Mercator Lines is expecting around 50% of its revenues to come from its non shipping businesses in the next two years.

Mr HK Mittal CMD of Mercator Lines told Business Line that “We have seen a steady growth in all our non shipping businesses. As the initial investment period is over, we have seen high returns from these segments. This will also allow us to hedge against the cyclical nature of the shipping business.”

In the first quarter of FY 2011, Mercator reported an eight fold increase in revenue from its non-shipping business. It reported an income of INR 229.06 crore compared with INR 42.54 crore in the corresponding quarter last year.

The company has already acquired three mines in Indonesia and one coal block in Mozambique. It plans to ramp its coal business and is targeting production of 8 million to 10 million tonnes annually from Indonesia over the next five years. By the end of this fiscal, output from these mines is likely to be 3 million tonnes to 3.5 million tonnes of coal.

The Mozambique mines, with estimated recoverable reserves of one billion tonnes, are expected to start production once infrastructure is in place. Mercator is initially targeting production of 30 million tones.

Mr Mittal said that “We are into transportation and handling of coal and, therefore, decided to get into coal mining. We are rolling 36 cargoes a month from Indonesia and are taking ships outside our fleet. In case we add more, it will be beneficial for us.”

The company was also awarded two oil blocks in Gujarat under the seventh round of the National Exploration Licensing Policy in 2008 though work is yet to begun. He added that “We are also looking at blocks outside India.”

Mercator plans to enhance its focus on the dredging business given the opportunities in the domestic market where ports are expanding capacities and new ones are being commissioned. It is also expanding its dredging fleet to 10, from the present four, in the next two years.

According to a shipping analyst, with the global freight market remaining volatile, these businesses will de-risk the company's earnings from the cyclicality related to shipping freight revenues. The analyst said that “They will provide revenue generation through sale of coal in domestic/international markets and transshipment through its own ships.”

(Sourced from Business Line)