Mangalore Refinery and Petrochemicals Limited analyst Q&A

Thank you, sir. We will now begin with the question and answer session. The first question comes from the line of Kishan Mundhra from DAM Capital.

So I have 2 questions. So firstly, if you could highlight if there was any inventory gain during the quarter in your GRM?

Yes. During the quarter, there was an inventory grain of around $0.42 per barrel.

Okay. And sir, as a follow-up to this, I mean, the benchmark Singapore GRMs were weaker actually, and your performance was relatively much better. So, were there any other factors at play apart from inventory gains, which led to you reporting a better GRM compared to the benchmark?

As I mentioned that our focus has been on improving on value-added products. And we have tried to manage our value addition through maximization on an economic -- whichever products are bringing more economics like aviation turbine fuel or the benzene molecules, we have tried to maximize.

Okay. And sir, the second question is, can you give us a number of what the total throughput or sales that you are doing from your retail outlets currently, the exit run rate for the quarter?

On an annual basis, I have the number. It is about 230 TKL we have done during the financial year '24, '25.

Okay. And any tentative target for FY '26?

FY '25, '26, we are targeting -- our target is to cross 300 TKL.

Okay. Understood. And last question, if I may, sir. I -- is there any capex target that you have for FY '26, '27?

You're targeting '26, '27 or '25, '26? outosidrary of al and Natural Gas Corporation Idrolledr

FY '26 and FY '27, 2 years.

FY'26, our target is going to be in the range of around INR1,000 crores. And FY'27 also, it could be in a similar range.

The next question comes from the line of Sabli Hazarika from Emkay Global Financial.

So sir, firstly, just I was not able to fully get it. So you mentioned 0.4% reduction in fuel and loss, right, from infrastructure project at your opening remarks?

Yes.

And what infra project is it?

It's the power import infrastructure project.

So it will be like external power, which you will be replacing from...

Yes.

And anything on the green hydrogen tender that you released a few years back?

We -- it is under evaluation now. There are 2 projects which we are doing. The first one is on a build, own and operate basis. For that, what bids we have received and that is under evaluation. The second one was trying to set up a smaller unit within the refinery of a 500 tons per year. That is being retendered now. It is under retendering now.

500 tons, right?

Yes, 500 tons per year. That is a much smaller capacity within the refinery.

This is retendered. Okay. Fair enough. Secondly, on the marketing side, you mentioned 150 retail outlet addition this year?

Yes.

So that will take it to, say, 330, 340, that will be the marketing network by the end of the year.

Yes, yes.

And that will be 3,000 TKL you mentioned. So basically, that...

I said 300 TKL.

300 thousand kiloliters, that's the number, right?

Yes.

Okay. Fair enough. And secondly, in terms of your Russian crude and Russian discounts, what were the levels in Q4? And what is the run rate currently? outosidrary of al and Natural Gas Corporation Idrolledr

See, we are -- sourcing of our Russian crudes is more or in line with what the Indian industry is today sourcing. And the discounts are also in the similar ranges. Discounts have come down, but we are -- whatever we are getting is that far with what the industry is getting.

That's the case in Q4 and current year, sir, that's only the case, right?

Yes, yes. You're right. Your understanding is right.

So industry number is something around 30% and $1.5 to $2. So that's what it is, right?

Yes, it is something similar to the industry numbers only.

Okay, sir. Fair enough. And last question is, I mean, this quarter, you are like almost at a $6 kind of core GRM. So in terms of optimization, are we at the -- are we in a normalized rate right now? I mean, assuming that -- I know Singapore GRM is not the exact right benchmark. But if we compare with, say, $14 diesel cracks and $8, $9 petrol cracks, then $6 could be it or it could even have been better under certain circumstances.

If the cracks what you mentioned are going to be there, then probably it is going to be slightly better than $6.

Slightly better than $6, right? Okay. Fair Enough.

The next question comes from the line of S. Ramesh from Nirmal Bang Equities.

In terms of your paraxylene business, there is an increase in your JV, sir. So how is the paraxylene business? And what do you see as the outlook for the paraxylene business going forward?

Ramesh, sorry to interrupt you. There was some cracking. We can -- there is some disturbance in the line, if you can please put your question again, please.

So just wanted to understand your thoughts on how the paraxylene business has performed and how do you rate your prospects for that…

I'm sorry, Ramesh, there's a lot of distance and there is some cracking in the voice. You mentioned something about paraxylene, but cannot not able to get questions clearly.

Could you get to a quieter location, Ramesh?

