Mercator Reort All Pages without pgnationmercator.in/investors/AnnualReport/AnnualReport2007-08.pdf · M. A., L. L. B. & CAIIB, has over 35 years of experience in handling treasury,

Approaching Destination

Approaching waters

Our Vision 03

Year at a Glance 05

Board of Directors 07

Chairman’s Letter to the Shareholders 09

Business Segments 11

Directors' Report 13

Corporate Governance Report 21

Management Discussion & Analysis Report 35

Auditors' Report 43

The Financials

Balance Sheet 46

Profit & Loss Account 47

Cash Flow Statement 48

Schedules 49

Consolidated Financials 79

Financial Data Analysis 99

CONTENTS

Seeing Beyond Boundaries

Seeking Horizon

OUR CORE VALUES

OUR CORE PURPOSE

OUR GOAL

Honouring Commitments towards all the stake holders.

Consistent growth.

Ensuring that every employee feels pride in being called a

“Mercatorian”.

Innovation... We believe in doing things differently.

Giving the best solutions and offering outstanding value

and service to our customers.

To become a dominant player in the international shipping

and offshore

OUR VISION

ANNUAL REPORT 2007-2008

2

Fostering Teamwork

Forcing Migration ON BOARD

Mr. H. K. Mittal - Executive Chairman

Mr. Atul J. Agarwal - Managing Director

Mr. Manohar Bidaye - Director

Mr. H. K. Mittal, aged 58 years, the Executive Chairman of the

company. Having received masters from Indian Institute of

Technology (IIT), Roorkee; he started his tryst with enterprise

by forming a proprietorship firm; way back 1975, which was

later converted into a limited company. This Company was

primarily into the manufacturing of Sulphuric Acid and

Ferric Alum. Expansion of businesses both vertically and horizontally; soon became his

passion that still continues to be a major driving force backed up by more than three

decades of entrepreneurial experience.

Mr. Mittal acquired Mercator Lines Ltd. in 1988 and with his vision and keen insight has

brought the Company to where it is today.

Mr. Atul J. Agarwal, aged 50 years, the Managing Director of

the Company, is a Chartered Accountant, with 27 years of

professional experience. He has been associated with the

Company since its inception.

As a Chartered Accountant, Mr. Agarwal specializes in the

financial aspects of business. He looks after day - to - day

management and financial matters of the Company. He also has a strong expertise in

financial and strategic planning and execution. Mr. Agarwal has been accredited with

memberships of various committees formed by the Government for shipping reforms.

He has been instrumental in the successful implementation of many of the

Company's projects.

He is also member of the Board of Trustees of Mumbai Port Trust and is on the Board of

Directors of various organizations such as Indian National Ship-owners' Association

(INSA); Thirumalai Chemicals Ltd., and Mercator Healthcare Ltd.

Mr. Manohar Bidaye, aged 45 years, has Masters in

Commerce (M.Com) from the University of Mumbai, and has

a general Degree in Law (LLB - Gen.). He is also an Associate

Member of The Institute of Company Secretaries of India

(ACS).

He has been a practicing Company Secretary since 1989 and

has a broad based experience in corporate advisory and counseling. He also brings

expertise in corporate and taxation laws to the board.

Mr. Bidaye is the Promoter and Chairman of Zicom Electronic Security Systems Limited,

where he's involved with the overall Corporate Planning, Strategy and

Implementation, Financial Management, Banking, Accounts, Taxation and Legal

aspects.

He joined the board of Mercator Lines Limited in May 1994.

Mr. Anil Khanna - Director

Mr. M. G. Ramkrishna - Director

Mr. K. R. Bharat - Director

Mr. Anil Khanna aged 49 years, a

Fellow Chartered Accountant, is a

practicing professional specializing

in business management, joint

ventures and auditing. He has been

on the Board of Directors of several

Indian and multinational companies. Mr. Khanna has over 10

years of experience in consultancy.

He joined Mercator Lines Limited in May 1994.

M. G. Ramkrishna, aged 64 years, an

M. A., L. L. B. & CAIIB, has over 35 years

of experience in handling treasury,

financial and banking matters.

During the span of his service, he has

worked with reputed national and

international Companies and banks, in various capacities and

is on the Board of many companies.

He joined Mercator Lines Limited in January 2003.

Mr. K. R. Bharat, aged 46 years is MBA

f r o m I n d i a n I n s t i t u t e o f

Management . He has been

associated with Capital Market for

more than 25 years in various

segments like Merchant Banking,

Equities and Investment banking; Risk Management, research

etc. He is on the Board of many companies. He worked as

Managing Director at Credit Suisse First Boston Securities

(CSFB) India and Pregrine Securities (India). Before that he had

a successful stint of 10 yrs with Citi Bank. He was also member

of Market Advisory Committee of Bombay Stock Exchange.

He joined Mercator Lines Limited in July 2007


6

Instilling Stability

Installing Anchor

Dear Shareholders,

At the outset; it has been yet another eventful year at

Mercator; fast tracking growth and sustain ability by exigent

expansions and prudent diversifications. Your company

undertook expansion to broad base offerings to the

customers; and diversification to take on newer opportunities

on the horizon.

May I share with you the firsts, Mercator embarked upon this year. Your company forayed into Dredging – another highly promising sector;

and integrated backwards by diversifying into coal mining. Opportunities in these areas are infinite; will ensure growth over medium to

even long term. The offshore segment appears firmer, having employed one jack-up rig already.

In shipping segment, the fleet expansion continued this year as well keeping the tradition of growth. Our consolidated capacity increased

by 15% to 2.34 Million DWT. In addition to the capacity; the type and age of vessels were once again rationalized to improve market access.

Your company demonstrated a solid all round performance; top line growth being 39% and bottom line grew by about 196%.

Mercator Lines (Singapore) Ltd – the Singapore based subsidiary got listed on main board of Singapore Stock Exchange successfully this

year after maiden IPO, raising USD 143 million. It is already the second largest shipping company in Singapore now; obviously the numbers

are simply indicative.

Our customer base has been growing continually. Several names of international repute find mention on our order books; such as Arcelor

Mittal; Cosco and Petronas to name but a few.

Your company continued its pursuit to continually improve and remain a world class organization by recognizing human capital as its real

assets. A holistic and systemic approach has been taken to spearhead sustainability initiatives towards ensuring safety, quality, our

responsibility towards environment and society at large.

We shall continue to endeavor, in all possible ways, to constantly and consistently return long term value to you, our shareholders. We truly

realize the enormity of responsibility arising out of your unwavering support and confidence bestowed on us. We are sure of the path and

the direction your company is headed towards.

Thank You,

Yours sincerely,

H. K. Mittal

Mumbai June 29, 2007


8

Unearthing Opportunities

Exploring Natural

Resources

BUSINESS SEGMENTS


10

SHIPPING

u

u

u

u

u

u

u

u

u

u

OFFSHORE

u

u

LOGISTIC SOLUTIONS

u

MINING

u

Tankers (Wet Bulk)

Dry Bulk Carriers

Dredgers

VLCC's

Suezmax

Aframax

Product Carriers

Chemical Carriers

Panamax – Geared

Panamx – Geareless

Post Panamax

Kamsarmax

Trailer Hopper Suction Dredgers (THSD's)

Premium Jack-Up Rigs

Oil and Gas Exploration

Coal Handling

Coal Mining

Sustaining GrowthSustaining Growth

Sustaining Energy

DIRECTORS’ REPORT

To

The Members,

Mercator Lines Limited

thWe take great pleasure in presenting the 24

annual report of your Company for the year ended

on March 31, 2008.


