Posted on August 17, 2017
By Deborshi Chaki, Deal Street Asia
Mercator Ltd is planning to carve out its dredging operations into a separate unit and plans to raise as much as $200 million from financial and strategic investors for that business, two people aware of the matter said.
Mercator, which is present in dredging, shipping, coal and petroleum businesses, will initially carve out the dredging business as a subsidiary on a slump sale basis, with an option to go for a complete de-merger in the future, these people said, speaking on condition of anonymity. The company has hired investment banker Singhi Advisors to manage the process. Emails sent to Mercator and Singhi for comment were not answered till press time.
Mercator is one of India’s largest dredging services providers. On 4 August, Mint had reported that the firm was in talks with potential investors to raise investments for a potential bid for state-run Dredging Corp. of India, which is expected to be put up for sale in the next few quarters. The Times of India had reported that Mercator was in preliminary talks with Canadian investor Fairfax and Dutch dredging services company Van Oord to evaluate a joint bid for a controlling stake in Dredging Corp.
In August, Union highways and shipping minister Nitin Gadkari had said in an interview that a proposal to sell a controlling stake by government in Dredging Corp. will be taken up by the cabinet soon. According to the people cited above, the government is looking at selling a 51% stake in Dredging Corp. where it currently holds 73.47%.
The major operators in India’s dredging market currently include Dredging Corp., Mercator, Adani Ports and SEZ and Dharti Dredging. Dredging Corp. is the largest dredging company in India in terms of capacity and the only state-owned company. Additionally, international companies—Van Oord, Jan De Nul, Royal Boskalis and Dredging International, part of the big four club—are also active in India.
Mercator is in the process of restructuring its businesses. Last year, it sold its dry bulk shipping business to Singapore’s Bellerophon Holdings Pte Ltd, MIB Investments Pvt. Ltd and Wroclaw Holdings Ltd. This year, it completed the sale of its mobile offshore production unit to Oriental Resources for around $76 million. The asset sales were done to pare the overall debt of the group. The company has been able to reduce its consolidated debt to Rs1,839 crore as on 31 March from Rs2,632 crore in the year earlier. It has also put its coal assets in Indonesia and Mozambique on the block to reduce debt further, the people cited above said.
The company also owns four oil and gas blocks—two in Cambay basin (Gujarat) and two offshore blocks in Myanmar. The Indian dredging market is currently said to be over 1 billion cu. m and structural changes are expected to grow the market further.
While 12 major ports are likely to opt for long-term maintenance dredging contract of as much as five years instead of the current practice of one year, major ports such as Kolkata, Cochin and Kandla may adopt depth-based dredging contracts with appropriate in-built incentive/penalties, the people cited above said. Also, the central government’s Sagarmala initiative which envisages minimum draft of 18 metres in major ports, expanding capacity in existing major ports, creation of new ports and development of inland waterways traffic is also expected to add to the demand for dredgers in India.
Source: Deal Street Asia
