Chennai Petroleum Corporation Share price and Fundamental Analysis

Company History

Chennai Petroleum Corporation Limited (CPCL) is in the business of refining crude oil to produce & supply various petroleum products, manufacture and sale of lubricating oil additives. Indian Oil Corporation Limited, the holding company, markets a majority of the fuel products produced by CPCL.Chennai Petroleum Corporation Limited (CPCL) was incorporated on 18th November of the year 1965. Formerly known as Madras Refineries Limited (MRL), it was formed as a joint venture between the Government of India (GOI), AMOCO and National Iranian Oil Company (NIOC) having a share holding in the ratio 74%: 13%: 13% respectively. CPCL has two refineries with a combined refining capacity of 10.5 Million Tonnes Per Annum (MMTPA). The Manali Refinery has a capacity of 9.5 MMTPA and is one of the most complex refineries in India with Fuel, Lube, Wax and Petrochemical feedstocks production facilities. CPCL's second refinery is located at Cauvery Basin with 1.0 MMTPA at Nagapattinam. The main products of the company are LPG, Motor Spirit, Superior Kerosene, Aviation Turbine Fuel, High Speed Diesel, Naphtha, Bitumen, Lube Base Stocks, Paraffin Wax, Fuel Oil, Hexane and Petrochemical feed stocks.

In the year 1985, AMOCO disinvested in favour of GOI and the shareholding percentage of GOI and NIOC stood revised at 84.62% and 15.38% respectively. A Propylene Plant with a capacity of 17,000 tonnes per annum was commissioned in the year 1988 to supply petrochemical feedstock to neighbouring downstream industries. CPCL had entered into an agreement with Balmer Lawrie & Co. Ltd. Chennai in September 1991 for supply of Anti-oxidants Feedstock and the first supply was successfully started in March of the year 1992. GOI disinvested 16.92% of the paid up capital in favor of Unit Trust of India, Mutual Funds, Insurance Companies and Banks on 19th May 1992, thereby reducing it's holding to 67.7 %. During the year 1992, the company commissioned its Hexane Plant with a production capacity of 25,000 Metric Tonnes per annum and also commissioned a Sewage Water Treatment Plant with capacity of 2.5 MGD.

The initial unit of the company was set up in Cauvery Basin at Nagapattinam with a capacity of 0.5 MMTPA in the year 1993 and later on its capacity was enhanced to 1.0 MMTPA. The public issue of CPCL shares at a premium of Rs. 70 (Rs. 90 to FIIs) in 1994 was oversubscribed to an extent of 27 times and added a large shareholder base of over 90000. In 1995, CPCL's new boiler for co-generation of 130 T/HR capacities to meet the increased stream load was commissioned. The company had commissioned the LPG separation unit & steam turbo generator in the year 1996 at CBR. During the year 1997, as to satisfy the customers and to meet the demand, CPCL had launched the 500N grade of LOBS in the field of LOBS. In the same year 1997, The Company obtained clearance from the Govt. to expand the capacity at Manali by another 3 million tonnes per annum.

As a part of indigenisation of reverse osmosis membranes in collaboration with Central salt and marine chemicals research institute the R&D unit of the company had commissioned a reverse osmosis pilot plant in the year 1997 with capacity of 50,000 liters per day capacity to study the membrane performance. The Joint Venture was considered between Petronas, IOC and MRL in 1997 for setting up an underground cavern storage facility at the Ennore liquefied natural gas import station. The company signed a MOU with Indian Oil Corporation Ltd in the year 1998 to work jointly on projects of mutual benefit including a refinery project in Southern India.

The Tamil Nadu Electricity Board signed a power purchase agreement with the company during the year 1999. During the year 2000, Indian Additives Ltd a joint venture of the company, and Chevron Chemical Company US, had ceased to be a subsidiary of the company. In the same year, CPCL had launched crumb rubber modified bitumen for laying high quality and cost effective roads. The Company changed its name to Chennai Petroleum Corporation Ltd (CPCL) with effect from 6th April of the year 2000. As a part of the restructuring steps taken up by the Government of India, Indian Oil acquired equity from GOI in 2000-01 Currently IOC holds 51.88% while NIOC continued its holding at 15.40%. During the year 2001, CPCL and EDL India Pvt Ltd had signed a MoU to set up a 14.85 MW waste-to-energy project using municipal solid waste.

The Chennai Port Trust had signed an agreement with the company in the year 2003 to set up a Tier I Oil Spill Response facility at the Chennai port. The Propylene Plant unit was revamped to enhance the propylene production capacity to 30,000 tonnes per annum in the year 2004. During the year 2005, the company and Indian Oil Corporation collectively made a deal to provide project consultancy on crude pipeline. The crude throughput for the year 2005-06 was 10.36 million metric tonnes, and has surpassed its yearly target. Highest ever production was achieved in the value added products like LPG, Petrol, Aviation Turbine Fuel, and High Speed Diesel. The total exports through Indian Oil were 642 TMT during the year 2005-06.