12

FINANCIAL HIGHLIGHTS:

Particulars Year ended

31.03.2007

Standalone

Year ended

31.03.2008

Standalone

Year ended

31.03.2008

Consolidated

Year ended

31.03.2007

Consolidated

Income from operations

Total Income

Operating Profit

Interest

Depreciation

Profit before Tax & Minority Interest

Minority Interest

Taxes

-Current Year

-Fringe Benefit Tax

Net Profit After Tax & Minority Interest

Balance brought forward from last year

Prior Period Adjustments

Short provision for tax of earlier years

Profit available for appropriations:

Less: Appropriations:

Transfers to Reserves

-Tonnage Tax Reserve

-General Reserve

Interim Dividend on Preference shares

Dividend on Equity Shares of previous yr

Provision for final Dividend on Equity

Shares

Tax on Dividend

Balance carried to Balance Sheet

1,122.76

1142.69

322.91

80.77

103.80

138.34

(0.08)

(3.27)

(0.13)

134.86

150.99

(0.43)

Nil

285.42

16.00

7.50

3.20

Nil

18.92

3.67

236.13

781.14

863.07

339.14

58.56

103.83

176.75

N.A.

(7.70)

(0.21)

168.84

153.06

(1.20)

(1.30)

319.41

33.00

17.70

3.08

0.80

25.84

5.05

233.94

1454.87

1588.98

721.48

144.64

167.49

409.35

(29.89)

(8.81)

(0.21)

370.44

236.13

(41.49)

(1.30)

563.79

33.00

17.70

3.08

0.80

25.84

5.05

478.32

783.26

801.15

235.78

63.38

97.54

74.86

N.A.

(3.10)

(0.13)

71.63

131.15

(0.43)

Nil

202.35

16.00

7.50

3.20

Nil

18.92

3.67

153.06

Amount Rs. in Crores


13

contracted to acquire one more dredger at a cost of about Rs.

57.60 crore which was proposed to be financed through mix of

internal accruals and debt. The Company through its subsidiary

Mercator Lines (Singapore) Ltd. (MLS), acquired five Kamsarmax

vessels; thereby adding a total tonnage of 387,265 MT, during the

year under review. The total cost of acquisitions was Rs. 1048.26

crores which was financed by a mix of internal accruals and debt.

Subsequent to the year end, MLS also contracted to acquire two

Panamax vessels of 1,38,442 DWT in aggregate, at a cost of about

Rs. 522 crores, equivalent to USD 131 million. These are proposed

to be financed by its IPO proceeds.

In December 2007, MLS successfully concluded its maiden IPO for

an amount of about Rs. 568.56 crores, which is equivalent of USD

142.80 million. MLS also issued shares arising upon conversion of

FCCB Series A of USD 35mn which is about Rs. 139 crores (together

with an interest amount of USD 4mn (about Rs. 16 crores ) accrued

thereon) as per the terms of the issue. The shares of this subsidiary

are listed on the main board of the Singapore Stock Exchange.

With a foray into dredging during the year, your Company has

added one more segment under its fold in addition to its existing

range of segments of Bulk Carriers, Tankers and Offshore.

The global demand for commodities still continues to be mainly

driven by India and China. India expects the rate of growth to be

around 8-9% per annum. With a consolidation in double hulls

taking place at faster pace; the tanker market is expected to

remain firm in near future.

All major Indian ports are presently working at 100% capacity,

whereas India further expects 8 to 9% growth rate. This would

translate into a meteoric rise in seaborne trade from current levels

of about 400mn tons to 900mn tones by the year 2013. The Indian

Government plans to develop new ports, as well as deepen the

existing ports to absorb additional requirements. In addition to

this is the “Sethusamduram” project that promises to provide

tremendous opportunities in dredging.

In the offshore services; the delivery of the jack-up rig is expected

as scheduled during the quarter of Jan-March 2009. Subsequent

to the year end; this rig has been contracted for deployment with

effect from date of its delivery. With the demand overhang from

the year 2008; the business prospects of further acquisitions and

the deployment of rigs appears good. Your Company is also

equipped to take up Exploration and Production (E&P) activities in

the Oil & Gas sector. With forthcoming NELP VII by the Government

of India; your Company foresees good opportunities in this sector

too.

BUSINESS OPERATIONS & FUTURE OUTLOOK:

The consolidated turnover for the year under review was

significantly higher at Rs. 1588.98 crores as against Rs. 1142.69

crores in the previous year; registering a substantial growth of

39%. The operating profit for the year of Rs. 721.48 crores was

higher by 123% over previous year of Rs. 322.91 crores.

Inspite of 79% higher interest costs amounting to Rs. 144.64 crores

(previous year Rs. 80.77 crores); and 61% higher depreciation to the

tune of Rs. 167.49 crores (The previous year Rs. 103.80 crores). The

Profit Before Tax (PBT) almost tripled this year; precisely an increase

of 196% to Rs. 409.35 crores as against Rs. 138.34 crores in the

previous year. Profit After Tax (PAT) also grew correspondingly by

197% to Rs. 400.33 crores as against Rs. 134.93 crores for the

previous year in spite of the higher tax outgo of Rs. 9.02 crores

against Rs. 3.41 crores in the previous year; increase of 165%. After

providing for the minority interest of Rs. 29.89 crores (Rs. 0.08 crore,

previous year) the net profit was recorded at Rs. 370.44 crores

(Rs. 134.86 crore); an increase of 175%.

The key driver of this exciting consolidated performance of the

Company was timely expansion of the fleet, culminating in

achievement of 99% fleet utilization.

On a standalone basis, the turnover of the Company for the year

under review was Rs. 863.07 crores as against Rs. 801.15 crores in

the previous year, registering a growth of 8% for the year. The

operating profit for the year under review at Rs. 339.14 crores was

higher by 44% as against Rs. 235.78 crores of the previous year. The

Profit Before Tax increased by 136% to Rs. 176.75 crores as against

Rs. 74.86 crores in the previous year. Profit after Tax also grew by

136% to Rs. 168.84 crores as against Rs. 71.63 crores for the

previous year. Better utilization of the fleet and the profits due to

sale of vessels have contributed to register a remarkable growth in

the bottom line of the Company.

A few more feathers to our cap were added this year too.

Mr. H. K. Mittal, the Executive Chairman of the Company was

awarded the “Newsmaker of the Year 2007” by Lloyd's List Middle

East and India Subcontinent and “Outstanding Achievement

Innovation” by Shipping & Marine Leadership & Excellence Awards

2008.

During the year under review, the Company continued its

expansion-cum diversification drive, and forayed into Dredging by

acquiring three dredgers of 24,153 DWT at a total cost of about Rs.

