Bongaigaon Refineries Rs.89.30

Bongaigaon Refinery & Petrochemicals Limited (BRPL) was incorporated in 1974 as Government of India Undertaking. In 2001, it became a subsidiary of Indian Oil after the disinvestment by the Govt. of India. With an investment of about Rs.890 cr. in Refineries & Petrochemicals plants, BRPL has the unique distinction of being the first indigenous grass root Refinery in the country integrated with a Petrochemical complex at one location. Being in the north eastern region, BRPL enjoys special excise duty concession of 50 per cent from the government Petroleum products from the Refinery includes conventional fuels like LPG, petrol, MS, Naphtha, ATF, SKO, HSD, LDO, LVFO, LSHS, etc. Apart form petro products it also produces petrochemical like ylene, Dimethyl Terephthalate (DMT), Orthoxylene, Paraxylene, Ceenine and Polyester Staple Fibre (PSF).

BRPL has two crude distillation units (CDU) in Bongaigaon in Assam with a total crude processing capacity of 2,35,000 MTPA. The major products of this unit are Reduced Crude Oil, LPG, Straight run Naptha, Reformer feed naptha, Raw kerosene & Diesel oil. Reduced Crude oil is then converted into Fuel Gas, LPG, Naptha, gas oils, Fuel oil and Raw petroleum coke under its two delayed coke unit (DCU) each having capacity of 5,00,000 MTPA. Its Coke calcination unit is designed to convert 75,000 MTPA of Raw petroleum coke available from DCU into 52,500 MTPA Calcined petroleum coke. It also has a Kerosene treating unit with a capacity of 2,37,500 MTPA which can process raw kerosene from CDU to produce Superior kerosene oil and Aviation turbine fuel. Moreover its Xylenes plant can produce 29,000 MTPA of Para-ylene,6,000 MTPA of Ortho-ylene and 10,000 MTPA of Ceenine. BRPL also has a Dimethyl Terephthalate plant which can produce 45,000 MTPA of DMT. Recently, the company has suspended its production of DMT and PSF units due to lower market demand and unremunerative sales realisation.

Currently, BRPL is processing crude available from the oil fields of ONGC and OIL located in the North-East India Ravva crude oil from the Krishna-Godavari basin off the coast of Andhra Pradesh. Its working almost at 100 per cent capacity utilisation and gross refining margin is at record high of USD 9.30. For future growth, the company is implementing modernisation and other efficiency improvement schemes under a capex plan of Rs800~1000 cr. to become a vibrant petroleum company of national prominence. Though some analysts expect it to be merged with IOC, chances of it areess as BRPL will then lose the 50 per cent excise benefit concession.

Fundamentally, it is a strong and investor-friendly company having paid a healthy dividend of 77 per cent for FY04. For the quarter ending Dec 2004 it posted impressive numbers. Sales grew by 60 per cent to Rs1174 cr. and NP increased by 40 per cent to Rs134 cr. Its March’05 quarter numbers will be much better compared to March 2004 since the company has already made higher provision for under recovery of CST. With the continuation of strong refining margins, a healthy balance-sheet and the guiding hand of the parent Indian Oil, we expect it to end FY05 with Sales of Rs4300 cr. and NP of Rs550 cr. This works out to an EPS of Rs28 on its current equity of Rs199.82 cr. Hence the scrip is trading very cheap at 3 PE in spite of a good dividend yield. Investors are advised to buy at the current market price and hold it patiently for 12 months to see a price target of Rs150.