000 tons of benzene last year and we are sustaining the complex on that mode and reformate is definitely bringing more margins onto the table today compared to paraxylene. Basically, our refinery complex we have some kind of a product swing capabilities. So, OMPL, erstwhile OMPL we have a flexibility to look into the economics and operate it either on PX or reformate mode. So, from past 2 years we are finding making Reformate more cost advantageous to us and similarly within the refinery also we have a lot of -- little bit of product swing capabilities between Diesel ATF, between other products. So, we are trying to look into the market conditions and wherever the cracks are good we are trying to maximize that.

And sir last question from my side is like apart from IBB are there any downstream products which we are planning because we have the upstream with us like benzene we have, PX we have, toluene propylene you rightly mentioned, would be available from our complex only. So, any other products apart from that which we are planning to add along with IBB for our downstream?

Yes Neerav as DF mentioned we are right now in the study mode which is on advanced stage for increasing our petchem intensity from around 10% to 12.5%. So, all these things are getting covered in that and probably by Q3 of this year we should be getting our necessary approvals to go ahead and get into the implementation mode. We are looking at various products based on the feedstocks that are available within the company.

Got it, sir. Thank you so much, sir, and wish you all the best.

APR for this project is under compilation. So, the board approval may take by Q3. By that time all kind of these projects are being evaluated and which brings more economic value to the company those projects will be on-boarded in this expansion.

Thank you so much sir and wish you all the best. Thank you. The next question is from the line of Harsh Maru from Emkay Global. Please go ahead. Thank you for the opportunity. My question basically pertains to the Bio-ATF part. So, two specific points over there. One is when do we expect Bio-ATF output to be available for sale? And the second question being what would be the premiums that we are looking at vis-a-vis hydrocarbon-based ATF? Bio-ATF is expected to be ready by the year 2026-2027 when the SAF becomes mandatory for an international flights. 2026-2027, we would be ready with the project. What was the second question? mff3goliwT MRPL

Price, premium on ATF.

Mangalore Refinery and Petrochemicals Limited May 06, 2024 The premium on SAF over ATF, presently it is very high when it comes in the international market. Presently, we are not taking any number at this moment, but we expect to get substantial premium for this particular product.

Okay. Thank you so much.

Thank you. Ladies and gentlemen, that was the last question for today. As there are no further questions from the participants I now hand the conference over to Mr. Rwibhu Aon from UBS Securities. Thank you and over to you for closing comments. Thanks, moderator. We are extremely grateful to host this insightful audience call and I would like to extend our heartfelt gratitude to the company management for taking out their time for the call. And I would like to thank all the analysts, investors, and experts for dialing in. I would now like to hand the conference over to the management for their closing comments, if any. Over to you, sir.

At the outset, thank you all for participating in this con call and it was a privilege for us also to have at least a con call and try to address your whatever clarification questions that you have had and hope we have met all the expected responses to all your clarifications. We would be looking forward to meet you probably in the near future also as and when we have an opportunity again. Thank you on behalf of the entire team here, Director Finance, Director Refinery, ED Projects, GGM Finance and the entire fmance team present here. We would like to thank you all.