The Hindu Business Line : Mercator plans Rs 1,300-cr fleet expansion

The Mumbai-based tanker owner would also be diversifying into the bulk segment as part of this expansion plan, which would shore up its tonnage to 1.5 million dwt (dead weight tonnes), Mr H.K. Mittal, Chairman and Managing Director, told Business Line.

The company would be raising around $60 million by way of foreign currency convertible bonds (FCCB) and the balance would be met by domestic debt plus internal accruals, he said.

The company has convened an EGM on Monday to secure shareholders' consent on the investment plans.

Mercator's investment plans assume significance in the current market scenario where ship prices are at an all-time high. But Mr Mittal believes this is the right time to expand capacity. "I agree that prices are high but the market is also growing. We took the decision based on our experience. We are confident that our investments will yield expected returns." The company had reported a net profit of Rs 58 crore in last quarter against a full year profit of Rs 50 crore in the previous year.

Starting off with one small ship in 1988, Mercator took advantage of the deregulation of the oil cargo to emerge as the second largest private shipping company in the country with a tonnage of over one million dwt. Bulk of the expansion took place in the last two years.

One significant aspect of MLL's current expansion will be its foray into the bulk market, having been confined to the tanker market till now. "Out of the six vessels we propose to acquire, three will be bulk carriers, including a new one, another fairly new and a five-year-old ship. We have been toying with the idea of expanding our portfolio by entering into the bulk segment for quite some time. We feel this is the best time for us to enter this area, as the bulk market is characterised by bullish sentiments," Mr Mittal said.

Its present fleet of 10 vessels comprises only tankers, including one VLCC (very large crude carrier), five Aframax tankers and two MR (medium range) tankers.

MLL is also planning to either set up its own subsidiary or make a suitable acquisition overseas, in which it will have at least 51 per cent stake. "The idea behind having an overseas subsidiary is to get better access to the global shipping market. This will also help us tap certain opportunities in terms of finances," according to Mr Mittal.

"Another strategy that has paid off is our fleet utilisation. We have always tended to cover our assets by going in for longer contracts. Generally, 70 per cent of our fleet is in the long-term contracts, while the remaining is in the spot market," he said.

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