Mercator Management Discussions


Annexure I

Review of performance

We are a diversi ed group with business operations spread across several key industries like shipping, dredging, coal mining and logistics, and oil & gas exploration and production. We were operating a eet of oil tankers, serving Indian and international waters, along with dredgers in Indian ports until Financial Year 2019-20. We have coal mines and logistics infrastructure services in Indonesia, a mining license in Mozambique and oil blocks in Indias Cambay basin. The Company had an EPC project for ONGC which was wrongly terminated by the contractor in the previous years. Our projects span across India and Indonesia.

The consolidated revenue from operations for FY 2022-23 stood at Rs. NIL compared to Nil in FY 2021-22. The consolidated EBIDTA is Rs. (22.48) million against Rs. (121.11) million in the previous year. The consolidated loss before tax was Rs. 24.56 million against previous year loss before tax of Rs. 206.64 million. The loss after tax was Rs. 24.56 million as against loss after tax of Rs. 195.39 million in the previous year.

NCLT Updates:

A Corporate Insolvency Resolution Process (CIRP) was initiated against the Company vide order Company Petition No. (IB) 4404/MB/2019 dated February 08, 2021 of the Honble National Company Law Tribunal, Mumbai Bench (‘NCLT) under the provisions of the Insolvency and Bankruptcy Code, 2016 (Code) in the matter of ICICI Bank Ltd V. Mercator Ltd & Anr. Pursuant to the order, the powers of the Board of Directors were suspended and were vested with Mr. Girish Siriram Juneja, who was appointed as Interim Resolution Professional (IRP) by the NCLT and later con rmed as Resolution Professional (RP) by the Committee of Creditors (CoC).

The Resolution Plans submitted by the Resolution Applicants (RAs) were placed before the Committee of Creditors for their consideration and voting but failed to receive the requisite votes in terms of the provisions of the Code. Accordingly, an application for liquidation has been led in terms of Section 33 of the Code.

Pursuant to the aforesaid application, NCLT, Mumbai has ordered the company to be liquidated as a going concern and Mr. Girish Siriram Juneja has been appointed as Liquidator of the company vide its order dated February 21, 2023.

Debt status:

Total Debts at standalone levels and consolidated levels as on March 31, 2023 stands at Rs. 9429.19 million and Rs. 16413.30 million respectively. We have further deleveraged Long-term debts by selling the Floating Storage and O oading Unit (FSO) ‘Prem Pride in the nancial year 2019-20 on January 16, 2020 for Rs. 495.40 million and Vessel M. T. Hansa Prem on March 23, 2020 through an e-auction process for a consideration of USD 3.60 million plus taxes and in the nancial year 2020-21, sold the Vessel M. T. Prem Mala vide Honble Bombay High Courts order dated May 26, 2020, con rmed the sale of the Vessel under the auction process to the highest bidder at a consideration of Rs. 364 million.

As per the Code, the Liquidator has to receive, collate, verify and admit all the claims submitted by the creditors of the Company. Such claims can be submitted to the Liquidator during the Liquidation. The impact of such claims, if any, that may arise has not been considered in the preparation of the unaudited nancial results.

Principal portion of loans from nancial creditors in the books of the Corporate Debtor have not been restated with the amounts admitted by Liquidator as on Insolvency Commencement Date (“ICD date”) (Rs. NIL million). Total amount of claims towards principal dues of the nancial creditors as on March 31, 2023 stand as under:

a. Principal amount of Loans admitted by Liquidator Nil
b. Claims under veri cation by Liquidator/ Not led Nil

Total

Rs. Nil*

* Liquidator had not received any claims as on 31st March 2023. The last date of the receipt of the claim was 07th April 2023. As on 07th April 2023, the total claim amount is Rs. 22,934.1 million, which includes fresh claims led during the liquidation process and the claims submitted during the CIRP process. As per clause c of sub-regulation 2 of Regulation 12 of Liquidation of IBBI (Liquidation Process) Regulations, 2016, where a stakeholder does not submit its claims during the liquidation process, the claims submitted by such a stakeholder, and duly collated by the interim resolution professional or resolution professional, as the case may be, during the corporate insolvency resolution process under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, shall be deemed to be submitted during the liquidation process.

At the consolidated level, there are total claims of Rs. 15,800 million as on date receivable by the Company which we believe that if realised, provide a reasonable su cient opportunity for the repayment of loans from lenders and provide required resources for the development of business opportunities for the revival.

Global Economy

After growing 3.1 percent last year, the global economy is set to slow substantially in 2023, to 2.1 percent, amid continued monetary policy tightening to rein in high in ation, before a tepid recovery in 2024, to 2.4 percent. Tight global nancial conditions and subdued external demand are expected to weigh on growth across emerging market and developing economies (EMDEs). Projections for many countries have been revised down over the forecast horizon, with upgrades primarily due to stronger-than-expected data at the beginning of 2023 more than o set by downgrades thereafter. In ation has been persistent but is projected to decline gradually as demand weakens and commodity prices moderate, provided longer-term in ation expectations remain anchored. Global growth could be weaker than anticipated in the event of more widespread banking sector stress, or if more persistent in ation pressures prompt tighter-than-expected monetary policy. Weak growth prospects and heightened risks in the near term compound a long-term slowdown in potential growth, which has been exacerbated by the overlapping shocks of the pandemic, the Russian Federations invasion of Ukraine, and the sharp tightening of global nancial conditions. This di cult context highlights a multitude of policy challenges. Recent bank failures call for a renewed focus on global nancial regulatory reform. Global cooperation is also necessary to accelerate the clean energy transition, mitigate climate change, and provide debt relief for the rising number of countries experiencing debt distress. At the national level, it is imperative to implement credible policies to contain in ation and ensure macroeconomic and nancial stability, as well as undertake reforms to set the foundations for a robust, sustainable, and inclusive development path.

Indian Economy

Growth continues to be resilient despite some signs of moderation in growth, says the World Bank in its latest India Development Update, the World Bank Indias biannual agship publication. The Update notes that although signi cant challenges remain in the global environment, India was one of the fastest growing economies in the world. The overall growth remains robust and is estimated to be 6.9 percent for the full year with real GDP growing 7.7 percent year-on-year during the rst three quarters of scal year 2022/23. There were some signs of moderation in the second half of FY 22/23. Growth was underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption, particularly among higher income earners. In ation remained high, averaging around 6.7 percent in FY22/23 but the current-account de cit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices.

The World Bank has revised its FY23/24 GDP forecast to 6.3 percent from 6.6 percent (December 2022). Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related scal support measures.

The Indian economy continues to show strong resilience to external shocks," said Auguste Tano Kouame, World Banks Country Director in India. “Notwithstanding external pressures, Indias service exports have continued to increase, and the current-account de cit is narrowing.

Although headline in ation is elevated, it is projected to decline to an average of 5.2 percent in FY23/24, amid easing global commodity prices and some moderation in domestic demand. The Reserve Bank of Indias has withdrawn accommodative measures to rein in in ation by hiking the policy interest rate. Indias nancial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth.

