Mangalore Refineries PCDs: Unattractive

Recommendation: Unattractive

Reshma Krishnan

MRPL issued this partly convertible bond in May 1992 at Rs 135.

After conversion, the bond had a face value of Rs 76. The bond is redeemable in four instalments of Rs 19 starting at par, from July 1999 with the final redemption in July 2002. The current face value of the NCD is Rs 19. It has a high coupon rate of 16 per cent and interest is paid semi-annually. The bond traded between Rs 19 and Rs 20.05 in the last fortnight and is fairly liquid compared to other bonds. It now trades at Rs 20.05.

The bond's YTM, calculated on the current market price, stands at 14.56 per cent. This is a pretty good return even after transaction costs. This return is attractive at the current price levels. However, the company posted a loss of Rs 260 crore (after interest, depreciation and tax) and had a debt-equity ratio of 6.5 for the year ending March 2001. Considering the company's financials, investors can exit the bond as soon as prices begin to rise. Fresh exposures in this bond are not advisable.