MRPL plans 100 retail outlets; JV with Gulf Oil yet to take off

Mangalore Refineries and Petrochemicals Ltd (MRPL), a subsidiary of ONGC Ltd, plans to set up around 100 retail outlets in the current financial year as part of its expansion plans in the retail business.

"The company plans to add 100 retail outlets in FY17," said a person with direct knowledge of the company's retail plans. MRPL currently operates just two retail outlets in Karnataka and looks to expand further to cash in on road traffic growth in India. "With the positive outlook for the Indian economy and increasing demand in the transportation sector, we have drawn up ambitious plans for consolidating our retail business," D K Saraf, MRPL chairman, said in the company's annual report for 2015-16.

MRPL is also examining its existing joint venture with Gulf Oil Lubricants India Ltd for a viable business plan.

MRPL has a joint venture in place with Gulf Oil for its retail business named Mangalam Retail Services Ltd (MRSL). The joint venture so far has not commenced any business activities. "Continuance of JV with Gulf Oil is being examined for a viable business plan," a MRPL spokesperson said in an emailed response. MRPL holds 49.98 per cent stake in Mangalam Retail. An email query sent to Gulf Oil remained unanswered.

After deregulation of high speed diesel pricing, the company is expecting to commission a sizeable number of retail outlets during 2016-17, MRPL said in its annual report. In an email query sent to MRPL over plans to start 100 retail outlets, the company spokesperson said, "The company has plans for expanding the retail network, and certain approvals are awaited at this point in time."

In 2015-16, India's industry sales for petrol rose 15 per cent to 21.84 million tonnes and sales for diesel rose eight per cent to 74.63 million tonnes, according to data available with the Petroleum Planning and Analysis Cell. Industry officials from both private and state-run companies operating in the fuel retailing business are optimistic the growth rates will remain robust.

However, MRPL may find it difficult to establish itself in a deregulated market. With the deregulation in diesel and petrol pricing, incumbents like Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd and IndianOil Corporation Ltd are seen focusing on their non-fuel retail business to fight competition. "It is a very vibrant market and is growing at double digits. Even if the demand for petrol and diesel is going up, the existing players have already created a huge network. In the period when private companies were missing from this segment, state-run companies have expanded and have plans to further expand.

For any new player to make profits it needs to have a huge scale," said Debasish Mishra, partner-consulting, Deloitte Touche Tohmatsu India LLP.

In addition to the state-run companies, private refiners like Reliance Industries Ltd and Essar Oil are also increasing focus in this segment. Reliance Industries is in the process of restarting operations at 1,400 outlets. Essar Oil also looks to increase its retail outlets from the current 2,500 to 5,000 outlets in less than 18 months' time.