Mercator plans to restructure loans as losses mount

The company's total liabilities at the end of the last financial year (FY) stood at Rs 2,370.86 crore, an increase of Rs 168.68 crore from a year ago

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Mercator plans to restructure loans as losses mount

In view of its worsening financial condition, Mumbai-based Mercator Ltd is looking at restructuring its loans. The company's total liabilities at the end of the last financial year (FY) stood at Rs 2,370.86 crore, an increase of Rs 168.68 crore from a year ago.

Making matters worse, the company reported dismal fourth-quarter earnings in FY2018-19 and a comprehensive loss of Rs 307.36 crore as against Rs 83.81 crore during the corresponding period of the previous fiscal. Likewise, the annual consolidated loss widened to Rs 836.26 crore from Rs 276.07 crore in FY2017-18.

Last fiscal, Mercator also sold two ships that were nearing the end of their lifecycles and it expects to turn profitable with the sale of these loss-making ships.

However, the company is facing difficulties to service dredging contract at Porbandar Port's harbour with dues pending to several individual and companies. In fact, one of the dredgers – Veera Prem – was grounded, resulting in an impairment loss of Rs 97 crore last year. As the company has initiated insurance proceedings, going forward, an insurance claim for the total constructive loss is likely to be recognised.

Another dredger, Omkara Prem, has been labelled as unseaworthy and the seafarers that were on board have not been paid their salaries since April. The agent too hasn't been paid the dues, claimed Omkara Prem's Master Captain Karuna Shankar. All the 32 seamen had abandoned the vessel, but with a replacement crew unavailable, they were forced to board the ship once again.

A look at Mercator's segment-wise consolidated statement shows that annual revenue from the shipping segment fell from Rs 405.66 crore in FY2017-18 to Rs 311.96 crore last fiscal, resulting in an increase in the liability position. As per the filings, the liabilities have shot up to Rs 1,807.39 crore in 2018-19 over Rs 1,095.45 crore from a year ago.

Mercator's chief executive officer Shalabh Mittal said in a statement, "During this quarter, we have taken firm steps towards further balance-sheet de-leveraging with the sale of loss-making VLCC ship having concluded in April 2019. Our coal business did an all-time high level of production and performed in-line with our expectation, given the volatility in coal prices witnessed in the year. Our oil and gas business remains our growth driver; ramp up of this business is dependent on drilling of developmental wells and is postponed due to delay in tying up capex funding; we are in discussion with potential lenders."

"We are also in discussion with the lenders of Mercator for restructuring our loans to make the company sustainable in the long run," added Mittal.

Since June 7, the company's shares have touched 52-week low every day. On Friday, the scrip closed at a new low of Rs 1.63 from its yearly high of Rs 25.75 per share.

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