240.23cr. Two of these dredgers were financed by internal accruals

and one with a mix of internal accruals and financial assistance

from the banks. Subsequent to the year end, the Company

AWARDS AND RECOGNITIONS

EXPANSION AND FINANCE


14

Being one of the largest carriers of coal into the country; one of the

strategic fit was to integrate the company backwards. Your

company has therefore, forayed into coal mining through its

subsidiaries. Two coal licenses in Indonesia and one in

Mozambique have already been granted to the said subsidiaries.

Both the projects are progressing well in terms of timelines and

operational milestones. The company expects revenues from

these projects in the current year.

In view of the global trade in commodities continuing to be

growing at a higher rate, the future outlook of industry in general,

and that for your Company in particular, appears to be bright,

barring unforeseen circumstances.

During the year, the Company allotted 3,76,52,887 equity shares of

Rs. 1/- each on the conversion of 5,150 FCCB's of an aggregate

amount of USD 51,500,000 at a price of Rs. 59/812 per share at a

fixed exchange rate of Rs. 43/73 per USD. The Company also issued

and allotted 32,00,000 equity shares of Re. 1/- each at a price of Rs.

137/50 along with the entitlement of 48,00,000 equity shares as

bonus shares to the promoter's group Company in exchange of

warrants allotted to them, pursuant to the resolution passed by

the shareholders of the Company at their EOGM held on January 17,

2006. Subsequent to the year end, further 10,96,686 equity shares

of Re. 1/- each were issued and allotted in lieu of surrender of 150

FCCB for conversion out of the abovementioned FCCB issue.

Further during the year 285,00,000 warrants carrying an option to

apply and subscribe for an equivalent number of shares at a price

not less than Rs. 58/50 per share to one of promoters on

preferential basis in accordance with SEBI Guidelines pursuant to

the resolution passed by shareholders of the Company at their

EOGM held on October 11, 2007.

During the last quarter of the financial year; the Company

redeemed its 8% Preference Share capital aggregating Rs. 40

crores on maturity.

The Board of Directors are pleased to recommend a 110% dividend

i.e. Rs. 1.10 per equity share of Re. 1/- each for the financial year

2007-08 on the enlarged capital base post issue of shares on

conversion of FCCBs; for your approval. The previous year total

dividend was 100% i.e. Re.1 per share aggregating Rs. 19.72 crores

on 19,72,42,500 shares. The aggregate amount of the dividend on

equity shares for the financial year 2007-08 would be Rs. 30.23

crores including corporate tax & surcharge thereon (as against Rs.

22.14 crores in the previous year). The dividend pay out has

therefore increased significantly in absolute value i.e. by 37%.

SHARE CAPITAL:

DIVIDEND:

Further during the year; the Directors declared and paid pro-rata

dividend of 8% on the Redeemable Cumulative Preference shares

of Rs. 4000 lacs, amounting to Rs. 3.60 crores (as against the

previous year at Rs. 3.65 crores) inclusive of the Corporate Tax &

surcharge thereon amounting to Rs. 0.52 crore (as against Rs. 0.45

crore in the previous year).

In accordance with the provisions of the Companies Act, 1956 and

the Articles of Association of the Company, Anil Khanna is the

Director liable to retire by rotation at the ensuing Annual General

Meeting and being eligible, has offered himself for re-

appointment. The brief resume of Anil Khanna is included under

the Corporate Governance section of this report.

Your Directors recommend for your approval the re-appointment

of Anil Khanna at the ensuing Annual General Meeting.

Your company has following subsidiaries/fellow subsidiaries:

DIRECTORS:

SUBSIDIARY COMPANIES:

Sl No. Name Country of

Incorporation

Mercator International Pte. Ltd. Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Mercator Offshore Ltd.

Mercator Lines (Singapore) Ltd.

Varsha Marine Pte. Ltd.

Vidya Marine Pte. Ltd.

Mercator Lines (Panama) Inc.

Mercator Oil & Gas Ltd.

Oorja Holdings Pte. Ltd.

Oorja 1 Pte. Ltd.

Oorja 2 Pte. Ltd.

Oorja 3 Pte. Ltd.

Oorja Indo KGS.

Oorja Mozambique Lda.

Broadtec Mozambique Minas Lda.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

Panama

India

Indonesia

Mocambique

Mocambique

Pursuant to Accounting Standard (AS 21) issued by the Institute of

Chartered Accountants of India, consolidated financial statements

presented by the Company include financial information of its

subsidiaries.


15

Your Company has not imported any technology during the year. It

has earned foreign exchange of Rs. 269.00 crores (as against the

previous year earnings of Rs. 201.73 crores) and spent Rs. 602.12

crores (as against Rs. 751.75 crores for the previous year) in foreign

exchange on account of acquisition of vessels, charter hire & other

vessel expenses and interest etc.

Your Company complies with the provisions laid down in

Corporate Governance laws. It believes in and practices good

corporate governance. Mercator maintains transparency, creates

value and wealth for its shareholders and also enhances corporate

accountability.

A separate report on the Corporate Governance, along with the

requisite certificate from the Auditors of the Company is annexed

herewith as part of this Annual Report.

Your company is a responsible corporate citizen, both in letter and

in spirit. Mercator therefore is always keen to discharge its social

responsibility towards the society it operates within. The company

has several such initiatives; mainly focused on education sector.

Your company has increased its amount of donations by about 9%

during the year to Rs. 32 lacs.

All properties of the Company are adequately insured.

Pursuant to the provisions of section 217(2AA) of the Companies

Act, 1956, the Directors hereby confirm that:

(I) In preparation of the annual accounts, the applicable

accounting standards have been followed along with proper

explanation relating to material departures;

(ii) They have selected such accounting policies and applied

them consistently and made judgments and estimates that

are reasonable and prudent, so as to give a true and fair view

of the state of affairs of the Company at the end of the

financial year and of the profit for the year under review;

CORPORATE GOVERNANCE:

OUR SOCIAL RESPONSIBILITY:

INSURANCE:

DIRECTORS' RESPONSIBILITY STATEMENT:

A statement in respect of the said subsidiaries pursuant to Section

212 of the Companies Act, 1956 is enclosed herewith as required.

The Company has received an exemption from the Government of

India u/s 212(8) of the Companies Act 1956 from attachment of the

documents of above subsidiaries for the year ended on March 31,

2008. The annual reports and accounts of subsidiaries will be kept

for inspection at the registered office of the Company and also of

the subsidiary companies concerned; and the same along with

related detailed information will be made available to the

investors of the Company, as well as, subsidiaries at any point of

time. Investors desirous of obtaining annual accounts of the

Company's subsidiaries may obtain the same on request.

The Auditors of your Company, M/s. Contractor, Nayak &

Kishnadwala, Chartered Accountants, retire at the ensuing Annual

General Meeting and have confirmed their eligibility for re-

appointment under Section 224 (1-B) of the Companies Act, 1956.

The Directors recommend their re-appointment for approval of

the members.

At Mercator, we believe that our employees are our partners in our

success and hence our partners in rewards. It is nothing but their

dedication, hard work and inimitable team spirit that has enabled

the Company to achieve new milestones in business.

