Expect to beat S'pore benchmark by $1.50-2 a barrel soon: MRPL

Mangalore Refinery and Petrochemicals Limited (MRPL) reported its first quarter results this past Saturday where its net profit stood at Rs 720 crore against Rs 405 crore in the same quarter last fiscal.

The gross refining margins (GRMs) stood at USD 10.01 per barrel compared to USD 6.62 per barrel during the same quarter last fiscal.

In an interview with CNBC-TV18, H Kumar, MD of MRPL said that he is hopeful of this positive uptrend in GRMs to continue in the second and third quarters and expects to beat the Singapore benchmark by USD 1.50-2 per barrel over next 2 quarters.Below is the verbatim transcript of H Kumar’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: Inventory gains have boosted your gross refining margins (GRMs) this time to USD 10 per barrel can you tell us what the expectation is on GRMs for the next couple of quarters? A: For the quarter two, July has not been a great month and August was also not good. However, September is looking very bright, so we would hopefully continue the same trend. Even in quarter one if you see our inventory gain has not been much in compared to the peers I should say. Our inventory gain was around USD 4.7 odd, but we have made core GRM 5.3 plus. So, we are quite hopefully that this trend should continue in quarter two and quarter three also. Latha: Is everything paid out to Iran? Is there anything that we will see as an impact on your profit and loss (P&L)? A: We had already paid more than USD 2 billion and maybe hardly we need to pay USD 500 million odd or so. We are quite comfortable on that. Only thing is that we were earning some interest as you know, so that will come down but at the same time mark to market loss also what we used to book earlier that is also kind of help us out on the balance sheet. Sonia: You said that you will maintain this level of gross refining margins but can you tell us exactly what the range could be say over the next two quarters. Will it will around this USD 10 per barrel itself? A: In September things are looking good. I will put it another way, what we are looking at irrespective of the inventory gain or loss, we should be kind of beating the Singapore benchmark by say USD 1.5-2 that is our target. If we are able to do that I think we are doing quite reasonable. Anuj: How is the merger of MRPL and ONGC Mangalore Petrochemicals Ltd (OMPL) progressing and in the future are there any more synergies that the board will be looking at? A: The merger in fact we had taken over 51 percent of OMPL through a share purchase from the ONGC. The balance merger process is now currently with the ministry. Ministry of Corporate Affairs (MCA) is looking at it. We are closely following up and hopefully we should achieve this shortly. Latha: Can you give us an idea of your expansion plans? You were going to expand your refinery as well and you all were acquiring land. Give us a time table are we starring at anything at all in FY18 or is it further down? A: We have a target of going to be BS-VI fuels by 2019 September that is the target for the refineries and in the market by April 1st 2020. So, looking at diesel we are quite comfortable, hopefully by this yearend we will be comfortable. We had taken care of most of the requirements during the recent expansion what we did a couple of years back, to the extent of Rs 1,500 crore and as part of BS-III diesel is quite comfortably placed. As regards the gasoline, Motor Sprit (MS) petrol we need to do some work, so are at it. We will be meeting the targets. The approximate cost would be Rs 1,800 crore for that but most of the expenditure will come towards 2020.