(Updates with closing share price in sixth paragraph)
Oct. 10 (Bloomberg) -- Mercator Lines Ltd., India’s second- largest shipping company, plans to buy more dredgers as it seeks to benefit from the nation’s push to expand ports.
The shipping line is in talks to purchase “a couple of more” dredgers to add to its fleet of five, Atul Agarwal, managing director and chief financial officer, said in an e-mail reply to Bloomberg News questions on Oct. 7. He didn’t say how much money the company would spend on the acquisition.
State-controlled Dredging Corp. of India has also said it will add four more vessels as the nation’s ports work to deepen shipping channels to attract larger vessels amid a surge in trade. Mumbai-based Mercator has diversified into coal mining and offshore services to shield itself from cyclical downturns in the traditional cargo business.
“It is a good strategy,” said Chetan Kapoor, an analyst at IDBI Capital Market Services Ltd., who has a ‘buy’ rating on Mercator. “There should be a good opportunity as there aren’t many players active in dredging work in India.”
India plans to spend as much as 2.87 trillion rupees ($58 billion) on its harbors in the 10 years ending 2020 as it aims to boost the annual capacity at major ports to 1.6 billion tons from 616 million tons, according to the shipping ministry.
Mercator gained 4.3 percent, the most in three weeks, to 24.05 rupees at close of trading in Mumbai. The stock has dropped 59 percent this year, compared with a 20 percent fall in the BSE-500 index.
100 Billion Rupees
The nation may need to spend about 100 billion rupees for dredging in the next five years, IDBI Capital’s Kapoor said.
Mercator’s dredging business has more than 4 billion rupees of orders, and all its dredgers are contracted for the next one to two years, according to Agarwal. Mercator earns as much as 8 percent of revenue from dredging.
The shipping line’s profit gained 77 percent to 940 million rupees in the year ended in March 31, according to data compiled by Bloomberg. Sales rose 56 percent to 28.2 billion rupees. The company also operates eight tankers and 18 dry bulk carriers, according to its website.
“While existing major ports are going for expansion, new private ports are also coming up,” Agarwal said. The Indian government is “encouraging coastal shipping, which gives many opportunities for dredging in the years to come.”
--Editors: Vipin V. Nair, Arijit Ghosh
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