In Manali Refinery, to enhance the availability of water, an additional 2.5 MGD capacity Sewage Reclamation Plant consisting of Biological Treatment, Chemical Treatment, Ultra Filtration and Reverse Osmosis was commissioned in December of the year 2006. The Standard & Poor (S & P), the world's leading credit rating agency, identifies CPCL as one of the seven Indian Companies having potential to emerge as Challengers to the World's leading Blue chip companies during the year 2006-07. The subsidy sharing mechanism of LPG/SKO by way of discounts offered by refineries to Marketing Companies, which was introduced in the year 2006 was withdrawn in 2006-07. As at January of the year 2008, CPCL plans to invest Rs 50 billion for revamping its Chennai refinery to enhance the quality of manufactured petroleum products. CRISIL assigned AAA and P1+ for Chennai Petros bank facilities during April of the year 2008.

In 2013-14, CPCL's Manali Refinery achieved the highest ever throughput of 10065 TMT as compared to the previous best of 10045 in 2010-11. Refinery III at Manali surpassed, for the first time, the expanded design capacity of 4.0 MMTPA during the year. Once Thru Hydro Cracker Unit (OHCU) achieved the highest ever throughput of 2007 TMT, as against the previous best of 1996 TMT in 2010-11. Fluidised Catalytic Cracking Unit (FCCU) achieved the highest ever throughput of 1065 TMT, as against the previous best of 1006 TMT in 2010-11. The energy index of Manali Refinery was lowest at 62.5 MBN as against the previous best of 65.8 MBN in 2012-13. HSD and propylene production in Manali Refinery achieved the highest ever crossing 4 MMTPA and 35.8 TMT respectively.

During the year under review, the Manali Refinery increased the Spot Crude Oil Basket from 37 to 50 numbers, thereby increasing the chances of selection of crudes with higher intrinsic value. Further, Manali refinery processed three new crudes viz., Kikeh from Malaysia and Agbami and Okwuibome from Nigeria. By processing these new crudes, the company realizes the benefit of adding new crudes to the basket.

During the year under review, CPCL's Cauvery Basin Refinery (CBR) processed a new Crude Oil, Agbami for the first time. CBR achieved the highest ever Crude coastal receipt parcel size of 44.4 TMT in March 2014 through Marg Karaikkal Port, as compared to the previous highest shipment of 42 TMT.On the marketing front, CPCL added about 10 new customers during the year for supply of Sulphur, Hexane and Propane.

CPCL constructed and commissioned two tanks with a capacity of 13,000m3 each in June 2013, for storing fire water alongwith associated fire water pumps. It also constructed and commissioned the Volatile Organic Compound (VOC) absorption facility with 3 nos. of activated carbon filters at Effluent Treatment Plant -II. The company constructed a new Storage Tank of capacity 10,000 KL, to handle slop more effectively. CPCL constructed one Naphtha and one MS tank, each of capacity 10,000 KL to accommodate increased production of MS/Naphtha.

As a risk mitigation measure and in line with the norms prescribed by the Oil Industry Safety Directorate (OISD), CPCL is implementing a Mounded Bullet Storage facility for LPG and Petrochemical products at an estimated cost of Rs 279 crore. The project was taken up in April 2013.

In order to meet long term fund requirements, CPCL, during January 2014 on a direct placement basis, issued 10000 numbers of 9.65% Secured Redeemable Non-Convertible Debentures (Series - II) of Rs 10 lakh each redeemable at par for Rs 1000 crore.

CPCL achieved highest ever crude throughput in FY 2014-15. The distillates yield was the highest at 72.1% as against the previous best of 71.4% in 2013-14.

CPCL's Manali Refinery achieved the highest ever crude throughput of 10,251 TMT as compared to the previous best of 10065 TMT in 2013-14. Fluidised Catalytic Cracking Unit (FCCU) achieved the highest throughput of 1075 TMT as against the previous best of 1065 TMT in FY 2013-14. The throughput of Continuous Catalytic Reforming Unit (CCRU) was the highest at 389 TMT as against the previous best of 359 TMT in 2013-14. Similarly, the throughput of Diesel Hydro treating Unit (DHDT) was the highest at 2186 TMT. The NMP Lube Extraction Unit also registered the highest throughput of 425 TMT as against the previous best of 390 TMT in 2003-04. The Energy Index for Manali Refinery was also the lowest at 62.3 MBTU/ BBL/NRGF as against the previous best of 62.5 MBTU/BBL/NRGF in 2013-14. Production of Propylene, MS and HSD in Manali Refinery also surpassed the highest levels at 37 TMT, 1050 TMT and 4474 TMT respectively.