The central government is likely to meet its scal de cit target of 5.9 percent of GDP in FY23/24 and combined with consolidation in state government de cits, the general government de cit is also projected to decline. As a result, the debt-to-GDP ratio is projected to stabilize. On the external front, the current account de cit is projected to narrow to 2.1 percent of GDP from an estimated 3 percent in FY22/23 on the back of robust service exports and a narrowing merchandise trade de cit. Spillovers from recent developments in nancial markets in the US and Europe pose a risk to short-term investment ows to emerging markets, including India, But Indian banks remain well capitalized.

Dredging

Indian Ports & Dredging Industry

With the global shipping eet growing rapidly in terms of size and capacity, Ports in India have realised the importance of deeper channels and berths, which will help them accommodate bigger ships, attract more cargoes and increase revenues. With a signi cant amount of dredging activity that has taken place so far, draught levels at some Indian ports have increased. However, they remain considerably lower than international standards.

During the ve-year period (FY2013 to FY2017), at least 440 million cubic metres was dredged at major ports. Another 103 million cum was dredged at non-major ports (FY2014 to FY2016) Besides ports, dredging is also undertaken at inland waterways (in rivers, canals, lakes, etc.). From 2011-12 to 2015-16, around 50 million cum of dredging was undertaken at National Waterways (NWs)-1, 2 and 3.

Indian ports are under rapid expansion and hence the requirement of dredging in India has also shooting up and will be everlasting. In India the main market is for maintenance dredging rather than capital dredging. Maintenance dredging is undertaken for the periodic removal of silt and sediments from existing navigational channels, berths, etc., in order to maintain an appropriate depth for navigational and operational purposes.

Major Port-wise, the maximum maintenance dredging was carried out at Cochin port, followed by the ports of Kolkata and Kandla. The Haldia Dock Complex (HDC) has depth limitations on account of high siltation, which results in high annual maintenance dredging and Cochin port has the highest annual siltation load among Indian ports, leading to a large demand for maintenance dredging all year round. About nonmajor ports, maintenance dredging of 22.7 million cum was undertaken between 2013-14 and 2015-16. Around 7 million cum of quantity was dredged at Dhamra port in 2014-15.

"DCI is mainly into maintenance dredging. 76% of the &#8377700 crore maintenance dredging market at Indias state-run major Port Trusts will be out of bounds for private dredging contractors after a consortium of four port trusts Visakhapatnam, Deendayal, Paradip and Jawaharlal Nehru buys the Centres 74.44 per cent stake in the Dredging Corporation of India Ltd (DCI). Capital dredging is undertaken to develop a new harbour, berth or waterway, or to deepen the existing facilities to allow access to larger vessels.

The maximum capital dredging at major ports of which 49% of the total quantity was carried out at the Jawaharlal Nehru Port Trust followed by Kamarajar port 13% and Deendayal port 10%. Non-major ports have also witnessed signi cant capital dredging. In year 2015-16 around 25.3 million cum of dredging was carried out at Mundra and 13.5 million cum at JSW Jaigarh port.

The Indian dredging market is serviced by both domestic and foreign players. In Pro les of Major Players, 13 domestic players (12 private and one public sector player) and ve foreign players have been covered. The 13 domestic players own 115 dredgers.

At present, then DCI and a limited set of private vendors serve the Indian dredging market, the government needs to open the dredging market to attract more players particularly international players, in dredging activities to increase and maintain draft depth at ports to attract large vessels and enable them to become hub ports.

Operational Highlights

The revenue of the division was NIL during FY 2022-23 as compared to Nil in last nancial year.

After due consideration of the business opportunities and other governing factors, the Company had decided to revamp its strategy in respect of the dredging division. With a view to reduce and eliminate the standing cost of the dredgers, the Company moved towards an asset light model by monetizing the dredgers owned by it. The Company continues to explore suitable opportunities in the asset light model, where the dredging quali cations, experience, expertise of the Company can be leveraged.

During FY 2020-21, the Company has executed the contract at Mumbai Port. This was an asset light dredging contract. Owing to its experience and quali cations the Company shall continue to carry on the Dredging business and may do capex light expansion at an opportune time subject to the market conditions and commercial viability.

An injunction order against Dredging Corporation of India (DCI) in the matter of execution/enforcement order was passed by Honble Delhi High Court in April 2019 followed by directions in the last hearing held on October 31, 2019 to DCI to deposit the entire award amount (for Rs. 480 million) along with up to date interest with the Court within 6 weeks. The petition on the execution order in the DCI matter is scheduled for nal hearing. DIC has already deposited Rs. 130 million in the court and the court has directed them deposit further sum of Rs. 80 million before August 31, 2023.

Shipping

Global Shipping Industry

The supply chain industry is hopeful of a better peak season this year and expects freight demand recovery in the Q2 of 2023, according to the recently published monthly container market forecaster for April by the online logistics platform, Container xChange.

The container price sentiment index (xCPSI), a sentiment analysis tool by Container xChange that concurrently surveys supply chain professionals on their short-term price expectations, continued to show negative readings until mid-March. But the results consistently turned positive, reaching an all-time high at the beginning of April, when the index started showing con dence building for the coming quarter.

While the industry sentiment is gradually turning positive, there have been many headwinds in the shipping sector in Q1.

“The global container logistic ecosystem is like a spiders web. One disruption does not linearly impact the knot. Instead, every disruption reverberates across the web sometimes in unexpected directions. The increase in FED rates, the banking sector crisis, the strikes might seem concentrated in one region, but they have their impact across all trade lanes .” shared Christian Roelo s, cofounder and CEO, of Container xChange as he commented upon the current state of the container shipping industry.

Looking back at the rst quarter of 2023

Overall, in the rst quarter of 2023, North America registered the biggest decline in average prices for 20 ft dry cargo containers. After North America, the Middle East and ISC region witnessed the second biggest drop in container prices, followed by Southeast Asia.

Contract Negotiations in Q2 2023

Industry sources reveal that though the negotiations are due in May, shippers might delay these since the contract rates are still higher than the spot rates. So, the shippers are holding back to place themselves better during those negotiations. Another expectation is the reduction of contract tenures from one year to smaller time frames.

Outlook 2023

Commenting on the outlook for the rest of the year, Christian Roelo s shared further, “Despite avoiding a global nancial and economic recession for now, the shipping industry is experiencing a freight recession due to the postponement of inventory replenishment cycles by retailers who overstocked. As we look ahead, we anticipate a subdued rebound in demand as retailers begin to deplete their excess stock in the coming months, leading up to the peak season.”

A survey was conducted recently (April 2023) with close to 664 supply chain professionals by Container xChange and asked how they perceived the peak season to develop this year in 2023 as compared to the last year.

“This is an important time for NVOCCs and Freight forwarders who are diligently crafting their strategies to adapt to the current market conditions impacting consumer demand and freight demand. The anticipated changes in the industry, particularly after contract renewals towards the end of the rst half of 2023, signal a crucial time for preparation. With cautious optimism, we foresee that this years peak season will be better than the previous year, as we leverage our experience and industry insights to navigate the challenges and capitalize on the opportunities that lie ahead.” commented Harry Duong, Pudong Prime, an international freight forwarding company, while sharing about the companys forecasts for the rest of the year.