As required under provisions of Section 217(2A) of the Companies

Act, 1956, read with the Companies (Particulars of Employees)

Rules 1975 as amended, the requisite particulars in respect of the

employees of the Company, who were in receipt of remuneration

in excess of the limits specified under the said section are set out in

the annexure forming part of this report.

The Conservation of Energy and Technology Absorption under the

Companies (Disclosure of Particulars in the Report of the Board of

Directors) Rules, 1988 are not applicable to your Company. All the

same, the Directors would like to assure you that every measure is

taken to save and conserve energy at all the stages of our

operation of the vessels, as well as, in our shore activities.

In its endeavor of the development of the export market, the

Company has formed new subsidiaries during the year.

AUDITORS:

PARTICULARS OF EMPLOYEES:

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION;

EXPORT MARKET DEVELOPMENT AND FOREIGN EXCHANGE

EARNINGS & OUTGO:


16

(iii) They have taken proper and sufficient care for the

maintenance of adequate accounting records in accordance

with the provision of the Companies Act 1956, for

safeguarding the assets of the Company and for preventing

and detecting fraud and other irregularities;

(iv) They have prepared the annual accounts on a going concern

basis.

As required under clause 3(1) (e) of the Securities and Exchange

Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 persons constituting “Group” (within the

meaning as defined in the Monopolies and Restrictive Trade

Practices act, 1969) for the purpose of availing exemption from

applicability of the provisions of Regulation 10 to 12 of the aforesaid

Regulations, are given in the annexure B attached herewith and

forms part of this Annual Report.

GROUP FOR TRANSFER OF SHARES:INTERSE

ACKNOWLEDGMENTS:

The Directors' would like to take this opportunity to thank the

Ministry of Shipping, M/s. Transchart, the Directorate General of

Shipping and other statutory authorities for their continual

support and encouragement.

We would also like to express our gratitude towards our bankers;

all the stakeholders and employees for their unflinching support

and faith in the Company.

For and on behalf of the Board

H. K. MITTAL

Executive Chairman

Regd. Office:rd3 Floor, Mittal Tower,

B-wing, Nariman Point,

Mumbai - 400021

Dtd: May 14, 2008


ANNEXURE - A TO THE DIRECTORS' REPORT

Information as per Section 217(2-A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming

part of the Report of the Board of Directors for the year ended on March 31, 2008.

17

NOTES

1. The employment at 1& 2 above are on contractual basis. All others are on non-contractual basis.

2. Gross Remuneration includes salary, commission, reimbursement of medical expenses and all other monetary benefits.

3. None of the above is relative of any Director of the Company.

4. *indicates the employees employed for part of the financial year.

Name Nature Of

Duties

Gross

Remune-

ration

(Rs. In Lacs)

Qualification Experience

(Yrs.)

Date of

Commen-

cement of

Employment

Age

Yrs.

Particulars of Previous

Employment

H. K. Mittal Executive

Chairman

800.29 M. Tech

(IIT - Roorkee)

32 Yrs Managing Director with

Natraj Organic Ltd for

17 Yrs.

59

Atul J.

Agarwal

Managing

Director

805.49 B. Com, F.C.A. 27 Yrs 01/01/1990

01/01/1990

Proprietor of A.J Agarwal &

Co. Chartered Accountant

for 7 Yrs

49

Atul M.

Malhotra

General Manager

- Logistic

34.45 B. Com 14 Yrs 22/09/1996 35

Kowshik

Kuchroo

Vice President -

Strategy

39.90 HND (Nautical

Science) MICS

14 Yrs 43

T. V.

Shanbhag

Advisor- Shipping 34.91 MA (Economics),

F.I.C.S (London),

A.I.I.I.

36 Yrs 18/04/2005 Chief Controller of

Chartering GOI for 10 Yrs

61

F. X. Chacko* Marine

Superintendent

22.44 B. Sc, Master -

Foreign Going

40 Yrs 11/01/2006 K Steamship Agencies Ltd.

for 2 years

53

Valentine

Dias*

Marine

Superintendent

8.52 Master - Foreign

Going

26 Yrs 01/02/2006 Wallem Ship Management

Hongkong for 7 Yrs

44

Ranjan

Agarawal

C.E.O.- Oil and

Gas

42.28 B. Tech (Chemical

Engg.) PGDBM

24 Yrs 10/07/2006 Reliance Industries Ltd for

2.5 Yrs

47

S. M. Rai Technical Head 29.46 B. E. 40 Yrs 16/08/2006 Shipping Corporation of

India for 37 years

61

Arun Nanda Vice President -

Tankers

Operations

42.07 Master - Foreign

Going

35 Yrs 28/08/2006 Marshall Produce Ship

Brokers, Mumbai for

6 Months

53

Joshua

Kandula

Vice President -

Offshore

69.46 B. Tec (Electrical)

MBA - IIMS

24 Yrs 21/08/2006 The Great Eastern Shipping

Co of India for 9 Yrs

48

Nitin

Kolhatkar*

Vice President -

Finance and

Accounts

22.86 M. Com, AICWA 19 Yrs 06/08/2007 United Phosphorous Ltd

for 14 years

44

Madhusudhan

Thayi*

General Manager

- Dredging

Operation

6.34 B. E (Civil) 30 yrs. 01/12/2007 Dredging Corporation of

India for 29 years

51

K. S. Raheja General Manager

- Projects

5.61 B. Tech (IIT), MBA

(XLRI)

03/01/2007 Tata Steel for 13 years 38

Jayesh Doshi* Chief Financial

Officer

8.56 F. C. A.; L.L.B 13/06/2006 Gujarat Ambuja Cement

Ltd. for 15 years

43

Mundo Gas for 7 Years01/04/2005

NA

21 yrs.

14 yrs.


18

ANNEXURE – B TO THE DIRECTORS' REPORT

For the purpose of transfer of shares under Regulation 3 (1) (e) of the Securities and Exchange board of India

(Substantial Acquisition of Shares and Takeovers) Regulations, 1997, the following person constitute “Group” as defined in the

Monopolistic & Restrictive Trade Practices, 1969, (54 of 1969):

1. Mercator Healthcare Ltd.

2. MLL Logistics Pvt. Ltd.

3. AHM Investments Pvt. Ltd.

4. Mercator Mechmarine Ltd.

5. Ankur Fertilizers Pvt. Ltd.

6. Rishi Holdings Pvt. Ltd.

7. AAAM Properties Private Ltd.

8. Mercator International Pte. Ltd.

9. Mercator Offshore Ltd.

10. Mercator Oil & Gas Ltd.

11. Mercator Petroleum Pvt. Ltd.

12. Mercator Lines (Singapore) Ltd.

13. Mercator Lines (Panama) Inc

14. Varsha Marine Pte. Ltd.

15. Vidya Marine Pte. Ltd.

16. Oorja Holdings Pte. Ltd.

17. Oorja 1 Pte. Ltd.



20. Oorja Indo KGS

21. Oorja Mocambique Minas Limitada

22. Broadtec Mocambique Minas Limitada

23. Oorja Indo Pentangis Three

24. Oorja Indo Pentangis Four

25. H. K. Mittal

26. Archna Mittal

27. Atul J. Agarwal

28. Manjuli Agarwal

29. Shalabh Mittal

30. Shruti Mittal

31. Adip Mittal

32. Aayush Agarwal

33. Arooshi Agarwal

inter se

Building Future

Cultivating Industry

COMPANY'S PHILOSOPHY:

I. BOARD OF DIRECTORS:

The Company strongly believes in ethical way of

conducting business. The Company upholds its

relationship with the society and hence its social

responsibility of environmental safety and human

welfare.