Manali refinery processed two new crudes viz., DAS crude from Abu Dhabi and Brass River from Nigeria. By processing these new crudes, the company realized the benefit of adding new crudes to the basket.

On the marketing front, CPCL added 11 new customers during the year for supply of Food Grade Hexane, Sulphur and Paraffin wax. Agreement was entered into with Cetex Petrochemicals Limited for a period of4 years for supply of 6000 MT per annum of MEKFS.

In order to accommodate increased production of MS and Naphtha, one Naphtha and one MS tank, each of 10,000 KL capacity was constructed and commissioned in October 2014. Further, in order to handle slops more effectively, a new storage tank of 10,000 KL capacity was completed and commissioned in November 2014. As part of the Resid Upgradation Project enabling job, a new reservoir of 4 MGR was constructed and commissioned.

Activities are initiated to replace the existing 45 year old Crude oil pipeline running from Chennai Port to Manali Refinery with a New Crude oil Pipeline with state-of-the-art technology and safety features, to ensure reliable and faster crude transfer to refinery at a cost of Rs. 257.87 crore. The new pipeline is aligned along the berm of Ennore Manali Road Improvement Project. The Coastal Regulatory Zone (CRZ) clearance from Ministry of Environment & Forests was received in January 2014. Clearance from Ministry of Road Transport and Highways (MORTH) has been obtained on 4 April 2015, followed by Petroleum and Explosives Safety Organisation (PESO) approval on 11 May 2015.

After incurring losses for three consecutive financial years, CPCL achieved turnaround in 2015-16 by posting a Profit Before Tax of Rs. 787 crore and Profit After Tax of Rs. 771 crore. This was mainly due to improvement in operating areas, support from Holding Company IndianOil and softening of prices in international market and better Working Capital / Borrowings Management.

CPCL allotted 100 crore Non-Convertible Cumulative Redeemable Preference Shares (NCCRP Share) of Rs. 10/- each amounting to Rs. 1000 crore to Indian Oil Corporation Limited, the holding company, on private placement preferential allotment basis on 24 September 2015. The NCCRP Shares is not listed in any Stock Exchange. The Preference shares are entitled to a dividend rate equivalent to the Post tax yield of AAA rated corporate bond i.e. prevailing 10 year G-Sec yield plus spread on AAA rated corporate bond i.e., 6.65% p.a. The coupon rate on preference shares would be adjusted to reflect the subsequent changes in tax laws with the consent and approval of preference share holders by way of special resolution.

The State of Tamil Nadu especially Chennai City had experienced unprecedented rains and consequent floods in December 2015. CPCL, through its dedicated employees, ensured operations of critical plants and utilities in these extremely difficult and challenging conditions. The product pipelines were operated continuously to enable petroleum products availability during the heavy rains and floods, ensuring that there was no shortage of products in the market. The company also ensured that no significant damage to plants and equipments were caused during the period. The units were restarted in the shortest possible time immediately after the improvement in the conditions.

The distillates yield in 2015-16 was the highest at 72.5% as against the previous best of 72.1% in 2014-15.

During the year under review, CPCL's Manali Refinery processed two new crudes viz., Al Shaheen Qatar condensate crude from Qatar and Akpo crude from Nigeria. By processing these new crudes, the company realizes the benefit of adding new crudes to the basket.

During the year, CPCL produced two new products viz. VG-40 grade Bitumen and 380 CST Bunker Fuel for Chennai Port, which received good response from the market. During the year, supply of MEK feedstock to CETEX commenced and augmented. Eighteen new customers have been added during the year for supply of Food Grade Hexane, Propylene, Sulphur and Paraffin Wax.

CPCL achieved the highest plan expenditure of Rs. 1272 crore for plan projects in 2015-16. In order to provide intrinsically safe storage in line with the recommendations of the External Safety Audit, construction of Mounded Bullet storage facilities for LPG, Propane and Petrochemical Feedstocks (Propylene & Butylene) (Total 12 Mounded bullets) was taken up for implementation at an estimated cost of Rs. 279 crore. These Mounded Bullets have been commissioned in a phased manner by March 2016.CPCL's Cauvery Basin Refinery commissioned new crude oil storage tanks - Tank H in August 2015 and Tank G in December 2015.

For the financial year ended 31 March 2017, CPCL registered its second highest Profit Before Tax since inception at Rs. 1,365 crore. On the operational front, the distillates yield was the highest ever at 72.6% as against the previous best of 72.5% in 2015-16. CPCL successfully completed OHCU revamp shutdown in February 2017, improving its capability of handling coker streams and enhancing its capacity. The MS production was the highest at 1,105 TMT as against the previous best of 1,050 TMT in 2014-15; the isomerate production was the highest at 166 TMT as against the previous best of 135 TMT achieved in 2011-12. During the year, Manali Refinery processed one new crude E.A. blend (Low-Sulphur category) from Nigeria, which was added to the regular basket.