The industry is hopeful that the pent-up freight demand will be propelled by the beginning of the retail inventory replenishment cycles in the quarter after a slump in demand and overstocking by retailers.

Southeast Asia has emerged as a strong economic “partnership region” as the world looks to a more diverse sourcing and manufacturing trade strategy.

“The diversi cation of trade will prove to be bene cial for ocean trade because this will cause a boom to the regional trade within Asia. It will also lead to more locations adding to the direct trade from the region to North America or to Europe. So, diversi cation will play a role and in general, this will soak up more capacity than what we would have had on transpaci c China to the USA or China to Europe alone.” shared Christian Roelo s.

According to the Vietnam Customs data, Vietnams two-way trade in February was up almost US$3 billion over January despite February being a slightly shorter month. On the other hand, Chinas exports to the EU totalled RMB 552.837 billion from January to February 2023, a year-on-year decline of 5.0%.

According to the 2023 Container Shipping Outlook by Alix Partners published in March 2023, “Bangladesh, Malaysia, and Vietnam are already eating into Chinas share of consumer goods exports and foresee Chinas position eroding further as nearby countries increase their shares of supply chains and as government policies and business strategies outbound momentum. Mexico and Eastern Europe stand to gain over the medium term as more and more volumes shift out of China and to neighbouring countries.”

Indian Shipping Industry

It is estimated that the Indian logistics sector will reach the USD 350-380 billion mark by 2025, and the goal is to bring the Indian logistics sector to the 25th position in the Logistics Performance Index in the next ve years

Indias logistics sector, which is also referred to as the backbone of the supply chain, has been reeling under high costs, largely due to ine ciencies across the value chain and the fragmented nature of the industry. Another important industry that forms the backbone of the Indian economy, the MSME industry, which heavily relies on the logistics sector to link its businesses to their customers, has been signi cantly feeling the brunt of this. With time-consuming manual processes, documentation, and regular interference from various authorities, MSMEs operating in the e-commerce model have been witnessing logistical challenges in cross-border trade. Further, small businesses deal with complex shipping processes and compliance issues, including several customs clearances and quality or packaging checks, along with nancial problems as they are largely neglected by the formal banking sector.

The Indian governments ambitious goal of growing its economy to USD 5 trillion in three years will rely heavily on policymakers ability to unleash the MSME sector. In the post-pandemic market, most businesses are going digital, which has opened new avenues for MSMEs to expand, such as omni-channel, social commerce, and exploring cross-border opportunities. The government has been making signi cant progress on making small and medium enterprises self-reliant through its "Make in India" initiative; however, it is imperative to understand that for the Atmanirbhar Bharat Abhiyaan to succeed, the logistics sector also must be strengthened to drive economic growth.

NLP and Gati Shakti to promote cross-border trade

The recent government initiatives for the logistics sector, such as the National Master Plan for Multi-Modal Connectivity (Gati Shakti) and the National Logistics Policy (NLP), will provide the required impetus to both the logistics and MSME sectors. NLP was launched with the primary goal of lowering logistics costs and streamlining processes for seamless coordination. Moreover, the policy is said to assist Indian businesses, especially MSMEs, to become globally competitive as it creates a robust logistics infrastructure for facilitating cross-border trade. NLP brings a digital approach, a robust logistics network, and a tech-enabled infrastructure port that aids the sector in cross-border trade. PM Gati Shakti was launched to ensure that investments in infrastructure are well synchronised, with a more granular focus on developing logistics infrastructure and establishing multi-modal logistics facilities. Putting together, these policies are designed to help reinforce the participation of MSMEs in international markets in three important aspects: connectivity, technology, and e ciency. NLP, along with Gati Shakti, ensures to help boost the competitiveness of domestic goods in the global market, encouraging businesses and strengthening their exports from India.

The Dedicated Freight Corridors (DFCs) have the potential to completely alter how products are moved from manufacturing centers to hubs for consumption or export. This more e cient, a ordable, and trustworthy method of cargo transportation, will help lower Indias absurdly high logistics expenses. The Free Trade Agreement (FTA) with India and its interim trade agreement and the Economic Cooperation and Trade Agreement (ECTA), negotiated in April of this year, were both rati ed by the Australian parliament on November 22, 2022. A wide range of Indian industries, including but not limited to textiles, leather, furniture, jewellery, and machinery, will bene t from duty-free access to the Australian market. For roughly, 96.4 per cent (by value) of Australias exports, India will receive zero-duty access. The current customs duty rate for many of these goods in Australia is 4-5 per cent.

Adoption of Digital technologies to ease the cross border

With unparalleled ease, speed, and economic expansion, the Uni ed Logistics Interface Platform (ULIP) has created a national, integrated, and multi-pronged system that has propelled the Indian logistics industry. Implementation of other digital initiatives, such as the integration of technology through Digital Systems (IDS), Ease of Logistics (e-LOG), System Improvement Group (SIG), etc., is expected to reduce ine ciencies and allow paperless export and import. Besides this, faceless assessments for customs and provisions for e-way bills are a few initiatives that will ease business for MSMEs, empowering them to make timely deliveries. The growth of e-commerce and D2C business models has been driving growth in the last two to three years, achieving commendable results, and having a signi cant positive impact on the entire logistics industry in India. With its investment in technology and other government initiatives, MSMEs will get more control over the supply chain, uplifting Indias exports.

It is estimated that the Indian logistics sector will reach the USD 350-380 billion mark by 2025, and the goal is to bring the Indian logistics sector to the 25th position in the Logistics Performance Index in the next ve years. While India pursues trade deals with di erent countries, favourable policies will make sure MSMEs boost their integration into the global supply chain network, acquire new markets, and build up strategic relations in key economies.

Operational Highlights

The shipping segment for both FY 2022-23 and FY 2021-22 recorded revenues of Rs. Nil, on account of the Company not having any tonnage in the year under review. There has been a sale/auction of all the ships in standalone business, the proceeds of which has been used for reducing Debts and liabilities.

A lender had arrested the Vessel M. T. Prem Mala (Built 2000) in persuasion to Event of Default recognized under Debenture Trust Deed Dated March 26, 2018. The Honble Bombay High Court vide its order dated May 26, 2020, con rmed the sale of the Vessel under the auction process to the highest bidder at a consideration of Rs. 364 million. The said vessel has been handed over by the court appointed Sheri to the Buyers on July 13, 2020. The sale proceeds of Rs. 364 million as deposited by the buyer in court has been appropriated vide order dated 5-5-2021. On account of short provision for expenses which related to Prem Mala, further expenses towards port charges for Rs. 9.7 million were expensed out in nancial year 2020-21.

The Company shall endeavour to carry on the Shipping business and may incur capex light expansion at an opportune time subject to the market conditions and commercial viability.

Oil & Gas

Global Oil & Gas Industry

The oil and gas industry is facing increasing demands to clarify the implications of energy transitions for their operations and business models, and to explain the contributions that they can make to reducing greenhouse gas (GHG) emissions and to achieving the goals of the Paris Agreement.

The increasing social and environmental pressures on many oil and gas companies raise complex questions about the role of these fuels in a changing energy economy, and the position of these companies in the societies in which they operate.