I'm speaking on the phone. Sorry about that. So I was just asking about your performance in the paraxylene business? And how do you see the outlook going forward?

We are not -- we are still not making the paraxylene. We are operating and moving the product as reformate. During the last financial year, we increased our reformate production by almost 30%. We sold about 1.2 million tons of reformate. And we also improved our benzene production from the complex from 130 TMT to 200 TMT during the last financial year. outosidrary of al and Natural Gas Corporation Idrolledr

Okay. So in benzene and the reformate, are you getting margins comparable to your refining margins? Or are you taking some sacrifices there?

It is better -- there are better margins for that.

Now on the marketing side, what would be the share of EBITDA from the retail sales of petrol and diesel based on the numbers you have shared?

Share of marketing in the EBITDA? See, right now, we are not reporting in a separate segments. We are reporting it as a combined -- as a one entity. We are not splitting out as how much is from the marketing.

But the refining margin is just ex-refinery, right? It doesn't include the marketing margin, right?

It's including. It is including that.

Okay. So, they are them your reported is including marketing, all right. So if you're looking at your outlook for '26, '27, based on the expansion in the retail outlets and assuming stable refining margins, what is the kind of delta one can expect in terms of your gross refining margin per barrel, including your marketing margins on integrated basis?

For '25, '26 with the kind of current cracks which are going on and the crude prices which are there we are expecting the GRMs to be in the range of around INR6 to INR6.5 which is what is currently -- which is what we saw in Q4. And from the retail businesses, we are -- on a long- term basis, we expect that the margin from the retail should be at around INR3 on petrol and INR3 on diesel.

The next question comes from the line of Mr. Yogesh Patil from Dolat Capital Markets.

Congratulations for the good set of GRM numbers sir, I have received a few questions from the investor side. Sir, we also wanted to know the MRPL product swing ability like ATF to diesel and the MS to reformate. Is that played any role on the higher GRM side during this quarter?

Sorry, Yogesh, the last part, we could not -- I could not catch you fully, please. If you can repeat the question.

Yes. So sir, we wanted to understand for the MRPL product swing ability like ATF to diesel and MS to reformate that played any role on the higher GRM during the quarter for FY '25?

Between ATF and diesel, yes, there is a play. But if you really see in quarter 4, the ATF margins were -- ATF cracks were not that attractive compared to diesel in quarter 4. But in between MS and reformate, we -- our first objective is to meet the domestic MS demand, where we supply to our retail outlets, our oil marketing companies and whatever is the excess, we try to maximize from the aromatic complex.

Sir, what was our distillate yield, and how it has improved over the last 2 to 3 years? And what would be the diesel and the MS yield? outosidrary of al and Natural Gas Corporation Idrolledr

Our distillate yields if you look at, say, '21, '22, we were at around 77.25%, and we have now come to around 81.9% during '24-'25. So there has been a steady increase in our distillate yields. And basically, we have been trying to now maximize on the middle distillates, where our light distillates are kind of stabilizing at around 29% to 30%.

Okay. In the next 2 years, sir, we see the HPCL Rajasthan Refinery and the IOCL additional refining capacities will come in the market, then how it will impact on the domestic price realization of the oil products? And considering the one of the lowest net refining capacity, I mean, going to be added in 2025, how the cracks will pan out in FY '26?

I mean these are the 2 separate questions. Mostly first one is on the domestic side. And the second one is on the side of global net refining capacity addition in 2025, and how the cracks do you believe will pan out in FY '26? On the domestic front, the commissioning of HRRL and the IOCL Refinery, Yes, definitely, there is going to be there is going to be product supplies sources will increase. However, the recent projections or the reports which have come out from PPAC, that indicates a robust growth in terms of both MS and diesel, where they have indicated an MS growth in the range of around 6.5% and diesel to grow around 3%. So with that kind of growth numbers happening, we are very confident that we'll be able to improve our domestic sales. That is on the domestic front. On the international market, the cracks as we speak, are around 10% to 12% for diesel and ATS and MS in the last couple of -- in the last week or so has started strengthening. So our outlook is that our understanding is that the cracks on the MS and distillate yield is going to be in that range. And with the crude prices, with the oversupply of the crude, we don't expect the crude prices to further increase. So with a crack of around $10 to $12, I think we will be reasonably in a better position in the next financial year.

The next question comes from the line of Kishan Mundhra from DAM Capital.

So sir, this INR3 per liter kind of a margin that you are targeting in your -- from a retail outlet, sir, if you could clarify if this is gross margin? Or is it net margin net of your freight and other marketing expenses?

It's a net of everything.