On the marketing front, 29 new customers were registered for supply of food grade hexane, propylene, sulphur and paraffin wax during the year. During the year, fresh agreements were signed with Indian Additives Ltd. and Kothari Petrochemicals Ltd. for sale of fuel oil and lean Poly Butylene Feedstocks respectively.

CPCL achieved Plan and Non-plan expenditure of Rs. 1,134 crore and Rs. 135 crore respectively, totaling Rs. 1,269 crore during the year.

CPCL is implementing the Resid Upgradation Project at an estimated cost of Rs. 3,110 crore to increase distillate yield and maximise the processing of high-sulphur, heavy crudes. The project consists of new secondary processing units like Delayed Coker Unit (DCU), Sulphur Recovery Unit, Revamp of Once-through Hydrocracker Unit (OHCU) and addition of associated utilities and offsite facilities. The revamp of OHCU has been completed and commissioned during March 2017. The DCU has been mechanically completed during February 2017 and other associated utilities Soffsite facilities are under various stages of construction/commissioning.

A 150 KW rooftop grid-connected solar power plant was successfully installed at the control room and substation-1 building of Crude Distillation Unit at CPCL's Cauvery Basin Refinery.

CPCL's Profit Before Tax at Rs. 1,458 crore for the financial year ended 31 March 2018 was the second highest since the company's inception. On the operational front, the company achieved the highest ever crude oil throughput of 10.789 million metric tonnes per annum (MMTPA) during the year 2017-18 as against the previous best of 10.779 MMTPA during 2014-15. The distillates yield was the highest ever at 73.2% as against the previous best of 72.6% in 2016-17. The company clocked the highest ever Once-thru Hydro Cracker Unit (OHCU) throughput of 2,164 TMT as against the previous best of 2,007 TMT in 2013-14. The Fluidised Catalytic Cracking Unit (FCCU) throughput achieved was also the highest at 1,084 TMT as against the previous best of 1,075 TMT in 2014-15. Production of Motor Spirit was the highest at 1,107 TMT in 2017-18 as against the previous best of 1,105 TMT in 2016-17. HSD production (including raw diesel) also recorded the highest at 4,599 TMT as against the previous best of4,474 TMT in 2014-15.

CPCL processed two new low-sulphur crude oil grades (Okono from Nigeria and Madanam indigenous grade), which were added to the regular basket.

CPCL commenced sale of Petcoke in December 2017. Direct marketing of Fuel Oil (FO) to Indian Additives Limited through a dedicated line was also commenced during the year.

CPCL achieved Plan and Non-plan expenditure of Rs. 931.92 crore and Rs. 88.40 crore respectively, totaling Rs.1,020.32 crore during the year.

The company has successfully implemented the Resid Upgradation Project comprising mainly of new secondary processing units like Delayed Coker Unit (DCU), Sulphur Recovery Unit (SRU) and Revamp of Once-through Hydrocracker Unit (OHCU), at a cost of Rs. 3,110 crore. This project was implemented to increase distillate yield and maximise the processing of high-sulphur, heavy crudes. The DCU has been commissioned in November 2017 and dispatch of Petcoke commenced. This will add significantly to the profitability of the refinery. The unit was dedicated to the nation by the Minister for Petroleum & Natural Gas, Skill Development & Entrepreneurship in February 2018. The new Cooling Tower, DM plant and SRU were also commissioned in June 2017, December 2017 and March 2018 respectively.

The company has successfully revamped the existing DHDS unit at Manali Refinery from 1.80 MMTPA to 2.34 MMTPA capacity at a cost of Rs. 310 crore; this has enabled production of diesel meeting Bharat Stage IV (BS-IV) quality norms. The revamped unit was commissioned in February 2018.

The Board of Directors of CPCL at the meeting held on 5 April 2018, has accorded approval for the partial redemption of non-convertible cumulative redeemable preference shares to the extent of Rs.500 crores, out of the total outstanding amount of Rs.1,000 crores. Accordingly, in terms of the issue, offer for partial redemption of nonconvertible cumulative redeemable preference shares to the extent of Rs.500 crores, was made to Indian Oil Corporation Limited, the holding company. Based on the acceptance of the offer by Indian Oil, the same has been remitted to Indian Oil Corporation Limited subsequently on 6 June 2018.

The Board of Directors of CPCL at its meeting held on 5 April 2018 accorded approval, subject to the approval of the shareholders of the company in the General Meeting, for cancellation of unsubscribed equity share capital of Rs.20,86,89,000, consisting of 2,08,68,900 equity shares of Rs.10/- each, comprising partial subscription to the Rights Issue made by the company in 1984 by the Government of India and non-subscription by Amoco India Inc. to the Rights Issue made by the company in 1984.