But the core question, against a backdrop of rising GHG emissions, is a relatively simple one: should todays oil and gas companies be viewed only as part of the problem, or could they also be crucial in solving it? This is the topic taken up by the International Energy Agency (IEA) in this report, which builds on a multi year programme of analysis on the future of oil and gas in the IEA World Energy Outlook (WEO) series.

This report does not aim to provide de nitive answers, not least because of the wide diversity of oil and gas companies and company strategies around the world. It does aim to map out the risks facing di erent parts of the industry, as well as the range of options and responses.

Three considerations provide the boundaries for this analysis. First, the prospect of rising demand for the services that energy provides due to a growing global population some of whom remain without access to modern energy and an expanding global economy.

Second, the recognition that oil and natural gas play critical roles in todays energy and economic systems, and that a ordable, reliable supplies of liquids and gases (of di erent types) are necessary parts of a vision of the future. And last but far from least, the imperative to reduce energy-related emissions in line with international climate targets.

These elements may appear to be in contradiction with one another, but this is not necessarily the case. The WEO Sustainable Development Scenario (SDS) charts a path fully consistent with the Paris Agreement by holding the rise in global temperatures to “well below 2°C … and pursuing e orts to limit [it] to 1.5°C”, and meets objectives related to universal energy access and cleaner air. The SDS and the range of technologies that are required to achieve it provide a benchmark for the discussion throughout this report.

The other scenario referenced in the analysis is the Stated Policies Scenario (STEPS), which provides an indication of where todays policy ambitions and plans would lead the energy sector. These outcomes fall far short of the worlds shared sustainability goals.

The focus of this report is therefore on accelerated energy transitions, the forces that could bring them about whether from society, policy makers, technology, investors or the industry itself and the implications that this would have for di erent parts of todays oil and gas industry.

The oil and gas industry faces the strategic challenge of balancing short-term returns with its long-term license to operate. Societies are simultaneously demanding energy services and also reductions in emissions. Oil and gas companies have been pro cient at delivering the fuels that form the bedrock of todays energy system; the question that they now face is whether they can help deliver climate solutions. The analysis in this report highlights that this could be possible if the oil and gas industry takes the necessary steps. As such, it opens a way which some companies are already following for the oil and gas industry to engage with the “grand coalition” that the IEA considers essential to tackle climate change. This e ort would be greatly enhanced if more oil and gas companies were rmly and fully onboard. The costs of developing low-carbon technologies represent an investment in companies ability to prosper over the long term.

No oil and gas company will be una ected by clean energy transitions, so every part of the industry needs to consider how to respond. The industry landscape is diverse and there is no single strategic response that will make sense for all. Attention often focuses on the Majors, seven large integrated oil and gas companies that have an outsized in uence on industry practices and direction. But the industry is much larger: The Majors account for 12% of oil and gas reserves, 15% of production and 10% of estimated emissions from industry operations.

National oil companies (NOCs) fully or majority-owned by national governments account for well over half of global production and an even larger share of reserves. There are some high-performing NOCs, but many are poorly positioned to adapt to changes in global energy dynamics.

So far, investment by oil and gas companies outside their core business areas has been less than 1% of total capital expenditure. For the moment, there are few signs of a major change in company investment spending. For those companies looking to diversify their energy operations, redeploying capital towards low-carbon businesses requires attractive investment opportunities in the new energy markets as well as new capabilities within the companies.

As things stand, leading individual companies spend around 5% on average on projects outside core oil and gas supply, with the largest outlays in solar PV and wind. Some oil and gas companies have also moved into new areas by acquiring existing non core businesses, for example in electricity distribution, electric vehicle charging and batteries, while stepping up research and development activity. A much more signi cant change in overall capital allocation would be required to accelerate energy transitions.

There is a lot that the industry could do today to reduce the environmental footprint of its own operations. Uncertainty about the future is a key challenge facing the industry, but this is no reason for companies to “wait and see” as they consider their strategic choices. Minimizing emissions from core oil and gas operations should be a rst-order priority for all, whatever the transition pathway.

There are ample, cost-e ective opportunities to bring down the emissions intensity of delivered oil and gas by minimizing aring of associated gas and venting of CO2, tackling methane emissions, and integrating renewables and low-carbon electricity into new upstream and lique ed natural gas (LNG) developments.

As of today, 15% of global energy-related GHG emissions come from the process of getting oil and gas out of the ground and to consumers. Reducing methane leaks to the atmosphere is the single most important and cost-e ective way for the industry to bring down these emissions.

Electricity cannot be the only vector for the energy sectors transformation. A commitment by oil and gas companies to provide clean fuels to the worlds consumers is critical to the prospects for reducing emissions. The 20% share of electricity in global nal consumption is growing, but electricity cannot carry energy transitions on its own against a backdrop of rising demand for energy services.

Bringing down emissions from core oil and gas operations is a key step in helping countries to get environmental gains from using less emissions-intensive fuels. However, it is also vital for companies to step up investment in low-carbon hydrogen, biomethane and advanced biofuels, as these can deliver the energy system bene ts of hydrocarbons without net carbon emissions. Within ten years, these low-carbon fuels would need to account for around 15% of overall investment in fuel supply.

The oil and gas industry will be critical for some key capital-intensive clean energy technologies to reach maturity. The resources and skills of the industry can play a central role in helping to tackle emissions from some of the hardest-to-abate sectors. This includes the development of carbon capture storage and utilisation (CCUS), low-carbon hydrogen, biofuels, and o shore wind. Scaling up these technologies and bringing down their costs will rely on large-scale engineering and project management capabilities, qualities that are a good match to those of large oil and gas companies.

For CCUS, three-quarters of the CO2 captured today in large-scale facilities is from oil and gas operations, and the industry accounts for more than one-third of overall spending on CCUS projects. If the industry can partner with governments and other stakeholders to create viable business models for large-scale investment, this could provide a major boost to deployment.

A fast-moving energy sector would change the game for upstream investment. Investment in upstream projects is still needed even in rapid transitions, but the type of resources that are developed, and how they are produced, changes substantially.

Production from existing elds declines at a rate of roughly 8% per year in the absence of any investment, larger than any plausible fall in global demand. Consequently, investment in existing and some new elds remains part of the picture. But as overall investment falls back and markets become increasingly competitive, only those with low-cost resources and tight control of costs and environmental performance would be in a position to benefit.

A shift from “oil and gas” to “energy” takes companies out of their comfort zone, but provides a way to manage transition risks. Some large oil and gas companies are set to make a switch to “energy” companies that supply a diverse range of fuels, electricity and other energy services to consumers. This means moving into sectors, notably electricity, where there is already a large range of specialised actors and where the financial characteristics and scale of most low-carbon investment opportunities are (with the partial exception of o shore wind) a long way from traditional oil and gas projects.

Electricity provides long-term opportunities for growth, given that it overtakes oil in accelerated energy transitions as the main element in consumer spending on energy. It also opens the door to larger and broader reductions in company emissions, relieving social pressures along the way, although investors will watch carefully the industrys ability to balance diversification with expected returns and dividends.