Okay, net of everything. And, sir, what drives this assumption of this INR3 per litre? I mean, is there a formula to drive this or is there a cost build up kind of a thing? What is the logic of this INR3 per litre? I mean, cannot it be INR4 or INR2 per litre?

As we speak, it is much higher. That is why I said on a long term basis, we expect the prices to be adjusted out and this is the kind of margins which have been there historically also and we expect the same thing to continue.

Okay. Any IRR assumption that goes behind this INR3 per litre kind of a margin? outosidrary of al and Natural Gas Corporation Idrolledr

Each retail outlet when we select, each one of them will undergo economic analysis and if there is IRR, then only we move forward from each of the retail outlet.

We carry out a detailed market study, the potential sales that is possible, and then IRR economic evaluation is carried out before we decide our retail outlet.

The next question comes from the line of S. Ramesh from Nirmal Bang Equities.

So you mentioned healthy production in polypropylene. So, given the global pressure on the margins, have you included this margin in your gross margin? How much would be the delta in the GRM from the polypropylene business?

See, as I mentioned, we are not separately reporting on a segment-wise basis, and currently, the gross margin includes everything. So we have not separated out any of the specific or petrochemicals or any marketing segments in that.

In terms of the future outlook for your polypropylene business, what is the growth you expect in terms of your sales volume in polypropylene given that there's a lot of competition? So, how do you see that in the next 1, 2 years?

Competition is expected because there are newer units which are expected to get commissioned. But the kind of presence and the brand image that we have established in the market, we are not foreseeing any reduction in the sales forcing us to look at an export market. Our brand has been very well accepted in the markets where we are operating.

Okay. So, in terms of the capex numbers you shared, can you give us an idea about where the capex is going?

It is almost 50% going in for the refinery capex and 50% for the new or marketing kind of activities.

So, going back to the previous question on the refinery capacity additions in Asia and globally, what is your sense in terms of capacity closures and the net refinery capacity addition in Asia and the global capacity, say, in the next 1 year?

Basically, as far as India is concerned, the capacity growth is expected from present to 250 -- or 260 to 450 by 2045. So there is going to be an increase in capacity based on the demand assessment because at present, India's primary energy, the oil contribution is much, much lower than the international. I think we are just about one-third of the global average, let alone countries like China or US. So we have some margin. So till then, expansion won't be a challenge, and demand will be there. As far as international, the global scenario is concerned, there are refineries getting closed down in Europe and Australia. There are some stand-alone refineries. So globally, also, there could be a kind of sustenance in the cracks for at least next medium term. That's the present outlook we are thinking.

The next question comes from the line of Sabli Hazarika from Emkay Global Financial Services. outosidrary of al and Natural Gas Corporation Idrolledr

So 2 questions. Firstly, so your exports would be something like 30%, 35% as of now, right? That's the normalized export, right? It was higher in Q4, but on an average, that should be the run rate, right?

Yes.

And which are the products and to which countries are you exporting?

See, we don't typically have a B2B agreement with any specific country. Our products are typically on a spot cargo. And in the recent past, we also have been entering into a term with the traders. So the traders ultimately will be moving the cargoes to the destination where they have back-to-back arrangements.

Okay. Got it. And which are the items which are like most exported?

It is basically diesel, then we have the reformate from the aromatic complex and ATF, benzene.

Okay, sir. Fair enough. And is there any expansion plans very preliminary stage, anything which you are thinking about or any kind of like petrochemical plans where you want to raise the intensity, something of that sort?

Yes. We are planning for some value addition to our couple of streams which are there in the refinery. The feasibility studies are going on for that.

This will be a major capex or should be minor?

It can -- see it is basically some C2, C3 molecules -- which we have, C2, C3, C4 molecules. So it is not -- we can look at it in smaller capex and take it out. So the -- it is not going to be a capex of a mega capex. It's a very medium or a very smaller range capex, spread probably over a period of 2, 2.5 years to 3 years.

So this is a part of the INR1,000 crores only that you have reported, right?

As of now, yes.

The next question comes from the line of Soumaya from Avendus Spark Institutional Equities.

This is Soumaya. Thanks for the opportunity, sir. So first question, within this INR1,000 crores of capex, what would be the maintenance capex on the refinery side?

So it is almost 50%.

So INR500 crores on marketing, INR500 crores on refining and the refining entire is almost...

INR500 crores, it is not entire INR500 crores is marketing. Marketing is one part of it. And the balance, we are looking for some ongoing projects which are there like isobutyl benzene, power import projects. So they're all part of that. outosidrary of al and Natural Gas Corporation Idrolledr

Can you get a rough split, sir? Just want to understand on the refinery side, what would be a maintenance capex within this number?

