Financial Daily from THE HINDU group of publications
Thursday, Jan 02, 2003
ONGC hopes to get going on MRPL's financial revamp
MUMBAI, Jan. 1
THE Oil and Natural Gas Corporation Ltd (ONGC) hopes to implement its financial restructuring plans for Mangalore Refinery and Petrochemicals Ltd (MRPL) by the end of this month.
"The process of gaining Public Investment Board (PIB) approval is expected to come through in January. As soon as this is completed, we will seek lenders' consent for going ahead with the debt restructuring plan,'' Mr R.S. Sharma, Director (Finance), ONGC told Business Line.
ONGC had, in August, bought AV Birla group's 37 per cent stake in the 9-million tonne stand-alone MRPL refinery at Rs 59.42 crore. The MRPL package also includes capital infusion of another Rs 600 crore in the ailing company to increase ONGC's stake to 51 per cent. Also, part of the debt would be converted into equity.
ONGC's Rs 600-crore capital infusion plan got delayed after the Ministry of Finance asked the company to take permission from PIB for the investment, although the project had been approved by PIB when it was first implemented. PSU investments, especially by Navratna companies, of above Rs 200 crore have to be ratified by PIB.
MRPL has been suffering recurrent losses because of difficulties in placing volumes in retail markets even though Hindustan Petroleum Corporation is a 37 per cent partner.
In the long run, ONGC plans to buy out HPCL's stake in MRPL, making it a wholly-owned subsidiary.
According to MRPL officials, the company has already seen 50 per cent erosion of its net worth. Shareholders were informed about the same at an extraordinary general meeting on November 20.
"We have informed the Board for Industrial and Financial Restructuring of MRPL's status a `potential sick unit' as per Section 23,'' said a senior MRPL official.
According to banking sources, if ONGC's investment gets inordinately delayed, some of MRPL's Rs 5,500-crore debt may have to be classified as non-performing assets in lenders' books.
ICICI is the lead lender to the company, followed by IDBI and State Bank of India, which have exposures of around Rs 1,000 crore each. MRPL management hopes the money would come in quickly so that it can go ahead with the financial revamp.
The company has planned a preferential allotment of Rs 2,000 crore to its lenders, apart from the ONGC investment.
The capital infusion and debt conversion will bring down MRPL's debt-equity ratio to 2.5:1, according to officials.
Meanwhile, the company's board of directors has approved buying up 23 per cent stake in the Mangalore-Hassan-Bangalore (M-H-B) pipeline project, which transports MRPL product.
"We will be investing Rs 35 crore in the M-H-B pipeline which is a joint venture with Petronet India Ltd. But that is not our focus at the moment, as the project has not yet reached financial closing. Our focus is on MRPL's debt-restructuring,'' Mr Sharma said.
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