NOCs face some particular challenges, as do their host governments. The stakes are high for NOCs that are charged with the stewardship of national hydrocarbon resources, and for their host governments and societies that often rely heavily on the associated oil income. Changing energy dynamics have prompted a number of countries to renew their commitment to reform and to diversify their economies; fundamental changes to the development model in many major resource holders look unavoidable.

NOCs can provide important elements of stability for economies during this process, if they are operating effectively and alert to the risks and opportunities. Some leading NOCs are stepping up research e orts targeting models of resource development that are compatible with deep decarbonisation, e.g. via CCUS, trade in hydrogen or a focus on non combustion uses of hydrocarbons.

The transformation of the energy sector can happen without the oil and gas industry, but it would be more difficult and more expensive. Oil and gas companies need to clarify the implications of energy transitions for their operations and business models, and to explain the contributions that they can make to accelerate the pace of change. This process has started and company commitments to reduce emissions or emissions intensities are becoming increasingly common.

However, the industry can do much more to respond to the threat of climate change. Regardless of which pathway the world follows, climate impacts will become more visible and severe over the coming years, increasing the pressure on all elements of society to nd solutions. These solutions cannot be found within todays oil and gas paradigm.

Indian Oil and Gas Industry

The oil and gas sector is among the eight core industries in India and plays a major role in influencing the decision-making for all the other important sections of the economy.

Indias economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. India retained its spot as the third-largest consumer of oil in the world as of 2022.

The Government has adopted several policies to ful l the increasing demand. It has allowed 100% foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products and among others. The FDI limit for public sector re ning projects has been raised to 49% without any disinvestment or dilution of domestic equity in existing PSUs. Today, it attracts both domestic and foreign investment, as attested by the presence of companies such as Reliance Industries Ltd (RIL) and Cairn India. The industry is expected to attract US$ 25 billion investment in exploration and production by 2022. India is already a hub with 23, and expansion is planned for tapping foreign investment in export-oriented infrastructure, including product pipelines and export terminals.

Indias crude oil production in FY22 stood at 29.7 MMT.

According to the IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as Indias gross domestic product (GDP) is expected to increase to US$ 8.6 trillion by 2040.

As of September 2021, Indias oil capacity stood at 248.9 MMTPA, making it the second-largest re ner in Asia. Private companies owned about 35% of the total re ning capacity.

India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. Indias consumption of petrol products stood at 183.32 MMT in April-January, 2023. High Speed Diesel was the most consumed oil product in India and accounted for 38.84% of petroleum product consumption in FY22.

Indias oil consumption stood at almost 4.9 million barrels per day (BPD) in 2021, up from 4.65 million BPD in 2020.

Indias LNG import predicted at 2,266 million metric standard cubic meters (MMSCM) in January 2023. Gross production of LNG was 2,883 MMSCM in the same month. According to the International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 BCM, registering an average annual growth of 9% until 2024.

Following are some of the major investments and developments in the oil and gas sector:

• Indias crude oil production in April-October 2022 stood at 17.2 MMT

.• The total number of OMC retail outlets increased to 84,895, as of November 1, 2022, from 59,595 in FY17

.• As of August 1, 2022, India had 10,420 kms of crude pipeline network, with a capacity of 147.9 MMTPA

.• As of June 30, 2022, Gas Authority of India Ltd. (GAIL) had the largest share (57.74% or 19,524 kms) of the countrys natural gas pipeline network (33,815 kms)

.• In May 2022, ONGC announced plans to invest US$ 4 billion from FY22-25 to increase its exploration e orts in India.

• In April 2022, Indian Oil Corporation Limited, Larsen & Toubro and Goldman Sachs-backed renewable energy producer ReNew Power formed a joint venture by signing a term sheet. This JV will develop green hydrogen projects, helping India cut down its carbon emissions.

• Exports of petroleum products from India reached 62.7 MMT in FY22. The value of these crude oil and petroleum products stood at US$ 44.41 billion. In FY22, crude oil imports stood at 4.24 MBPD, which was worth US$ 120.4 billion

.• In March 2022, the Board of IOCL approved plans to invest Rs. 7,282 crore (US$ 932.6 million) for the development of City Gas Distribution (CGD) network in 9 geographical areas (GAs).

• In March 2022, the Board of Oil India approved an investment of Rs. 6,555 crore (US$ 839.49 million) for Numaligarh petrochemical project.

• As of March, 2022, the oil sectors total installed provisional re nery capacity stood at 249.21 MMT, and IOC emerged as the largest domestic re ner with a capacity of 70.05 MMT

.• In January 2022, Indian Oil Corp. Ltd. (IOCL) announced plans to expand its city gas distribution (CGD) business, looking to invest Rs. 7,000 crore (US$ 918.6 million).

• In January 2022, Adani Total Gas Ltd (ATGL), a joint venture between the Adani Group and Total Energies, won licences to expand its City Gas Distribution (CGD) network to 14 new geographical areas, with an investment of Rs. 20,000 crore (US$ 2.62 billion).

• In November 2021, Oil and Natural Gas Corp. Ltd (ONGC) announced that it invested up to Rs. 6,000 crore (US$ 800 million) in its petrochemicals arm (ONGC Petro Additions Ltd.) to meet its equity requirements.

• In November 2021, Indian Oil, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited announced the launch of the Model Retail Outlet Scheme and a Digital Customer Feedback Programme called Darpan@petrolpump. These three oil PSUs have joined hands to launch model retail outlets to enhance service standards and amenities across their networks, which serve over six crore consumers every day.

Some of the major initiatives taken by the Government of India to promote the oil and gas sector are:

•On May 21, 2022, the Government announced a reduction in excise duty of Rs. 8 (US$ 0.10) per litre on petrol and Rs. 6 (US$ 0.077) per litre on diesel.

• In May 2022, the government approved changes in the Biofuel Policy to bring forward the target for 20% ethanol blending with petroleum to 2025-26 from 2030.

•In the Union Budget 2022-23, the customs duty on certain critical chemicals such as methanol, acetic acid and heavy feed stocks for petroleum re ning were reduced.

• In February 2022, Minister of Petroleum & Natural Gas, and Housing & Urban A airs, Mr. Hardeep Singh Puri, said that India will more than double its exploration area of oil and gas to 0.5 million sq. km. by 2025 and to 1 million sq. km. by 2030 with a view to increase domestic output.

•In 2022, the Ministry of Petroleum and Natural Gas launched the ninth bid round under the OALP. Under this round, investors have been o ered around 223,031.4 square kilometre.

• In November 2021, India announced that it will release 5 million barrels of crude oil from its strategic petroleum reserves in a concerted e ort to bring down global crude oil prices. This is roughly equivalent to a days consumption in the country.

• In November 2021, the government set up a committee to work out measures needed to make natural gas available to power plants at reasonably stable prices.

• In October 2021, the Union Ministry of Petroleum & Natural Gas approved a revised project cost of US$ 3.8 billion (Rs. 28,026 crore) to increase re ning capacity for the ongoing Numaligarh Re nery Expansion Project from 3 to 9 MMTPA.

