New Delhi | August 23, 2016: Shipping and logistics company Mercator Limited (earlier known as Mercator Lines Limited) has decided to gradually shut its coal-trading business due to lower margins from the segment.

"We are not focusing on that business now because it is not contributing to profitability," Kishor Shah, chief financial officer, Mercator told Business Standard.

The company has been in the business of coal transportation and logistics since 1995.

Mercator acquired coal mines in Indonesia and Mozambique. The company has mining licences for three coal blocks in Indonesia.

The drop in income from operations in the April-June quarter is due to coal-trading business.

In that quarter, Mercator reported a consolidated net profit of Rs 16.6 crore, mainly on account of sale of its dry bulk cargo business, carried out by its Singapore unit.

The company's income from operations declined to Rs 584 crore in the April-June quarter from Rs 718 crore in the year-ago period.

Dry bulk cargo business was one of the pain points for the company. The business had a Rs 1,000-crore loan and operational losses. On a consolidated basis, the sale helped the company cut its debt.

"Presently we are doing 1.5 million tonnes of mining and selling in the Indonesian market. That business is contributing at the EBITDA (earnings before interest, taxation, depreciation and amortization) level," Shah said.

The company is also engaged in renting out infrastructure services like jetty, barges and crushers etc alongside mines in Indonesia.

Mercator is focusing on the development of its dredging business and it hopes to bag a few orders in the segment.

At present, the capital and maintenance dredging market in India is Rs 2,000 crore. Going forward this market is expected to expand to about Rs 6,000 crore.

The company's vessels are deployed with oil marketing companies like British Gas, on medium to long term charter basis.

Mercator's is banking on the ministry of shipping's Sagarmala project for a fillip to its dredging business.

"We are working for the port trusts in India. Wherever there is a port there is room for dredging activity. Focus is on the major ports. With Sagarmala project coming, the dredging segment of port is increasing and we are keen to participate in this segment. It's a sunrising business," Shah said.

The central government plan to convert 101 rivers with a total length of 82,000 km across the country into the navigable waterways.

"It is a huge opportunity for companies like Mercator. Some such companies may even have to tie up with foreign companies to have technology, requisite vessels in place," Shah added.

(Source: http://www.business-standard.com/)