Corporate governance to us is not just a compliance

issue but central guiding principle for everything it

does. It’s a way of thinking, way of conducting business

and a way to steer the organization to take on

challenges for now and for the future.

The Company recognizes its responsibility towards its

shareholders and therefore constantly endeavors to

create and enhance shareholder's wealth and value

by implementing its business plans at appropriate

times and thus taking maximum advantage of

available opportunities to benefit the Company, its

shareholders and the society at large. The Company

believes in monitoring its performance regularly and

with utmost transparency to ensure ethical

governance at all levels within the organization.

The Board of Directors of the Company comprises of

six Directors with a combination of two Executive

Directors and four Non-executive Independent

Directors. Among the two Executive Directors one is

Executive Chairman and the other is Managing

Director. The Company is in compliance with the

requirement of at least half of the Board comprising of

Independent Directors as the Chairman of the Board

is an Executive Director.

None of the Independent Directors:

a. apart from receiving director's remuneration, does not have any

material pecuniary relationships or transactions with the

company, its promoters, its directors, its senior management or

its holding company, its subsidiaries and associates which may

affect independence of the director;

b. is not related to promoters or persons occupying management

positions at the board level or at one level below the board;

c. has not been an executive of the company in the immediately

preceding three financial years;

d. is not a partner or an executive or was not partner or an executive

during the preceding three years, of any of the following:

i) the statutory audit firm or the internal audit firm that is

associated with the company, and

ii) the legal firm(s) and consulting firm(s) that have a material

association with the company.

e. is not a material supplier, service provider or customer or a lessor

or lessee of the company, which may affect independence of the

director;

f. is not less than 21 years of age

g. is not a substantial shareholder of the company i.e. owning two

percent or more of the block of voting shares.

There is no Nominee Director on the Board of the Company.

REPORT ON CORPORATE

GOVERNANCE

(Forming part of Directors' report for the year stended on 31 March 2008)


20


21

No Director of the Company is either member in more than ten

committees and/or Chairman of more than five committees

across all Companies in which he is Director and necessary

disclosures to this effect has been received by the Company from

all the Directors.

During the year, in all Eight Board meetings were held i.e. on May

28, 2007; June 29, 2007; July 30, 2007, September 13, 2007;

October 24, 2007; December 26, 2007; January 28, 2008; and

March 13, 2008. The time gap between any two meetings was not

more than 4 months.

The details of Directors and their attendance record at Board

Meetings held during the year, at last Annual General Meeting and

number of other Directorships and Chairmanships/ membership

of Committees is given below:

Sr.

No.

Name of Director Category No. of Board

Meetings

Attended

Attendance

at last AGM

No. of other

Directorship

No. of

committee

membership

in other

Companies*

No. of

committee

Chairmanship

in other

Companies *

H. K. Mittal Chairman & Managing

Director-Executive-Promoter

8 Yes Nil1

2 A. J. Agarwal Joint Managing Director,

Executive-Promoter

8

8

Yes

3 Manohar Bidaye Non-Executive

Independent Director

5 Yes

4 Anil Khanna Non-Executive


Yes

5 M. G. Ramkrishna Non-Executive


Yes

5

7

6 K. R. Bharat Non-Executive


Yes

5

8

11

8

2

2

1

2

1

2

Nil

Nil

Nil

1

Nil

1

Nil

*In accordance with Clause 49 of the Listing Agreement, Memberships / Chairmanships of only the Audit Committees and Shareholders'/ Investors' Grievance Committees of all Public Limited Companies have been considered.

II. AUDIT COMMITTEE:

Composition:

Pursuant to the provisions of Section 292(A) of the Companies Act,

1956 and Clause 49 of the Listing Agreements, the Company has a

qualified and independent Audit Committee comprising of three

Independent Non-executive Directors. Anil Khanna, a senior

member of Institute of Chartered Accountants of India, having a

sound accounting and financial background, is the Chairman of

the Committee with the other members being Manohar Bidaye, a

senior member of Institute of Company Secretaries of India and M.

G. Ramkrishna, a veteran from the banking & finance industry. The

Managing Director, Head of Finance Department along with the

Internal Auditors and Statutory Auditors are always invitees to the

Audit Committee Meeting. All other Functional Managers are

invited to attend the meeting, as and when necessary. The

Committee is vested, inter alia, with following powers and terms of

references as prescribed under relevant provisions of the

Companies Act, 1956 and Stock Exchanges Listing Agreement:

None of the independent directors had resigned nor removed for

the Board of the Company during the year and hence compliance

in respect of replacement thereof did not arise.

All the information required to be furnished to the Board was

made available to them along with detailed agenda notes.

The Board reviews compliance reports of all laws applicable to the

Company, presented by Managing Director at the meeting.

Code of Conduct:

The Board has laid down a Code of Conduct for all Board members

and senior management personnel of the Company, which has

been posted on the website of the Company www.mercator.in

All Board members and senior management personnel have

affirmed compliance with the code for the year ended on March

31, 2008. Declaration to this effect signed by the Chief Executive

Officer for the year ended on March 31, 2008 has been included

elsewhere in this report.


22

Powers:

a) To investigate any activity within its terms of reference.

b) To seek information from any employee.

c) To obtain outside legal or other professional advice.

d) To secure attendance of outsiders with relevant expertise, if it

considers necessary.

Terms of Reference:

The Audit committee reviews the reports of the Internal Auditors

and the Statutory Auditors periodically and discuss their findings

and suggest the corrective measures. The role of the Audit

Committee is as follows: -

1. Oversight of the company's financial reporting process and

the disclosure of its financial information to ensure that the

financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-

appointment and, if required, the replacement or removal of

the statutory auditor and the fixation of audit fees.

3. Approval of payment to statutory auditors for any other

services rendered by the statutory auditors.

4. Reviewing, with the management, the annual financial

statements before submission to the board for approval, with

particular reference to:

a. Matters required to be included in the Director's

Responsibility Statement to be included in the Board's

Report in terms of clause (2AA) of Section 217 of the

Companies Act, 1956.

b. Changes, if any, in accounting policies and practices and

reasons for the same.

c. Major accounting entries involving estimates based on

the exercise of judgment by the management.

d. Significant adjustments made in the financial statements

arising out of the audit findings.

e. Compliance with listing and other legal requirements

relating to financial statements.

f. Disclosure of any related party transactions.

g. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial

statements before submission to the board for approval.

5A. Reviewing, with the management, the statement of uses /

application of funds raised through an issue (public issue,

rights issue, preferential issue, etc.), the statement of funds

utilized for purposes other than those stated in the offer

document/prospectus/notice and the report submitted by

the monitoring agency monitoring the utilisation of proceeds

of a public or rights issue, and making appropriate

recommendations to the Board to take up steps in this

matter.

