M R P L — Q4 FY24 earnings call

Call held 6 May 2024

Management summary

MRPL delivered a record-breaking financial performance in FY24, characterized by peak profitability and significant deleveraging. The company successfully capitalized on improved refining margins and operational efficiencies, achieving record yields and throughput. Management is now pivoting toward long-term value creation through a multi-billion dollar petrochemical expansion and an aggressive retail footprint growth strategy.

Highlights

  • Highest ever annual PBT of ₹5,521 crores and PAT of ₹3,596 crores in FY24, up 30% and 36% YoY respectively.

  • Gross Refining Margin (GRM) for Q4 FY24 improved significantly to $11.35/bbl from $5/bbl in Q3 FY24.

  • Achieved highest ever Q4 throughput of 4.6 million metric tons (MMT) and record distillate yield of 79.27%.

  • Debt-equity ratio improved dramatically to 0.94 as of March 31, 2024, from 1.70 a year ago, following ₹5,058 crores in loan repayments.

  • Announced a major strategic shift to increase Petrochemical intensity from 10% to 12.5% with an ₹8,000 crore investment over 5 years.

  • Retail expansion on track with 103 outlets currently functioning and a target of 1,000 outlets by FY27.

  • Inventory gain for FY24 stood at $0.58/bbl, with Q4 specifically seeing a gain of approximately $1/bbl.

Key financials

  1. PAT ₹3,596 Cr +36.3%YoY
  2. PBT ₹5,521 Cr +30.2%YoY
  3. GRM 10.36 $/bbl +4.8%YoY
  4. Crude Throughput 16.59 MMT +2.8%YoY
  5. Debt-Equity Ratio 0.94 -44.7%YoY
  6. Net Worth ₹13,251 Cr +34.7%YoY

What they filed

Q1 FY27: revenue up 120.4%, net profit up 436.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue24,968 21,871 24,596 17,356 22,649 −9%24,712 +13%23,950 −3%38,254 +120%
EBITDA-474 1,031 1,130 180 1,489 +414%2,785 +170%1,783 +58%1,318 +632%
Net profit-682 304 363 -272 639 +194%1,445 +375%119 −67%915 +436%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Capacity

  • Petrochemical Intensity Capacity · next 5 years · High confidence 12.5%

    From 10% today

    Significant planning is underway for new projects aimed at enhancing our refineries GRMs by enhancing the PET-CHEM intensity from the current 10% to 12.5%.

    — Vivek Tongaonkar, Director Finance and CFO

Capex

  • Petrochemical Expansion Investment Capex · next 5 years · Medium confidence ₹8,000 crores
    We anticipate an investment of approximately INR8,000 crores over the next five years, primarily funded through internal accruals.

    — Vivek Tongaonkar, Director Finance and CFO

  • Annual Capex Trajectory Capex · FY25 onwards · Medium confidence ₹3,000-4,000 crores

    Previously ₹1,500 crores → ₹3,000-4,000 crores

    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?

    — Vivek Tongaonkar, Director Finance and CFO

Volume

  • Annual Throughput Volume · FY25 · High confidence >17 MMT

    From 16.59 MMT today

    Looking ahead to the next year, we are targeting a throughput in excess of 17 million metric tons with no planned shutdowns.

    — Vivek Tongaonkar, Director Finance and CFO

Other

  • Retail Outlets Other · FY26-27 · High confidence 1,000

    From 103 today

    We have a target of 1000 outlets by '26, '27, and also sales of 1 million metric tons products through these retail outlets.

    — Vivek Tongaonkar, Director Finance and CFO

Debt

  • Working Capital Loan Requirement Debt · Short-term · High confidence ₹7,500 crores
    Our normal working capital loan requirement is about INR7,500 crores. So that amount of debt would continue on a short-term basis.

    — Vivek Tongaonkar, Director Finance and CFO

Risks & concerns

  • Crude Oil Price Volatility

    medium

    Management noted that sudden spikes in crude prices could affect the cash position and dividend policy.

    Management acknowledged

  • Venezuelan Crude Sanctions

    medium

    Management confirmed they are not using Venezuelan crude currently as sanctions are reappearing, limiting crude diversification options.

    Analyst acknowledged

  • Geopolitical Factors Impacting Margins

    medium

    Refining margins are subject to geopolitical factors which could lead to a drop, though management doesn't anticipate a 'drastic fall'.

    Management acknowledged

  • 2G Ethanol Economic Viability

    low

    The project is currently on hold as it is not financially viable under current conditions.

    Management acknowledged

Areas of evasion (1)

  • Specific dollar-value discounts on Russian crude.

Q&A highlights

2 direct
Russian Crude Discounts and Usage Partial
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.

Confirms that MRPL continues to benefit from Russian crude discounts, which are a key driver for superior GRMs compared to global benchmarks.

Asked by Kirtan Mehta

Viability of 2G Ethanol Project Direct
As of now, the project is not viable. So we are not moving ahead unless the project becomes viable.

Management showed transparency by admitting a green energy project is currently stalled due to lack of economic viability, preventing value-destructive capex.

Asked by Sabri Hazarika

Potential Merger with HPCL Direct
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.

Directly addresses long-standing market rumors about consolidation within the ONGC group, placing the onus on the parent company.

Asked by Sabri Hazarika

2 min read 5 chapters

Detailed narrative

Record Financial Performance and Deleveraging

MRPL reported its highest-ever annual PBT and PAT of ₹5,521 crores and ₹3,596 crores respectively for FY24. This performance was supported by a robust GRM of $10.36/bbl for the full year and a significant jump to $11.35/bbl in Q4. The company utilized these strong cash flows to aggressively repay debt, reducing its debt-equity ratio from 1.70 to 0.94 by repaying over ₹5,000 crores in loans during the fiscal year.

Strategic Pivot to Petrochemicals

Management announced a major strategic initiative to increase petrochemical intensity from 10% to 12.5%. This involves a planned investment of approximately ₹8,000 crores over the next five years. The company is currently in the advanced stages of study and DPR (Detailed Project Report) finalization, with board approvals expected by Q3 FY25. This shift is intended to enhance long-term margins and reduce sensitivity to volatile refining spreads.

Aggressive Retail Expansion Strategy

MRPL is significantly scaling its marketing presence, targeting 1,000 retail outlets by FY27, up from the current 103. The company aims to sell 1 million metric tons of products through these outlets, noting that retail sales provide better margins than exports. Currently, average sales per outlet stand at 150 kL per month, which management claims is higher than the industry average.

Operational Excellence and Yield Optimization

The refinery achieved a record distillate yield of 79.27% in Q4 FY24. Management highlighted their ability to process diverse crudes, including new domestic crudes from ONGC and Reliance BP, and Siberian Light from Russia. The enhancement of the desalination plant capacity to 40 MLD has also mitigated risks associated with river water dependency during summer months, allowing for consistent throughput year-round.

Sustainability and Bio-Fuel Initiatives

MRPL is advancing its green energy agenda with a board-approved Bio-ATF (Sustainable Aviation Fuel) demo plant of 20 KLPD capacity, involving a capex of ₹350 crores. The plant is expected to be ready by 2026-2027 to meet mandatory SAF blending requirements. Additionally, a ₹50 crore green hydrogen project has been approved, while the 2G ethanol project has been put on hold due to current lack of economic viability.

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