ICRA has reaffirmed the long-term rating of 'AAA' assigned to the Rs 30 billion fund-based limits of Mangalore Refinery and Petrochemicals (MRPL). ICRA has also reaffirmed the short-term rating of A1+ assigned to the Rs 40 billion non-fund based facilities and to the Rs 15 billion of Commercial Paper/ Short-term debt programme of MRPL.

Besides, ICRA has also retained the issuer rating of AAA assigned to MRPL for general creditworthiness. The outlook on the long-term rating and issuer rating is 'Stable'. 

The ratings reflect the majority ownership of ONGC, and ONGC's demonstrated track record of support to MRPL, which is expected to be sustained given its strategic importance to ONGC's forward integration plans. The ratings are also supported by the high financial flexibility enjoyed by the company. 

While ongoing projects for refinery revamp-cum-expansion by MRPL have been delayed considerably, the same are now at advanced stages of execution with expected commissioning of the Phase-III secondary units by August 2014, and commissioning of the polypropylene (PP) unit by December 2014. In turn, MRPL is expected to benefit through an improvement in its GRM level due to increased complexity of refinery, which will enable the optimisation of crude mix, and higher distillate yield, subsequent to stabilisation of the operations for the ongoing projects which is expected in the second half of FY 2014-15. Notwithstanding this, ICRA notes that MRPL remains exposed to the residual project implementation & stabilisation risks in the near term. 

The ratings also factor in the moderate outlook on the international refining margins in the near to medium term, the vulnerability of profits on the domestic sales to the import duty differential and sensitivity of profitability to INR-USD exchange rates. ICRA further notes that although MRPL has been gradually reducing its dependence on oil from Iran, commercial risks for sourcing the crude from Iran remain high given the tightening of sanctions by USA on trade relationships with Iran since February 2013. Moreover, as the company diversifies its crude oil supplier base and stocks more inventory of oil to guard against any supply disruptions, its working capital requirements should increase, which could also expose the company to inventory loss in the event of any sharp fall in oil prices. 

Shares of the company gained Rs 1.85, or 3.68%, to trade at Rs 52.15. The total volume of shares traded was 224,046 at the BSE (3.56 p.m., Friday).