Mangalore Refinery and Petrochemicals’ (MRPL) share price dropped on Tuesday to a new low of Rs192.30, down nearly 7% compared with the previous close of Rs206.77. MRPL was trading at Rs202.48 as of the writing. This is a drop of 2.07% from its previous closing price.
Long-term, the share remains in green territory with gains of 4.38 % in the last 5 days trading and 5.01 % over the previous month.
Rise in Crude prices and Standalone Refiners
Elara Capital, a London-based brokerage firm, said in a recent report that independent refiners like MRPL will benefit most from the rising crude oil prices caused by the conflict currently engulfing the Middle East.
According to Business Today, Elara Capital stated that “industry GRM (Gross refining margin) will increase by $5/bbl per $10/bbl rise in crude oil – these companies don’t have to absorb retail losses.”
The brokerage stated that MRPL and Chennai Petroleum could both see a robust increase in Earnings Before Interest Taxes Depreciation And Amortization. However, this is not without its downside.
Under our stress scenarios, MRPL and Chennai Petroleum would both show very high EBITDA growth. Elara stated that “very high GRMs are often the focus of policy.”
If spreads remain elevated, policy intervention such as windfall duty or other interventions are not ruled out. While near-term earnings may be strong, the policy risk will increase with an expansion of margins.
The impact of high oil prices on the economy
Despite rising oil prices, MRPL still faces potential losses. Reports suggest that Indian state-owned oil companies are looking at paying them lower rates than imported to reduce mounting losses.
The Economic Times reported, citing unnamed sources that OMCs were looking to freeze or fix a discount for refinery transfer prices (RTPs) in order to pay refineries below the cost-parity of fuel imports. The move will prevent refiners passing along the full cost of crude oil and forcing them to absorb some of its impact.
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