MRPL & RPL - Analyzing Risk and Returns
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Case Code : FINC027
Case Length : 12 Pages
Period : 1993 - 2004
Pub. Date : 2004
Teaching Note :Not Available
Organization : Mangalore Refinery and Petrochemicals Limited (MRPL) and Reliance Petroleum Limited (RPL)
Industry : Petroleum and Finance
Countries : India
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
MRPL was the first grassroot refinery set up by the private sector in India. The company, which was incorporated in March 1988, had received government approval in April 1991 for setting up a refinery in Mangalore in the state of Karnataka.
MRPL was set up as a joint venture between Hindustan Petroleum Corporation Limited4 (HPCL) and Indian Rayon and Industries Limited (IRIL), a part of the ABG. HPCL and IRIL each held a 37.8% equity stake in the joint venture while the rest was offered to the public. The MRPL project was planned to be set up in 1992 with a refining capacity of three million (mn) metric tonnes per annum (MMTPA) at an estimated cost of Rs.11.62 billion (bn).
The project was partly financed through a public issue of 16% secured redeemable partly convertible debentures (PCDs) of Rs.135 amounting to Rs.5.82 bn and 17.5% secured redeemable non-convertible debentures of Rs.200 (with detachable equity warrants) amounting to Rs.5.60 bn.
The project ran into cost escalations and the plant was finally commissioned in March 1996 at a revised cost of Rs. 25.93 bn. In September 1999, MRPL increased the refining capacity of the plant to nine MMTPA.
The capacity expansion involved an additional cost of Rs. 37 bn. To ensure the continuous supply of crude for the refinery, MRPL entered into contracts with domestic as well as international crude oil producers. Initially, the sole rights for marketing MRPL's products were with HPCL, but in 2001, MRPL started direct marketing of its products by exporting fuel oil, aviation turbine fuel, motor spirit and naphtha.
RPL was the second grassroot refinery set up by the private sector in India after MRPL. RPL's plant was set up at Jamnagar in the state of Gujarat. It was promoted by the Reliance Group and was completely privately owned...