• In September 2021, the Indian government approved oil and gas projects worth Rs. 1 lakh crore (US$ 13.46 billion) in Northeast India. These projects are expected to be completed by 2025.

• In September 2021, India and the US agreed to expand their energy collaboration by focusing on emerging fuels. This was followed by a ministerial conference of the US-India Strategic Clean Energy Partnership (SCEP).

• In July 2021, the Department for Promotion of Industry and Internal Trade (DPIIT) approved an order allowing 100% foreign direct investments (FDIs) under automatic route for oil and gas PSUs.

• The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.

•Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, Indias oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% of Indias oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.

•Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from 174 MCMPD in 2021.

• India is planning to double its oil re ning capacity to 450-500 million tonnes by 2030.

• Energy demand of India is anticipated to grow faster than energy demand of all major economies globally on the back of continuous robust economic growth. Moreover, the countrys share in global primary energy consumption is projected to increase to two-fold by 2035.

Operational Highlights

The Company owns two onshore oil blocks in Gujarats Cambay basin. Production Sharing Contract (PSC) for the Block CB-ONN-2005/3 has been terminated by Ministry of Petroleum and Natural Gas vide their letter dated October 24, 2019 since there was no oil discovery in the said Block. However, PSC for the producing Block CB-ONN-2005/9 (CB9) remains in force. The CB9 block have high-quality crude reserves and are in close proximity to re neries. Minutes of Meeting (MoM) of the 5th Expert Appraisal Committee (EAC) for the Environmental Clearance (EC) presentation held on March 27, 2019 were issued of April 03, 2019 recommending grant of EC for Development of PML area of the Block CB-ONN-2005/9. Work over rig was deployed at Jyoti-2 from March 25, 2019 to May 07, 2019 for cement repairs but the operations had to be terminated because of technical problems. The well Jyoti-1 was also closed because of non-grant of (EC) which has since been granted on January 07, 2020. Management Committee has approved completion of Minimum Work Program (MWP) of Exploration Phase-I which is a pre-requisite for transfer of PI. Formal communication to this e ect is awaited.

The application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) led by an Operational Creditor before the National Company Law Tribunal (NCLT), Mumbai Bench against the material subsidiary of the Company, Mercator Petroleum Limited (MPL) was admitted vide the order of NCLT dated August 31, 2020 (Order). In terms of Section 17 of the IBC, the power of the Board of Directors stand suspended and all such powers stand vested in an Interim Resolution Professional (IRP) appointed vide the said Order. Further, in terms of stipulations contained in Section 14 of the Code, a moratorium has been declared vide the Order prohibiting certain stipulated actions.

Monetization of the Block CB-ONN-2005/9:

During the nancial year 2019-20, MPL made e orts to Farm-out (in full or in part) its Participating Interest (PI) in the Block CB-ONN-2005/9. To this e ect, MPL signed a Sale Purchase Agreement (SPA) with an identi ed buyer on December 26, 2019. Further, Deed of Assignment for transfer of 100% PI was signed on January 14, 2020. Application for transfer of PI along with requisite documents has been submitted to Director General of Hydrocarbon (DGH) for approval and the same was being reviewed by them. We had signed an addendum to extend the completion date to August 31, 2020 and further extending the long stop date to October 31, 2020. In terms of the update received from IRP, as a part of the Corporate Insolvency Resolution Process (CIRP), IRP had oated an Expression of Interest and had received interest from Public and Private Players in the process. Basis the latest available information with the management, the Request for Resolution Plans (RFRP) has been issued to the shortlisted Prospective Resolution Applicants (PRA) and they are required to submit their Resolution Plans in October 2021 as per the process laid down under the Code. Prospective Resolution Applicants (PRAs) have expressed their interest in the Oil Assets of MPL. The process of due diligence by these entities is currently going on. However, due to a pending litigation led in NCLT by a nancial creditor of the Parent Company and a consequent stay granted by NCLAT, the timelines under the Code stand extended.

EPC contract/Sagar Samrat:

Mercator Oil & Gas Limited (MOGL) and Mercator O shore (P) Pte. Limited (collectively ‘Mercator Oil & Gas) were engaged in the execution of an EPC contract involving conversion of Sagar Samrat, a mobile o shore drilling unit into a mobile o shore production unit for ONGC. The said contract was awarded to a consortium comprising of Mercator Oil & Gas and Gulf Piping Co. WLL (GPC), a shipyard based out of Abu Dhabi. On September 25, 2018, MOGL received a notice of termination from ONGC for Sagar Samrat Conversion Project giving the consortium 14 days cure period as per the contract. At the same time ONGC proceeded to encash the bank guarantees. MOGL had then challenged the invocation of Bank Guarantees and was granted a stay by Honble Single Member Bench (SMB) of the Bombay High Court. Appeal in the Arbitration Petition before division bench of Honble Bombay High Court in MOGL (a 100% subsidiary of the Company) was dismissed vide order in July-2019; By virtue of the above order, ONGC invoked bank guarantees worth Rs. 1421.90 millions. This had increased the debt of MOGL by an equivalent amount. Parallely, on December 15, 2018, MOGL initiated arbitration proceedings against ONGC, raising claims of US$ 173 million against ONGC on account of the following:

i. Certified work but not invoiced

ii. Works completed and invoiced but unpaid

iii. Unpaid and/or unapproved variations

iv. Wrongful deduction of liquidated damages

v. New Taxes

vi. Wrongful invocation of the Bank Guarantees

vii. Damages at large

viii. Wrongful termination

MOGL in its pleadings had alleged fraud and collusion by and between ONGC & GPC for illegally terminating the contract and subsequently awarding it to GPC which was ultra vires (a) the Contract signed between ONGC & the Consortium, (b) Contract signed between the Consortium parties inter se and (c) Guidelines laid down by the Central Vigilance Commission (CVC) for PSUs mandating policies for awarding contracts. The arbitration is likely to complete in a few months and the tribunal is expected to issue its award thereafter.

Mercator has also initiated arbitration proceedings against consortium partner GPC and have sought to encash their counter Bank Guarantees worth US$ 9.2 mn issued in favour of MOGL. Legal advice states that our case is strong in both the matter and expect a favorable outcome.

A nancial creditor has incurred legal costs aggregating Rs. 56.9 million in the year ended March 31, 2021 on behalf of MOGL in relation to the ongoing arbitration in the SSCP matter. The same has been expenses out in MOGL towards Legal Costs in the FY 2020-21. MOGL is also in advanced stages of discussions with overseas funds to fund litigation for Sagar Samrat Arbitration matter and encashment of the counter bank guarantees given by GPC for any shortfall of amount sanctioned by the nancial creditor and/or further expenses that may be needed for execution of the award.

Coal

Global Coal Industry

Global coal consumption is set to rise to an all-time high in 2022 and remain at similar levels in the next few years if stronger e orts are not made to move to a low-carbon economy, a report by the International Energy Agency (IEA) said on Friday.

High gas prices following Russias invasion of Ukraine and consequent disruptions to supply have led some countries to turn to relatively cheaper coal this year.

Heatwaves and droughts in some regions have also driven up electricity demand and reduced hydropower, while nuclear generation has also been very weak, especially in Europe, where France had to shut down nuclear reactors for maintenance.

