We plan to buy more vessels: Mercator CMD

In an industry traditionally dominated by companies such as the state-owned Shipping Corporation of India and the Great Eastern Shipping Company, a relatively younger company has carved a niche for itself. Mercator Lines, founded in 1983, has emerged as a major player in the coastal sector.

Last year, the company witnessed the highest jump in market capitalisation among shipping companies in percentage terms""""its stock price appreciated over 1000 per cent between January 2003 and 2004.

The company is now planning a preferential allotment. H K Mittal, CMD of Mercator Lines, comes candid in an interview with Business Standard.

Mercator was planning a preferential allotment. What is the status on that?

Mercator has finalised the preferential issue. An annual general meeting is being held on February 14 to seek shareholders' approval.

How long do you expect the buoyancy in the freight markets to continue? What is Mercator doing to capitalise on that?

We expect the freight market to remain buoyant through 2004. The company is planning to acquire more vessels.

Could you throw some light on the company's expansion plan and how it intends to fund it?

As a first step, the company is making a preferential issue to promoters and foreign institutional investors. If needed, we may issue further shares and raise debt to fund our growth plan.

Has the company become compliant with the ISPS code?

The company is fully compliant with the ISPS Code which comes into effect from the July 1, 2004.

Now that the commitment for a tonnage tax has been made in the vote on account when do you expect a formal introduction? How will it benefit the industry in general and Mercator Lines in particular?

Tonnage tax is likely to be implemented in the next Budget to introduced by the new government.

Presuming it is done, it should release cash to shipping companies which will enable them to fund their growth plans. Currently, the average taxation paid by companies are in the range of 10-12 per cent, which is expected to reduce to less than 2 per cent.

Is the demand for a tonnage tax, which entails payment of tax at 0-2 per cent, justified when even the infrastructure sector has been denied such benefits?

Worldwide, more than 90 per cent of the world tonnage is subject to tonnage tax. Shipping is a global industry and to remain internationally competitive, it is essential that tonnage tax is introduced.

What policy initiatives are required to give a push to coastal shipping in which Mercator is a leading player?

In the past, a number of committees were formed which had given various recommendations for giving a boost to coastal shipping, but none have seen the light of the day. With the mooting of Sagarmala project, a step in the right direction has taken been and we hope these will give a boost to coastal shipping.