MRPL & RPL - Analyzing Risk and Returns

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Case Details:

Case Code : FINC027
Case Length : 12 Pages
Period : 1993 - 2004
Pub. Date : 2004
Teaching Note :Not Available
Organization : Mangalore Refinery and Petrochemicals Limited (MRPL) and Reliance Petroleum Limited (RPL)
Industry : Petroleum and Finance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The Future Prospects

In August 2002, ABG announced that it would exit MRPL by selling its entire stake to the Oil and Natural Gas Corporation (ONGC) at a price of Rs. 2 per share.

According to Kumara Mangalam Birla, the chairman of ABG, one of the main reasons for exiting the joint venture was the poor financial performance of MRPL. According to analysts, purchasing an equity stake in MRPL would be a forward integration move for ONGC, which was in the business of oil exploration and production.

They also felt that by investing in the lucrative oil refining and marketing sector, ONGC would diversify risks in the oil exploration sector. Moreover, by investing Rs. 6 bn as equity as part of the financial restructuring of MRPL, ONGC would reduce its tax liability. In early 2002, RPL announced plans to merge with Reliance group's flagship company Reliance Industries Limited (RIL)...

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Exhibits

Exhibit I: Refineries in India
Exhibit II: Details of the RPL TOCD Issue (September 1993)
Exhibit III: Performance of Players in the Petroleum Sector in India
Exhibit IV: Calculating the Systematic Risk (Beta) of a Security

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