See FY17 GRMs around USD 7.5-8/bbl: MRPL

Mangalore Refinery and Petrochemicals (MRPL) has successfully commenced commercial production of polypropylene from its polypropylene (PP) plant. The plant, which is a part of its phase III refinery expansion and upgradation project, has capacity to produce 4,40,000 TPA polypropylene, said the company in its filing.

H Kumar, MD, MRPL told CNBC-TV18 that the plant will have capacity utilisation of only 60-65 percent in the second and third quarter and 100 percent from fourth quarter onwards.For FY17 which will be the first full year of commercial operations of the above plant, the gross refining margins would be USD 7.5-8 per barrel.Talking about the payment problems to Iran, he said 45 percent of payments are done in rupee terms and balance payments are done as and when the banking channels are open as per directions of government of India.

Below is the transcript of H Kumar's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Reema: Can you give us some more details? We understand that your plant has the capacity to produce four lakh forty tonne per annum of polypropylene but at what point do you think you will be able to reach 100 percent capacity utilisation, in first quarter or two quarters what will be the capacity utilisation and therefore the incremental revenues?A: A polypropylene plant as you have rightly stated, we have started the commercial production recently and in the first two quarters maybe Q2 and Q3 of the current year, we target around 60-65 percent of the capacity utilisation and hopefully, from Q4 we should be touching the full capacity.Coming to the impact in terms of gross refining margins (GRMs), on 15 million tonne basis, it should give us a GRM of USD 1.25-1.5 per barrel across the board.Latha: What percentage of your revenues under full output will be constituted by polypropylene at all? How much will be the refinery earnings, how much will be the petrochemicals earnings, for the first clear year of production which is what FY17?A: The way I would put it is we can expect USD 1.25 to 1.5 barrel from the polypropylene unit. The balance maybe USD 6-6.5 or so should come from my operation of the refinery portion.Latha: Are all problems of payment to Iran sorted out for MRPL?A: As far as the Iran payments are concerned, 45 percent of the payment is done in rupee terms. The balance 55 percent as and when the banking channels are open, we make the payment as per the directions of the government of India.

Latha: That will not stymie your sales, will it? A: No, it will not. Reema: Coming back to the point about GRMs, so in FY17 which will be the first full year of commercial operations of your this plant, can we expect a GRMs then for the company to be at USD 7.5-8 per barrel if we add up on the refinery as well as from polypropylene? A: That should be the kind of expectation that we are also having. Reema: Do you have any more capex in FY16 or FY17? A: No capex for FY16 and FY17 except a minor revamp of one of our units we call it as CCR. That is only Rs 195 crore investment. Other than that in the next two years, we are not planning anything. However, government of India has mandated euro 5 diesel from 2020. We would need to invest for that but that will be more of a back loaded arrangement and we would need around Rs 3,000-4,000 crore for that. Latha: What are likely to be the GRMs and your normal operating margins in FY16 itself? A: GRMs depends on the crack -- trends currently are the tracks are good, it is moving in a very narrow band and if Q1 trend continues, we should be somewhere close to the number of around USD 6/bbl for the year. Latha: And the operating margins for the company as a whole are likely to be how much? A: We should look at GRM of USD 6/bbl, our operating margins EBITDA could be in the region of Rs 3,000 crore.