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R.Y. Narayanan

Public issue may be considered at a later stage

MR K.K. ACHARYA, Managing Director, CPCL

Coimbatore May 19 Chennai Petroleum Corporation Ltd (CPCL) has no immediate plans to merge itself with IOC, which holds a majority stake in it, and being an independent entity as a refiner without any marketing arm of its own has not worked to CPCL's disadvantage as IOC has committed itself to market its products, according to the Managing Director of CPCL, Mr K.K. Acharya.

The company is in the process of implementing various expansion projects at a total investment of about Rs 6,000 crore.

Though initially the expenses would be met through debt, the company might consider coming out with a public offer to part fund the investments at a later stage, he said.

IOC assurance

Speaking to Business Line, he said IOC had assured that whatever was produced by CPCL would be `evacuated and marketed by IOC'. It had given a `sort of undertaking' that it would ensure that the product was not left in the refinery and the refinery would never be shutdown for lack of product movement.

When pointed out that IOC was merging its subsidiary IBP with itself and there were also talks of Bongaigaon Refinery and Petrochemicals Ltd (BRPL) being merged with IOC and whether a merger of IOC and CPCL would not be next on the cards, Mr Acharya said compared to these companies, in CPCL, the stake of IOC was about 52 per cent of its equity.

The rest was widely dispersed, with National Iranian Oil Company (NIOC) having about 15 per cent stake. He said CPCL was likely `to remain as a subsidiary of IOC and there is no immediate plan' of its merger with IOC.

Desalination plant

He said of the Rs 230 crore earmarked for the seawater desalination plant, about Rs 120 crore would be spent during the current year. For this year, an outlay of Rs 400 crore has been prepared and the planned expenditure for the next year would be about Rs 900 crore.

The maximum investment would come in 2009-10 when the new diesel hydro treating unit and the Resid Upgradation project at the Manali refinery would be at a very advanced stage.

Mr Acharya said in the next five years, CPCL would be investing about Rs 6,000 crore, much of which would be incurred during 2009-12. He said the company was spending about Rs 90 crore in setting up a 17.6 MW capacity windmill project.

This project would give the company the benefit of at least 18 per cent return every year.

The company would go to the debt market for raising required funds and later might even decide to go for public offers. At the moment, the company has not decided on this and it was looking to raise debt only.

Mr Acharya did not see any disadvantage in CPCL remaining a mere refining company.

The refining profit did not come down because CPCL did not have a marketing outfit that was done by IOC.

Oil marketing

The case of Mangalore Refinery and Petrochemicals Ltd (MRPL) that wants to enter marketing was different in that its parent ONGC wants to enter oil marketing through MRPL.

CPCL went into direct marketing of only those products that were not handled by IOC and also into exports.

He said the Engineers India Ltd's feasibility study on the new refinery-cum-petrochemical project would be available by June-July and the project might cost around Rs 30,000-35,000 crore.

The emphasis was petrochemicals and market demand would have a say on a final decision on this 15 million tonnes per annum project.

More Stories on : Mergers & Acquisitions | Petroleum

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