Mini-Ratna Mangalore Refinery and Petrochemicals Ltd's (MRPL) is losing nearly a sixth of its profit margin to windfall taxes, revealed Sanjay Varma, Managing Director (MD) of the state-owned refiner on Monday.

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Windfall taxes chipped away $2.38 per barrel from MRPL's gross refinery margin (GRM) resulting in a net earning of $17.11 per barrel in the quarter. GRM is the difference between the revenue generated from the sale of refined products and the cost of producing those products and is a crucial measure of profitability for refiners.

“We have written the GRM of around 17.11 in this quarter; this is a net off of the windfall taxes. The impact of windfall taxes was around $2.38 per barrel. So if you typically see our refinery, the overall GRM was around 19.49, and if you subtract 2.38 as a windfall tax, then the residual GRM that the refinery could get for that is around 17.11. So that was the impact of the windfall tax in Q2,” Varma told CNBC-TV18.

Windfall taxes are higher tax rates applied to profits that arise suddenly due to unexpected gains by a particular company or industry. The Indian government has increased windfall tax on domestically produced petroleum crude to ₹9,800 per tonne from ₹9,050 per tonne from November 1, according to a government notification.

For MRPL, this means that they may experience an even more significant impact from windfall taxes in the next quarter. As the tax rate has increased, they will need to adapt their strategies to cope with this financial setback.

However, despite these tax challenges, MRPL managed to record a profit after tax of ₹1,059 crore during the second quarter of 2023-24. This is a significant turnaround from the loss after tax of ₹1,789 crore in the same period of the previous fiscal year.

Additionally, the company reported a net profit of ₹2,072 crore during the half-year ending September 30, 2023, compared to ₹918 crore in the same period of 2022–23.

"Debt-Equity Ratio improved from 2.24 as on September 30, 2022, to 1.17 as on September 30, 2023," the company said in its press release.

The company plans to expand its retail business under its HiQ brand by achieving 1 million tonnes sales in the next three to five years to improve its retail marketing footprint, the release said.

Shares of MRPL settled at ₹109.30 on NSE, down more than half a percent. MRPL shares have gained more than 17% in the past month.

Also Read | Indian Oil Q2 Results: Profit, revenue decline versus June quarter; Refining margin miss estimates

(Edited by : Ajay Vaishnav)

First Published:Nov 6, 2023 10:58 PM IST