See, we have a shutdown capex. We have some catalyst replacements also coming. So it is -- these are the 2 main components of that, turnaround capex and the catalyst replacements.

Okay. Got it. Sir, this $6 of GRM, any broad idea would you be able to give like how much would petrochemicals would be contributing within this? And how much is marketing and how much is the core refining part?

At this point of time, see, as I mentioned to you, we have not done a segmental analysis or while arriving at our GRMs. So I will not be having that information right now.

Okay, sir. And also directionally between Q3 to Q4, Petchem would have been slightly supportive, directly, you'll be able to see that?

It was -- we did not see any difference between Q3 and Q4 in terms of Petchem marketing realizations.

Understood, sir. Sir, also on your crude sourcing part, can you give a color on -- you did mention about Russia. But in general, the crude sourcing basket, how much from Middle East and very, very broad numbers, if you can just give?

We can say almost one-third came from the Middle East and Domestic was also in the range of around -- we can say almost one-third.

Does that answer your question, Soumaya. We'll move on to the next participant as the participant has disconnected the line. The next question comes from the line of S. Ramesh from Nirmal Bang Equities.

So there was this discussion about MRPL being merged with HPCL. So is there any progress or time line on that? And what is the thought process on that?

Ramesh, thank you for that question. See, we as MRPL, first of all, we are not aware of any such developments. And even if there are any such developments, it is the 2 promoters who have to ultimately take the call.

Does that answer your question?

Yes, yes. Thank you very much.

The next question comes from the line of Yogesh Patil from Dolat Capital Markets.

Sir, capital expenditure plan of INR1,000 crores per annum for the next 2 years, then what would be the peak debt levels or debt-to-equity ratios one can expect from these capital expenditures? outosidrary of al and Natural Gas Corporation Idrolledr

We are expecting the debt-to-equity to be maintained at around the current levels. We are at around close to 1. So we will be -- we are -- our current -- the things is called projections are at the same levels only.

Okay. And sir, as per our understanding, MRPL is processing Barmer crude. Can you share the percentage of Barmer crude processed in FY '25 and typical discounts on the Barmer crude relative to the Indian crude baskets you are receiving? And sir, lastly, on the -- what is the alternate plan once the Barmer crude is shifted to HPCL and Rajasthan Refinery?

The Barmer crude -- last year, the Barmer crude volumes have come down because the output from Barmer itself has come down. Our number last year was, if I remember correctly, was -- it was almost around 3% to 4% of our total basket. And the discounts were not -- were in something in similar line, which they have been offering to the other players also.

Okay. Sir, separately, I wanted to understand the loss of tax offsets in case the MRPL undergoes another merger. Would you be knowing the tax provisions that drives this?

Sir, this is [Anil 0:35:23] this side. So in case any further development on any merger and acquisition further, we have till financial year '27, we need to have that carry forward of losses still in place. Then after 5 years of completion of the older merger, then only we can go forward.

Okay. And sir, lastly, just wanted to -- on your placement of oil products on the domestic side and the export side, what kind of advantage of selling the product -- oil products into the domestic market compared to the export market in terms of dollar per barrel, if you could give us a little bit understanding on the realization side?

Yes, Avin, this side. So basically, selling domestic is always better for us in general. Export market is targeted only when we have exhausted our domestic market fully for agri.

The next question comes from the line of Yogesh Patil from Dolat Capital Markets.

Considering the gas consumption at Mangalore refineries and one grid power upgradation is also going on, JT upgradation is also going on. Can you throw some light on the kind of a gas consumption, one thing? Secondly, the grid power upgradation and thirdly, on the JT upgradation?

Last year, we have a gas consumption of around -- close to around 0.55 MMSCMD, which we are targeting to take it to around 0.65 to 0.7 this year. And the grid infrastructure project, the target date for completion is by December. And we are hopeful that we will be able to complete and start drawing the power from there. The JT infrastructure project, the engineering activities have been completed. The long lead item orders have been placed and the tenders for the execution are in the final stages of awards are just ordered. It has just been ordered. outosidrary of al and Natural Gas Corporation Idrolledr

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments.

So thank you, everyone, and for this interaction. And I hope we could clarify the questions asked and about the last year performance as well as some of the outlook for the coming year. So thank you once again for the coordinator and the participants.

Thank you, sir. Ladies and gentlemen, on behalf of Dolat Capital Market Private Limited, that concludes this conference. You may now disconnect your lines.