6. Reviewing, with the management, performance of statutory

and internal auditors and adequacy of the internal control

systems.

7. Reviewing the adequacy of internal audit function, if any,

including the structure of the internal audit department,

staffing and seniority of the official heading the department,

reporting structure coverage and frequency of internal audit.

8. Discussion with internal auditors any significant findings and

follow up there on.

9. Reviewing the findings of any internal investigations by the

internal auditors into matters where there is suspected fraud

or irregularity or a failure of internal control systems of a

material nature and reporting the matter to the board.

10. Discussion with statutory auditors before the audit

commences, about the nature and scope of audit, as well as,

post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults in the

payment to the depositors, debenture holders, shareholders

(in case of non payment of declared dividends) and creditors.

12. To review the functioning of the Whistle Blower mechanism, in

case the same is existing.

13. Carrying out any other function as is mentioned in the terms

of reference of the Audit Committee.

Meetings:

During the year, in all five meetings of the Committee were held i.e.

on May 28, 2007; June 29, 2007; July 30, 2007; October 24, 2007

and January 28, 2008. The time interval between two meetings of

the Committee was not more than four months.


23

ESPS COMMITTEE:

III. SUBSIDIARY COMPANIES:

The Company has Employee Stock Purchase Committee (ESPS) of

Directors comprising of two Executive Directors viz. H. K. Mittal & A.

J. Agarwal and three Non-executive Independent Directors viz.

Manohar Bidaye; Anil Khanna & M. G. Ramkrishna, to implement the

Employee Stock Purchase Scheme of the Company.

As at March 31, 2008 the Company had following subsidiaries:

No. of Audit Committee

Meetings attended

Name of Director

5

5

5

H. K. Mittal

Atul J. Agarwal

Anil Khanna

3K.R. Bharat

No. of Audit Committee

Meetings attended

Name of Director

5

4

5

Anil Khanna

Manohar Bidaye

M. G. Ramkrishna

The Managing Director, as a head of the Finance Department;

Statutory Auditors and Internal Auditors attended all the four

meetings. The Company Secretary acted as the Secretary to the

committee.

Review of Information:

The Audit committee was presented with and reviewed following

information:

1. Management discussion and analysis of financial condition

and results of operations;

2. Statement of significant related party transactions (as defined

by the audit committee), submitted by management.

3. Management letters/letters of internal control weaknesses

issued by the statutory auditors, if any.

4. Internal audit reports related to internal control weaknesses;

and

5. The appointment, removal and terms of remuneration of the

Internal Auditor. Presently the Company has independent

Chartered Accountant's firm as its Internal Auditor

There was no instance of management letter/letter of internal

control weaknesses issued by the Statutory Auditors during the

financial year 2007-08.

The Company has Expansion Committee comprising of two

Executive Directors viz. H. K. Mittal & A. J. Agarwal and two Non-

executive Independent Directors viz. Anil Khanna & K.R. Bharat. The

Committee is authorized to assess the business opportunities and

take the decisions from time to time on expansion projects; means

of finance and other related matters, within the limits sanctioned

by the Board. During the year five meetings were held.

Attendance of each member at the audit Committee Meetings:

EXPANSION COMMITTEE:

Sl

No.

Name

1

Incorporated

in

Mercator International

Pte. Ltd. (MIPL)

Remark

Singapore Wholly Owned

Subsidiary (WOS)

2 Mercator Offshore Ltd. Singapore Wholly Owned

Subsidiary

3 Mercator Oil & Gas Ltd. India Wholly Owned

Subsidiary

5 Varsha Marine Pte. Ltd. Singapore Step down

subsidiary

(WOS of MLS)

4 Mercator Lines

(Singapore) Ltd.(MLS)

Singapore Step down

Subsidiary

(Subsidiary of

MIPL with

71.35% holding)

6 Vidya Marine Pte. Ltd. Singapore Step down

subsidiary

(WOS of MLS)

7 Mercator Lines

(Panama) Inc

Panama Step down

subsidiary

(WOS of MLS)

8 Oorja Holdings Pte.

Ltd.(OHPL)

Singapore Step down

Subsidiary

(WOS of MIPL)

9 Oorja 1 Pte. Ltd. Singapore Step down

Subsidiary

(WOS of OHPL)


Subsidiary

(WOS of OHPL)


Subsidiary

(WOS of OHPL)


24

12 Oorja Mocambique

Lda (OML)

Mocambique Step down

Subsidiary

(WOS of OHPL)

13 Broadtec Mocambique

Lda

Mocambique Step down

subsidiary

(Subsidiary of

OML with 85%

holding)

14 Oorja Indo KGS Indonesia Step down

subsidiary

(Subsidiary of

Oorja 3 wih 70%

holding)

Sl

No.

Name Incorporated

in

Remark

The Indian Subsidiary Mercator Oil & Gas Ltd., was neither listed nor

material as at March 31, 2008.

Mercator Lines (Singapore) Ltd., a then wholly owned subsidiary of

Mercator International Pte. Ltd., (MIPL) completed its IPO during

the year. Consequently, holding of MIPL reduced to 72.35%. The

shares of Mercator Lines (Singapore) Ltd. are listed on the main

Board of Singapore Stock Exchange.

Mercator Lines (Panama) Inc is dormant company.

Oorja 1 Pte. Ltd. has 50% joint venture Company Oorja Indo

Pentagis Four in Indonesia.

Oorja 2 Pte. Ltd. has 50% joint venture Company Oorja Indo

Pentagis Three in Indonesia

Subsequent to year end; Mercator Petroleum Private Ltd., was

taken over as 100%WOS by the Company.

The Audit Committee reviews the financial statements of all the

subsidiary companies including the investment made by the

Company.

The Minutes/resolutions of the Board Meetings of all the subsidiary

companies (including the step down subsidiary Companies) are

placed before the Board periodically.

The management periodically reviews a statement of all

significant transactions, if any, entered into by all the subsidiary

companies.

IV. DISCLOSURES:

(A) Basis of related party transactions:

i. A statement in summary form of transactions with related

parties in the ordinary course of business are placed

periodically before the audit committee.

ii. Details of material individual transaction with related parties,

which are not in the normal course of business, are placed

before the audit committee, whenever applicable.

iii. During the year, there was no material individual transaction

with related parties or others, which was not on an arm's

length basis.

(B) Disclosure of Accounting Treatment:

In the preparation of financial statements for the year ended on

March 31, 2008; there was no treatment different from that

prescribed in an accounting standard had been followed.

(C) Board Disclosures-Risk Management:

The Company has laid down procedures to inform Board members

about the risk assessment and minimization procedures. These

procedures are periodically reviewed to ensure that executive

management controls risk through means of properly defined

framework.

(D) Proceeds from public issues, rights issues, preferential

issues etc.

During the year, the Company raised an amount of Rs. 56.27 crores

through two separate preferential issues on private placement

basis, the uses/application of funds of which were disclosed to the

Audit Committee as a part of their quarterly declaration of

financial results. The funds were utilized for their intended

purposes as disclosed in the respective notices calling general

meeting seeking shareholders for such issues. All such disclosures

were duly certified by the statutory auditors.

