Shares of Mangalore Refinery & Petrochemicals Ltd. rose more than 6% in early trade on Friday after parent Oil and Natural Gas Corp. announced plans to develop a 1.75 million metric tonne (MT) national strategic petroleum reserve in Mangaluru. The announcement brought the refinery into focus because of its role in India's fuel storage infrastructure.
The stock climbed as much as 6% to Rs 159.30 apiece during the session, compared with its previous close of Rs 149.68.
The development comes as India expands its strategic crude oil storage capacity to strengthen emergency fuel reserves. Investors are also assessing the announcement against the backdrop of disruptions linked to the ongoing West Asia crisis and concerns over the Strait of Hormuz.
Why Are Mangalore Refinery Shares Rising?
Mangalore Refinery, a subsidiary of ONGC, has a refining capacity of 3 lakh barrels a day. The company's shares gained after ONGC announced the proposed 1.75 MT strategic petroleum reserve in Mangalore.
India is the world's third-largest importer and consumer of crude oil. Market participants expect the additional storage capacity to strengthen the country's emergency reserves and reduce its dependence on fuel imports.
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In a regulatory filing, ONGC said it is building the reserve in "national interest" and would seek the federal government's approval for commercial use of the storage facility.
The Centre has already permitted commercial use of parts of strategic petroleum reserves at Mangalore, Vizag and Padur, which together can store up to 5.33 MT of crude oil.
Mangalore Refinery has leased half of the 1.5 MT Mangalore Strategic Petroleum Reserve, while the remaining capacity has been leased to Abu Dhabi National Oil Co.
Expansion Of Strategic Storage
Earlier this year, Abu Dhabi National Oil Co. announced plans to expand its crude oil storage capacity in India to as much as 30 million barrels. It also said it would explore potential crude storage at Fujairah as part of India's strategic storage plans.
India is also planning to build an additional 4 MT strategic petroleum reserve at Chandikhol in Odisha and another 2.5 MT facility at Padur.
Share Price Performance
Before Friday's rally, Mangalore Refinery shares had declined about 2.39% over the past month, while the Nifty 500 gained about 4.84% during the same period.
Over the past 52 weeks, the stock has traded between Rs 120.40 and Rs 212.30. The company's market capitalisation stood at Rs 27,663.02 crore at Thursday's close, with an adjusted price-to-earnings ratio of about 13.69.
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