Mercator eyes Indonesia mine buy, overseas IPO for unit

Mercator eyes Indonesia mine buy, overseas IPO for unit

Mumbai: Mercator Lines Ltd, India’s second largest private shipping firm, expects to acquire a coal mine in Indonesia in the next one week for around $30 million, and plans to list its coal division overseas, a top official said.

“The likely resources (of the new coal mine) are about 60 million tonnes. The deal value will be roughly be in the region of $25-$30 million, managing director Atul Agarwal told Reuters on Monday.

He said a bulk of the funds for the acquisition will be raised from internal accruals of its coal division.

Mercator already owns coal mines in resource-rich Indonesia and Mozambique, Africa.

Mercator owns 100% of the Singapore-based coal mining unit known as Oorja Holdings Pte Ltd.

India holds 10% of the world’s coal reserves, but local supplies are falling short as the country builds more power plants and domestic coal projects run into environmental and land acquisition delays.

Last week, GVK Power & Infrastructure said it will pay $1.26 billion for a majority stake in three Australian coal mines and a port and rail project owned by Hancock Group to secure long-term coal supplies for the Indian group’s power projects.

Agarwal said Mercator Lines plans to float an initial public offering of its coal division by selling not more than 30% stake in the latter.

“We are still in discussions. The IPO will probably take six months to an year’s time," he said.

Mercator diversified into coal mining four years ago and is looking to raise the contribution of the high margin coal division.

Agarwal said the coal division makes up about 60% of Mercator’s total revenue now, with the shipping division accounting for 32%.

“The contribution from coal is likely to go up further. It could go to as high as two thirds," he said without specifying a timeline.

Firms such as Mercator and Great Eastern Shipping are keen on cutting exposure to the shipping segment in favour of coal mining and offshore business, which have better margins.

Mercator, which also has interests in offshore and oil and gas, has seen softer tanker and bulk freight rates sawing off shipping margins in the first quarter as also an oversupply of vessels in the segment.

The Mercator Group owns or operates a fleet of 18 dry carriers; eight tankers and four dredgers with an aggregate capacity of about 2.41 million DWT.

He also said the firm was looking to pare its standalone debt by 400 crore to 1000 crore by the end of the current fiscal year.

At 1:10 p.m. Mercator Lines shares were up 1.59% at 25.6 in a weak Mumbai market.

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