(E) Remuneration cum Selection Committee &

Remuneration of Directors:

The Company has Remuneration Committee comprising of three

Non-executive Independent Directors. Manohar Bidaye is the

Chairman of the Committee with Anil Khanna and M. G.

Ramkrishna being other members. The committee, on behalf of

the Board and the shareholders, determines, with agreed terms of

reference, the Company's policy on specific remuneration

packages for Executive Directors and senior management people

including pension rights and any compensation payment.


25

Non-executive Directors:

During the year, non-executive Directors were paid following

remuneration for the financial year 2007-08:

No other convertible instrument was held by any of the above

Non-executive Directors.

No stock options were issued to the Non-executive Directors

during the year.

Anil Khanna, the Non-Executive Director retiring by rotation at the

ensuing Annual General Meeting has declared his shareholding in

the Company and the same has been disclosed in the notice of the

Annual General Meeting.

(F) Management

A Management Discussion and Analysis report forming part of this

Directors' report is attached herewith.

During the year, there was no material financial and commercial

transaction by senior management that may have a potential

conflict with the interest of the Company at large.

The Board decided the payment of commission to Non-executive

directors within the limits approved by members of the Company

in their Annual General Meeting held on September 26, 2007.

Presently the Company pays remuneration to Non-executive

Directors by way of commission not exceeding 1% of its net profit

being distributed among themselves equally. No sitting fees are

being paid to non-executive Directors.

All the Non-executive Directors have disclosed their

shareholdings to the Company, which is as under:

Manohar Bidaye

Anil Khanna

M. G. Ramkrishna

Name No of equity shares held

as on 31/03/2008

K. R. Bharat

97,500

2,51,120

17,000

Nil

Name Commission

Amount Rs in Lacs

Manohar Bidaye

Anil Khanna

M. G. Ramkrishna

K. R. Bharat

2.50

2.50

2.50

2.50

The remuneration to the Executive Directors is governed by the

agreements executed with them as approved by the members of

the Company in their General Meeting. As per the agreement,

salary and perquisites are a fixed component and the commission

is based on the performance of the Company, i.e. on the net profit

of the year, calculated as per the provisions of the Companies Act,

1956. The present terms & conditions of appointment agreements

of both the Executive Directors were approved by the shareholders

at the Annual General Meeting of the Company held on September

26, 2007. As per the terms of respective agreements, the

appointments of Executive Chairman and Managing Director are

valid upto July 31, 2012 and can be terminated by either party by

giving six month's notice in writing. There is no severance fees

payable. The Executive Directors were not issued any Stock Options

during the year.

H. K. Mittal

Executive Chairman

Name Salary Commission Perquisites

A. J. Agarwal

Managing Director

Amount Rs in Lacs

48.00

48.00

746.25

746.25

6.04

11.24

This Committee also acts as a Remuneration Committee under

Schedule XIII and as Selection Committee under Section 314 of the


Two meetings of Remuneration Committee were held during the

year. Except M.G. Ramkrishna, who attended one meeting; all other

members attended both the meetings.

The remuneration of non-executive Directors is decided by the

Board/Shareholders.

The Company did not have any pecuniary relationship or

transaction with the Non-executive Directors during the year

other than those disclosed elsewhere in this report. Except

commission on net profits for the year ended on March 31, 2008 as

fixed by the Board of Directors and approved by the shareholder's

resolution; no Non-Executive Director was paid any

fees/compensation.

Details of remuneration paid to Directors for the financial

year ended March 31, 2008:

Executive Directors:


26

(G) Shareholders

Details of General Meetings held during last three years are given

below:

(i) GENERAL BODY MEETINGS:

No special resolution through postal ballot was passed last year nor proposed at the ensuing Annual General Meeting.

(ii) DISCLOSURES:

During the year, there were no transactions of materially

significant nature with the Promoters or Directors or the

Management or their subsidiaries or relatives etc. that had

potential conflict with the interest of the Company. However, the

transactions entered into with the related parties as per

Accounting Standard 18 are reported at Note No. 20 of Notes

forming part of the Accounts under Schedule I (B) annexed to the

Accounts for the year under review.

There were no instances of non-compliance on any matter related

to the capital market during the past three years and that no

penalties or strictures were imposed on the Company by any Stock

Exchange or SEBI.

Presently the Company does not have any Whistle Blower Policy.

Financial

Year

Date VenueTime Special Resolution(s)

11/10/20072007-08

(E.G.M)

Y. B. Chavan Centre,

General Jagannath Bhosle

Marg, Nariman Point,

Mumbai-400021

11.00 A.M. 1. Issue of warrants on preferential basis to

promoter.

31/07/20062006-07

(A.G.M.)

C. K. Nayudu Hall,

Brabourne Stadium,

Churchgate,

Mumbai-400020

12.00 Noon 1. Alteration of Object Clause of Memorandum

of Association.

2. Approval for commencing new business

activity set out in the object clause of

Memorandum of Association.

28/09/20052005-06

(A.G.M.)

C. K. Nayudu Hall,

Brabourne Stadium,

Churchgate,

4.00 P.M. 1. Approval to payment of sitting fees to

Non- Executive Directors.

2. Appointment of Whole-time Director

26/09/20072007-08

(A.G.M.)

Y. B. Chavan Centre,

General Jagannath Bhosle

Marg, Nariman Point,

Mumbai-400021

3.30 P.M. 1. Appointment of Mr. H. K. Mittal as

Executive Chairman of the Company and

remuneration thereof.

2. Appointment of Mr. A.J. Agarwal as

Managing Director of the Company and

remuneration thereof.

3. Appointment of Mr. Adip Mittal, a relative

of Director to hold the office or place

of profit of the Company.

4. Delisting of equity shares from Ahmedabad

Stock Exchange

17/01/20062005-06

(E.G.M.)

C. K. Nayudu Hall,

Brabourne Stadium,

Churchgate,

Mumbai-400020

4.30 P.M. 1. Increase in Authorised Share Capital and

amendments to the capital clauses of

Memorandum and Articles of Association

of the Company.

2. Issue of Bonus shares

3. Issue of warrants on preferential basis to

Promoter's group Company.

4. Increase in the limit of investments by FIIs

in the capital of the Company.


29

Shareholding of nominal

value of

No. of

Shareholders

% to total

Shareholders

No. of Shares % to total Capital

UPTO 5000 60,093 97.59 2,49,93,106 10.64

5001 10000 627 1.02 47,66,971 2.03

10001 20000 397 0.64 56,05,668 2.38

10001 20000 397 0.64 56,05,668 2.38

20001 30000 158 0.26 39,42,353 1.68

30001 40000 63 0.10 22,06,319 0.94

40001 50000 41 0.07 18,83,606 0.80

50001 100000 84 0.13 60,07,575 2.56

100001 AND ABOVE 116 0.19 18,54,89,789 78.97

TOTAL 61,579 100.00 23,48,95,387 100.00

SHARE TRANSFER:

SHAREHOLDERS'/ INVESTORS' GRIEVANCES COMMITTEE:

The Company has Shareholders'/Investors' Grievances Committee

comprising of one Executive Director and two Non-executive

Directors to look after share transfer and other related matters,

including the shareholders' grievances. Manohar Bidaye, a senior

member of Institute of Company Secretaries of India, is the

Chairman of the Committee with the other members being, A. J.

