MRPL jumped up 4.05% to Rs 9 on Thursday as the market was pleased by the CCEA's decision approving ONGC's taking up stake in the standalone refinery project.

By 9:58 IST, volumes on the counter touched 7,100 shares on BSE. In the three sessions between 14 and 17 February 2003, the scrip of the refinery rose over 13% to Rs 8.65 from Rs 7.65.

The Cabinet Committee on Economic Affairs on Wednesday cleared ONGC's proposal to acquire the AV Birla group stake in Mangalore Refinery & Petrochemicals.

In fact, Union petroleum minister Ram Naik recently said that ONGC would take a controlling 51% stake in the petrochemicals company. The statement from the minister comes in vindication of the Public Investment Board's approval of an investment of Rs 660 crore (Rs 6.6 billion) by ONGC in the 9-million-tonne-a-year refiner. Under a restructuring proposal approved on 22 January, ONGC will pick up the Aditya Birla group's 39.37% stake in MRPL for Rs 60 crore and infuse another Rs 600 crore (Rs 6 billion) as equity.

With the Centre's approving ONGC's proposal for acquisition, MRPL has been virtually rescued from the clutches of the Board for Industrial and Financial Restructuring. If not for ONGC, the company may have been referred to the BIFR.

Earlier, in December 2002, MRPL's board had, in fact, taken a decision to refer the company to BIFR as 50% of its peak net worth had been eroded in the past four years by accumulated losses. Hope that an infusion from acquirer ONGC was imminent dissipated when the Public Investment Board began an investigation into ONGC's acquisition of stake in the company.

The finance ministry, in fact, had pressed for the PIB route over the MRPL deal. According to the Department of Public Enterprises guidelines, framed on 22 July 1997, any investment by a public sector enterprise involving Rs 200 crore (Rs 2 billion) and above is required to go through the PIB route. However, the petroleum ministry opposed this move as ONGC's proposed investment of approximately Rs 60 crore in the beleaguered MRPL was far less than the Rs 200 crore (Rs 2 billion) required for the applicability of the PIB route.

Meanwhile, oil and gas analysts deem MRPL a `Dark Horse', implying that the company will come out with an excellent performance in months to come. They also believe the acquisition by ONGC will be mutually beneficial for both companies. It will enable ONGC to set up retail outlets sanctioned to it under the marketing rights for transportation fuels. ONGC has been authorised to set up 600 petrol stations in four states.

ONGC had recently informed Lok Sabha that it would acquire the remaining stake of Hindustan Petroleum in MRPL as well after acquiring the A V Birla group stake. After financial restructuring, which includes lenders converting part of their debt into equity, HPCL's stake in MRPL would come down to about 17% from the present 37.39%.

For the third quarter ended 31 December 2002, MRPL posted losses of Rs 130.3 crore (Rs 1.3 billion) compared to a loss of Rs 36.80 crore in the corresponding period of the previous year. Net sales increased by 89.8% to Rs 2,316.11 crore (Rs 23.16 billion) from Rs 1,220.50 crore (Rs 12.2 billion) in DQ 2001.

Analysts feel the results for Q3 were dismal, but are already discounted in the price of the stock. However, it is felt that the company will turn around once ONGC takes over management.