The IEAs annual report on coal forecasts global coal use is set to rise by 1.2% this year, exceeding 8 billion tonnes in a single year for the rst time and a previous record set in 2013.

It also predicts that coal consumption will remain at at that level to 2025 as falls in mature markets are o set by continued strong demand in emerging Asian economies.

This means coal will continue to be the global energy systems largest single source of carbon dioxide emissions by far.The largest increase in coal demand is expected to be in India at 7%, followed by the European Union at 6% and China at 0.4%.

"The world is close to a peak in fossil fuel use, with coal set to be the rst to decline, but we are not there yet," said Keisuke Sadamori, the IEAs director of energy markets and security.

Europes coal demand has risen due to more switching from gas to coal due to high gas prices and as Russian gas has reduced to a trickle.

However, by 2025 European coal demand is expected to decline below 2022 levels, the report said.

Global coal- red power generation is set to rise to a new record of around 10.3 terawatt hours this year, while coal production is forecast to rise by 5.4% to around 8.3 billion tonnes, also an all-time high.

Production is expected to reach a peak next year but by 2025 should fall to below 2022 levels.

The three largest coal producers - China, India and Indonesia - will all hit production records this year but despite high prices and comfortable margins for coal producers, there is no sign of surging investment in export-driven coal projects.

Indonesias coal production industry

Indonesia plans to produce 695 million tonnes of coal this year and sees exports of 518 million tonnes, Energy and Mineral Resources Minister Ari n Tasrif said on Monday, a level that would mean record shipments out of the country.

In 2022, Indonesia produced 687 million tonnes of coal and exported 494 million tonnes, he said. Production last year was higher than the target of 663 million tonnes despite an export ban at the start of the year that caused some miners to hold back output, as well as heavy rains that disrupted operations.

According to shipping data from consultancy Kpler, Indonesias exports to India, South Korea, Taiwan and the Philippines all rose last year, while shipments to its biggest market, China, dipped in 2022.

Meanwhile, Indonesias domestic coal consumption is estimated at 177 million tonnes in 2023, down from 193 million tonnes in 2022.

"There are a number e ciency programmes that we must carry out to reduce carbon emission from coal power plants," the minister said, explaining the lower estimate. Coal- red power makes up more than 50% of Indonesias energy supply and the government last year set a more ambitious target to cut emissions 31.89% on its own, or 43.2% with international support, by 2030. The country also aims to reach net zero emissions by 2060.

Ari n expects that coal prices will remain elevated this year after 2022s record prices, caused by supply disruptions from the war in Ukraine.

"Coal prices are expected to still hold up well in 2023 because of global energy (supply and demand) balance problems that still needs some support from coal," he told reporters.

Indonesias government-set monthly coal benchmark price peaked at $330.97 per tonne in October. It was $305.21 per tonne this month.

Ari n also said the country consumed 10.45 million kilolitres (kl) of biodiesel made from palm oil in 2022, and is targeting consumption of 13 million kl this year. The worlds top palm oil producer is expected to implement a B35 programme in February, which would mandate that diesel fuel contains 35% palm oil, up from 30% currently.

Operational Highlights

Coal process have uctuated due to Covid-19 pandemic. However, the operations of coal business at Indonesia are running normally. The business is trying its best to reduce costs.

Audited/Unaudited Financial Statements of all Indonesian subsidiaries for the year ended March 31, 2023 have not been provided to the Parent Company and hence their nancial statements for the 9 months period ended December 31, 2020 have only been considered for the purpose of preparation of Consolidated Financial Statements for the year ended March 31, 2023.

Total production of coal for the 9 months period ended December 31, 2020 in the year 2020-21 stands at 1,688,625 MT against 2,133,355 MT of PY. The company has made dispatches of 5,766,425 MT in the 9 months period ended December 31, 2020 in the year 2020-21 against 6,951,765 MT in PY through its coal handling infrastructure including 3rd party dispatches.

Legal Issues associated with coal business and its update

A. Disruption of Business

In September 2017, the group had changed its directors and senior management, which has led to certain disruption of operation of the business for approximately 5 months. Following the change of the subsidiaries directors and senior management, certain proceedings have been led by new management of the subsidiaries, ultimate parent company and shareholder of the said subsidiaries in Singapore and Indonesia against some of the former directors of the said subsidiaries, who have in turn initiated various proceedings against the company, shareholders of the Group and ultimate parent company. The subsidiaries have resumed its operation on January 15, 2018.

B. Legal matter for ownership dispute

Minority shareholder of PT Karya Putra Borneo (Step Down Subsidiary at Indonesia) has led a frivolous claim as shareholder of said company by allegedly accessing Legal Entity Administration System (LEAS) of Ministry of Law and Human Rights (MoLHR) and led Deed of Charge of Board of Directors, Board of Commissioner and Shareholders (Akta) dated March 05, 2019 which was on execution of the Circular Resolution based on misinterpretation of existing decision of Supreme Court No 1332K/Pid/2017 dated January 11, 2018. Subsequent to two joint hearings at MoLHR between all parties, one of the shareholder of PT Karya Putra Borneo has led court case with the State Administrative Court (PTUN).

As per information available until date of reporting, matter is sub-judice and under review cum discussion at court. Management of the Company is anticipating positive outcome as per their judgment and other compliance under applicable Mining Law in Indonesia. The Company is taking all legal steps to protect its rights and interests.

Financial Highlights

During the year under review, the income from operations on a consolidated basis was Rs. Nil against Nil in the previous year. The consequential loss in revenue were on account of (i) Audited/Unaudited Financial Statements of all Indonesian subsidiaries for the year ended March 31, 2023 not having been provided to the Parent Company and hence their nancial statements for the 9 months period ended December 31, 2020 have only been considered for the purpose of preparation of Consolidated Financial Statements for the year ended March 31, 2023 (ii) sale of entire eet of the ships during nancial year 2019-20 & 2020-21 and auction of 2 out of 4 dredgers during the nancial year 2020-21 (iii) remaining 2 dredgers remaining idle and in arrested condition and (iii) sharp decline in shipping and dredging income during the year a ected the revenue.

The table below shows nancial highlights of the Company.

