Eye stable revenue from non-core segment due to business’ cyclical nature.
Mercator Lines, India’s second largest shipping company, best known for its largest fleet of dry bulk carriers, became the biggest exporter of coal from Indonesia to India in November 2009, from its own mines. Its subsidiary there, Oorza, exported 0.33 million tonnes (mt) of coal to India in the month. And, the company is now aiming for 10 mt of annual production in the next three years from Indonesia alone.
“We are scouting for more mines for acquisitions in Indonesia,” said a company executive, who did not wish to be named. The company also has a mine in Mozambique, with recoverable reserve of 1 billion tonnes. “With that kind of reserve, anyone would like to have 30 million tonnes of annual capacity,” he said.
Though, the production in Mozambique will take longer, as the rail and port infrastructure is yet to be created.
Mercator Lines reported Rs 749 crore of revenue in the first half of the current financial year. Of this, 14 per cent, or Rs 104 crore, came from coal mining. The contribution of mining in the corresponding period of the previous year was zero: It started mining in Indonesia in the third quarter of the last financial year.
This is a conscious plan of the company, for its non-shipping revenue to overtake shipping revenue by March 2011. The company is building dredging and offshore businesses to meet this target.
Similarly, the largest private sector shipping company, Great Eastern Shipping, has put its focus on offshore drilling and exploration. “Exploration is a much more stable business in the long run,” said a company spokesperson.
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Its offshore subsidiary, Greatship, currently owns one 350 ft jack-up rig and has chartered another. Besides, it owns 14 offshore vessels and has chartered one more supply vessel. It will spend $423 million (Rs 1,928 crore at the current exchange rate) to buy 11 offshore vessels in the next two years.
“Shipping is cyclical, so it is prudent to build a more stable revenue stream with a related business like offshore,” she said.
In the first half of the current financial year the company reported Rs 334 crore of revenue from the offshore business, up from Rs 127 crore in the corresponding period of the previous year.
In the same period, shipping revenue fell to Rs 1,352 crore from Rs 2,300 crore and so, the contribution of the offshore business grew to 20 per cent of total revenue in the first half of the current financial up, from 5 per cent a year ago. These companies would be announcing their October to December quarter results this month.
“Offshore contracts are usually of three to four years, giving longer earning visibility,” said Jehangir Adi Master, an analyst with ICICI Securities. “It has become necessary for shipping companies to get into these segments for stable growth.”