The Hindu Business Line : Mercator Lines may foray into bulk cargo segment

MERCATOR Lines Ltd, the third largest private shipping company in India operating in the liquid bulk segment, is mulling over a proposal to foray into the bulk cargo segment in the light of the bright market outlook for this sector.

Being on a tanker acquisition spree in the last fiscal, the company may shift gears to include a bulk carrier in the $150-million capital expenditure programme that it has put up on the drawing board for the current fiscal.

"Nothing has been firmed up on this yet. We are still studying the (bulk) market and if we see the right opportunity we may take the plunge," according to Mr H.K. Mittal, Chairman and Managing Director of the company.

Admitting that the bulk market was very bullish in the last fiscal, he told Business Line, "As the tanker segment was equally strong, we opted for consolidation in this segment last fiscal." The company, however, will continue to focus on the tanker segment as its core business, while its possible foray into the bulk sector would just be a "business expansion", depending on the market conditions.

The company had been on an acquisition spree, with its total tonnage increasing from 92,000 DWT to 4.62 lakh DWT by the end of March 2004 and 8.60 lakh DWT at present. It has a fleet of nine tankers, including one very large crude carrier (VLCC), which it acquired last month, five Aframax tankers of one lakh DWT each and one Medium Range (MR) tanker of 50,000 DWT.

Reiterating that the company would stay focused in the tanker segment, Mr Mittal said it was scouting for a second VLCC in the second-hand market. "The recent surge in prices in the second-hand VLCC market has delayed our acquisition a bit. A VLCC as the one we purchased last month for $44 million is today costing $50 million, owing to the firming up of tanker freight rates. We are waiting for the right opportunity for the acquisition, which could happen any time this year," according to him.

Mr Mittal predicts a strong tanker freight market for the next one and half years, especially with the global tanker trade facing a one to 1.5 per cent shortage in tanker supply vis-à-vis the present demand.

The company has laid out a capital expenditure programme of $150 million for the current fiscal, targeting to increase its DWT from the present 0.86 million to 1.5 million. "The type of vessels we acquire will depend on the changes in the market conditions in the remaining part of the year. The expansion will be funded through the debt-equity route," he said.

Earlier this year, Indiaman Fund (Mauritius), a part of the Warburg Group, had picked up 8.2 per cent stake in the company through a preferential allotment at Rs 275 per share.

While Warburg picked up 5.5 lakh shares, another 5.4 lakh shares were allotted to the promoters.

On whether it had plans to enter the capital intensive LNG transportation market, Mr Mittal said the company was exploring the possibility, but "we will think about it seriously only from next year". The company was watching the developments with regard to the four LNG terminals proposed at Surat, Mangalore, Kochi and Kakinada in Andhra Pradesh.

"For entry into LNG sector, a shipping company has to necessarily tie up with the terminal operator, like in the case of LNG Petronet, for long-term contracts for shipping LNG," he pointed out.