FINANCIAL HIGHLIGHTS:

Rs in Million

Consolidated Standalone

Particulars

Year ended March 31, 2023 Year ended March 31, 2022 Year ended March 31, 2023 Year ended March 31, 2022
Income from operations - - - -
Other Income 0.48 3.93 123.80 126.95

Total Income

0.48 3.93 123.80 126.95
Operating Pro t (22.48) (121.11) 100.82 89.81
Finance Costs (1.28) (132.65) (1.28) (1.52)
Depreciation (0.80) (0.97) (0.80) (0.97)
Impairment - 48.09 (94.67) (46.46)
Exceptional Items - - - -

Pro t/(Loss) before Tax

(24.56) (206.64) 4.07 40.86
Taxes
-Current Year - - - -
-Excess/(Short) provision of earlier years - 11.25 - 11.25
-Deferred Tax - - - -

Net Pro t/(Loss) After Tax

(24.56) (195.39) 4.07 52.11
Minority Interest - - - -

Other Comprehensive Income Adjustment

- - - -

Risk & Concerns

Risk

Definition and Potential Impact

Companys plan

Economic Risk Our operations are spread across many countries in the world. Any slowdown in the economy in general & due to Covid-19 pandemic as well as local headwinds might have adverse impact on Companys operations. The Company periodically monitors various developments in areas of its presence to identify the risk, if any, arising from such developments. The Company has implemented SOPs for taking care of safety and health of employees and visitors in its o ces with a view to contain the spread of the pandemic.
Legal Risk Involvement in legal cases may lead to slowdown of operations and loss of consumer confidence in Companys operations. Mercators involvement in two legal cases might have adverse impact on its functioning. The Company has been stringently ghting against the lawsuit and is optimistic of positive results.
A Corporate Insolvency Resolution Process (CIRP) was initiated against the Company vide an order no. CP(IB) 4404/MB/2019 dated February 08, 2021 of the Honble National Company Law Tribunal, Mumbai Bench (‘NCLT) under the provisions of the Insolvency and Bankruptcy Code, 2016 (Code). Pursuant to the order, the powers of the Board of Directors were suspended and were vested with Mr. Girish Siriram Juneja, who was appointed as Interim Resolution Professional (IRP) by the NCLT and later con rmed as a Resolution Professional (RP) by the Committee of Creditors (CoC). At business levels, the Company is sincerely its cases to recover its dues.
The management / Liquidator is of the view that they are making best e orts to achieve favourable order in ongoing litigations in order to protect the value of its assets and is making e orts to revive operations. As per rules and regulations of the CIRP stipulated under the Code, RP had invited Resolution Plans from the eligible Prospective Resolution Applicants (PRA).
The Resolution Plans submitted by the Resolution Applicants were placed before the CoC for their consideration and voting but failed to receive the requisite votes in terms of the provisions of the Code. Accordingly, an application for liquidation of the Corporate Debtor has been led in terms of Section 33 of the Code.
Pursuant to the aforesaid application, NCLT, Mumbai has ordered the company to be liquidated as a going concern and Mr. Girish Siriram Juneja has been appointed as Liquidator of the company vide its order dated February 21, 2023.
Operating Risk Inability to manage customer relationships could impact revenues The Company has been successful in retaining customer relationships despite stringent business environment. It enjoys enduring relationships with major global and Indian companies.
Forex Risk Fluctuation of currency prices against local currency may have adverse impact of Companys protability Adoption of natural hedge against forex uctuation enables the Company to mitigate any adverse impact of currency rate uctuation.
Environmental Risk With rising awareness of effects of Climate change, unable to adhere to environmental norms may lead to negative impact on the Company. This may impact the long term demand for coal leading to lowering of coal prices Given the nature of business of Mercator, environmental protection measures are taken concurrently with coal operations for maintaining acceptable levels of environmental pollution. The company has a strict HSE policy in place to ensure business excellence as well as customer satisfaction.

Quality, Safety and Environment

The Company is committed to the policy of ‘Zero Accidents and Zero Spills. It believes that maintaining strict quality standards ensures full safety of all stakeholders and adherence to environmental norms is a critical component for business excellence and client satisfaction. The Company believes in ensuring the health, safety and security of its team, as well as those associated with it. All equipment and assets are regularly monitored and serviced to guard against any mishaps. The Company has put in place standard operating procedures (SOP) in its premises for the employees and visitors to be followed in order to contain the spread of covid-19 pandemic during the rst wave and second wave and continues to follow the same strictly. All employees go through a thorough training programme to equip them with full awareness and understanding of all quality, safety and environmental norms. The Company practice the ‘Stop Work culture in case of any unsafe activity. It exible Health, Safety, Security & Environment (HSSE) culture adapts to the changing external demands and ensures 100% compliance to all relevant national and international rules and regulations. We continue to remain committed towards this goal and are hopeful of reporting such victories in future as well.

Segment wise Performance

The Company is operating in single primary business segment i.e. Water Transport. Accordingly, no segment reporting as per Accounting Standard-17 has been reported.

Internal control system and their adequacy

To ensure adherence to and adequacy of all internal control systems, the Company utilise the services of internal auditors. They evaluate the e cacy and sustainability of our internal control systems and provide suggestions or improvements. The Audit Committee constituted by the Board of Directors reviews their ndings consistently.

Human resource policy

The Company believes that the team is the soul of our organisation and hence, take every measure to empower and motivate them. The Company remains focused on strengthening our human resources policies and internal processes where employees seek continual improvement, greater accountability and responsibility.

As on March 31, 2023, there was only 1 permanent employee and 0 contract employees with the Company. Globally, the data relating to Mercator group permanent employees and contract employees as on March 31, 2023 could not be collated on account of the same not having been provided to the parent company by the liquidators of the material subsidiary at Singapore which controls the step down Indonesian subsidiaries.

Details of significant changes in key financial ratios on standalone basis:

Ratios

2021-22 2022-23

Reasons/Explanation

Debtors Turnover NA NA Revenue from operations is NIL for the Financial Year 2021-22 and 2022-23
Inventory Turnover NA NA There is no inventory
Interest Coverage Ratio 51.57:1 78.77:1 No provision for interest on principal amount from the date of commencement of CIRP with effect from February 08, 2021
Current Ratio 0.19:1 0.19:1 No significant variation
Debt Equity Ratio 0.98:1 0.98:1 No significant variation
Operating Pro t Margin (%) NA NA Revenue from operations is NIL for the Financial Year 2021-22 and 2022-23
Net Pro t Margin (%) NA NA Revenue from operations is NIL for the Financial Year 2021-22 and 2022-23
Return on net worth (%) NA NA Net Worth is fully eroded

Opportunities and Threats

As explained in the foregoing paras, great opportunities lie in all the businesses, the company is operating. Currently, the operations of the company in all the segments are halted due to nancial issues.

Greatest threat for the company is that none of the resolution plans submitted by the Resolution Applicants was approved by the COC. Accordingly, an application for liquidation has been led in terms of Section 33 of the Code. Pursuant to the aforesaid application, NCLT, Mumbai has ordered the company to be liquidated as a going concern and Mr. Girish Siriram Juneja has been appointed as Liquidator of the company vide its order dated February 21, 2023.

Future Outlook of the company

Future outlook of the company depends on the decision by honourable National Company Law Tribunal, Mumbai on the application for liquidation by RP of the company.

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward looking statements within the meaning of applicable laws and regulations. Actual results might di er substantially or materially from those expressed or implied. Important developments that could a ect the Companys operations include demand-supply conditions, changes in Government and international regulations, tax regimes, economic developments within and outside India and other factors such as litigation and labour relations.

For and on behalf of the Board

For Mercator Limited

Jagmohan Talan

Director

(DIN:08890353)

(Powers of the board are suspended from

the Insolvency Commencement Date)

Taken on record by

Girish Siriram Juneja

Liquidator for Mercator Limited

Reg.: IBBI/IPA001/IP-P00999/2017-2018/11646

Regd. O ce:

83-87, 8th Floor, Mittal Tower,

B-wing, Nariman Point, Mumbai - 400 021

Dated: August 14, 2023