Dear Shareholders,
It gives me immense pleasure to present to you, the annual report for FY18. Despite the
operational challenges in a few business segments & the structural shifts in our
operating environments, our company has remained steadfast in its commitment to business
excellence by staying true to our core values of doing things differently and honouring
commitments with great perseverance.
Our journey began in 1983 as a private shipping company and I seek great delight in
witnessing its transformation into an energy focused conglomerate. Over the last few
years, our company has faced certain headwinds, on its path to success. I believe,
however, that the next few years will be truly remarkable for Mercator, marked by improved
financials, stronger corporate governance and better returns on capital. I am excitedly
looking forward to this very fulfilling journey of transformation and am thankful for your
continued support..
Warm regards,
H.K. Mittal
Executive Chairman
Company Overview
Financial Statements
Statutory Reports
Dear Shareholders,
FY18 proved to be a year of deep introspection on my part and the consolidation of each
segment of our business. We witnessed a few operational challenges in our business and
structural shifts in our operating environment in the period between FY16 and FY18. In
line with the changing business environment, we decided to strategically modify our
business model such that FY19 and FY20 become years of superior growth.
A key achievement in FY18 was the swift progress in developing our oil & gas
segment, for which we had declared commercially only in August 2017. The Field Development
Plans (FDP) for 23 Miliion barrels of oil in the two oil fields in the Cambay Basin, Jyoti
I & II, were submitted and approved. We achieved trial production in the two fields at
the end of FY18 and have since, received the mining lease to commence commercial
production. Jyoti I & II will produce high-quality light-weight crude, which will sell
at a premium. We aim to close FY19 at a production rate of ~5,500 barrels of oil per day.
This segment is expected to be our largest growth driver in future with ~35% of FY20's
EBITDA contribution coming from oil & gas. With the MoU with Indian Oil Corporation
Limited (IOCL) for crude oil sales already in place, we are projecting a production of ~2
Miliion barrels of oil by FY20.
Our coal business witnessed a roadblock in the first half of FY18, which led to
temporary disruptions in operations. We had to replace the entire management team at our
Indonesian headquarters due to reports of business irregularities and misappropriations.
We halted mining activities towards the middle of the 3rd quarter to ensure a
complete cleanup. However, we are were able to resume operations within a short period and
fully ramped up production
by the end of Q4. I am happy to report that we are currently achieving all-time high
production and dispatch levels.
We expect FY19 coal production at close to 2 Million tonnes with a 60:40 split between
the 3,700/3,800 Kcal and the 4,200 Kcal coal. By FY20, the higher quality of coal reserves
i.e. the 4,200 Kcal will have a 50% share in the total production, bringing better
realisations for the business. By end of FY19 we also expect to increase volumes of
dispatch from third-party customers using our coal infrastructure and jetty.
Dredging continues to be a key focus area for us, we consciously moved towards bidding
for higher margin contracts in the dredging segment during FY18. We have a large order
pipeline of over ff156 Crore for FY19 and continue to maintain our bidding success rate of
more than 50%.
The recent announcements by the Government of India with regards to National Waterways
development, building of new ports and dredging of key rivers like the Ganga augurs well
for the dredging sector in India. In our quest for higher margin and long-term contracts,
we are also now bidding for contracts in other Asian countries.
In the shipping business, we monetised our aged fleet during the year. While all our
vessels except the VLCC will remain 100% operational, FY19 is still expected to be a
slightly tough year for the shipping sector due to pressure on global charter and VLCC
rates. By FY20, we expect the demand-supply gap in the global tanker industry to narrow
significantly, which will aid the rebound in VLCC charter rates and subsequently, infuse
new life into our shipping business.
After several years of considerable strategic efforts, we are now a stronger, well
diversified and a more productive organisation. The results of our efforts will be seen
from H2 of FY19 onwards. We believe that FY20 will be the year of superior growth with
targeted revenues of ^1,450-^1,550 Crore, EBITDA of ff600-ff630 Crore and EBITDA margins
of more than 35%. This growth will be supported by full stream operations of the oil and
gas segment and scaling of our coal business.
I look forward to working with our committed and empowered management team and
supporting them as we pursue continued growth. We are focussed on high standards of
corporate governance, and creating meaningful sustainable value for our shareholders. I
look forward to your continued support.
Warm regards,
Shalabh Mittal Chief Executive Officer
www.mercator.com