Agarwal and Anil Khanna, both senior members of Institute of

Chartered Accountants of India. The Committee normally meets

fortnightly and looks into the shareholder & investor grievances

that are not settled at the level of the Company

Secretary/Compliance Officer and helps to expedite share

transfers & related matters.

Twenty three Meetings of the Committee were held during the

year. All the members attended all the meetings except one such

meeting by Manohar Bidaye.

Supriya Joshi, who was appointed as Company Secretary (under

the designation of Dy. Company Secretary) within the meaning of

the Companies Act, 1956 w.e.f. March 7, 2007 resigned w.e.f.

January 28, 2008. As at March 31, 2008, Deepak Dalvi, Manager

Secretarial was acting as Compliance officer. During the year, the

Company received 78 complaints from the shareholders and

which were duly resolved. Further, during the year requests for

transfer of 1,39,750 equity shares; and for demat of 87,30,547

equity shares were received and processed.

Registrar and Transfer Agents and Share Transfer System:

Intime Spectrum Registry Ltd., having their office at C-13, Pannalal

Silk Mills Compound, LBS Road, Bhandup (W), Mumbai - 400 078 (Tel

No.91-22-25963838) and branch office at 203, Dawer House,

197/199, D.N. Road, Mumbai - 400 001 (Tel No. 91-22-22694127) are

the Registrar and Transfer Agents (RTA) as also the registrar for

electronic connectivity. Entire functions of Share Registry, both for

physical transfer as well as dematerialisation/rematerialisation of

shares, issue of duplicate/split/consolidation of shares is being

carried out by the RTA at their above address.

The correspondence regarding query of dividends shall be

addressed to Compliance Officer at the registered office of the

Company.

(xiii)DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31,

2008

0

Ap

ril 2007

Marc

h 2

008

Sh

are

Pri

ce (Ru

pees)

30

50

70

90

110

130

150

170

190

Feb

ruary

2008

Sep

tem

ber2

007

Oct

ob

er

2007

Nove

mb

er

2007

Dece

mb

er

2007

Jan

uary

2008

May

2007

Jun

e 2

007

July

2007

Au

gu

st 2

007

High

Low


30

(xiv)SHAREHOLDING PATTERN AS ON MARCH 31, 2008:

Series No Category % to Capital No. of Holders

1 Promoters / Directors and their Relatives

Mutual Funds / UTI

38.11

12.13

10

38

No. of Shares

8,95,23,975

2,85,03,5322

Banks 0.47 211,12,8003

FIIs / Foreign Companies/foreign Banks 22.24 325,22,30,0224

Private Corporate Bodies 6.66 1,2771,56,35,1945

Indian Public 18.74 58,7294,40,23,2236

NRIs / OCBs 0.71 1,08116,69,7317

Non-promoter Independent Directors and their relatives 0.20 74,80,5958

Clearing members 0.73 40317,16,3159

Total 100.00 61,57923,48,95,387

(xv) DEMATERIALISATION OF SECURITIES:

The equity shares of the Company are under compulsory trading in de-mat form. Out of total capital of 23,48,95,387 equity shares;

23,03,69,303 equity shares representing 98.07% were held in de-mat form and balance 45,26,084 equity shares representing 1.93% were

in physical form as on March 31, 2008. The ISIN of the equity shares of the Company is INE934B01028.

The shares are actively traded on BSE and NSE and the turnover data during the financial year 2007-08; was as under:

Particulars

No of shares 24,35,37,639

228,611.85

29,13,43,341

284,112.88

53,49,00,980

512,724.73Value (Rs. In lacs)

BSE NSE Total

Promoters / Directors and

their Relatives - 38.11%

Mutual Funds /

UTI - 12.13%

Banks -

0.47%

FIIs / Foreign Companies /

foreign Banks - 22.24%

Private Corporate

Bodies - 6.66%

Indian Public - 18.74%

NRIs / OCBs -

0.71%

Non-promoter Independent

Directors and their

relatives - 0.2%

Clearing members - 0.73%


31

Series No No. of NCDs Coupon rate O/s. Face value

As on 31/03/08

Outstanding

Amount

ISIN

IV 30,00,000 10.00% Rs. 10/- each Rs. 3.00 crores INE934B07033

V 30,00,000 10.00% Rs. 20/- each Rs. 6.00 crores INE934B07041

VII-A 1600 7.50% Rs. 6,87,500/- each Rs. 110.00 crores INE934B07066

VII-B 50 7.50% Rs. 7,50,000/- each Rs. 3.75 crores INE934B07074

2,85,00,000 Warrants carrying an option to apply for equivalent

number of equity shares of Re. 1/- each in the Company; were

issued to a promoter on October 25, 2008, on preferential basis in

accordance with SEBI Guidelines on Preferential Issue, as approved

by shareholders in their meeting held on October 11, 2008; and the

same were outstanding as on March 31, 2008.

Further, out of 10,000 1.50% Foreign Currency Convertible Bonds of

USD 10,000 each aggregating USD 60 millions; 850 FCCBs of an

aggregate amount of USD 8.50 mn were outstanding as at March

31, 2008 consequent upon surrender of 9,150 FCCBs for conversion

by the Bondholders during the year. The conversion price of

the Bonds is fixed at Rs. 59.812 (ex-bonus) per share with a fixed

rate of exchange on conversion of Rs. 43.73= USD 1.00 with

maturity date as April 27, 2010.

Subsequent to year end, further 10,96,686 equity shares of Re. 1/-

each were issued and allotted in lieu of surrender of 150 FCCBs for

conversion out of the said issue. Consequently, there were 700

outstanding FCCBs of aggregate amount of USD 7 million.

If all the FCCB holders exercise their rights to convert FCCB into

equity shares then the paid up equity capital of the Company

would increase by 51,17,869 shares of Re. 1/- each.

'Mercator Lines (Singapore) Ltd', a step-down subsidiary of the

company, had issued Convertible Bonds aggregating USD 51

million, consisting of Bonds-A of USD 35 Million and Bonds-B of USD

16 Million, during last financial year. Consequent to the IPO by the

said subsidiary in the month of October 2007; Bonds-A were

converted into shares pursuant to the terms of the issue. However,

these conversion of bonds had no impact on equity capital of the

Company.

Other than above, there was no outstanding GDRs/ADRs or

warrants or any other convertible instruments.

(xvi)OUTSTANDING GDRs/ADRs OR WARRANTS OR ANY

CONVERTIBLE INSTRUMENTS, CONVERSION DATE AND

LIKELY IMPACT ON EQUITY

(V) CEO/CFO CERTIFICATION:

VI) COMPLIANCE:

VII) PLANT LOCATIONS:

The necessary certification from Chief Executive Officer H. K. Mittal

and Chief Financial Officer Atul J. Agarwal in respect of the financial

year ended on March 31, 2008 has been annexed to this report.

The Company has complied with all the mandatory requirements

of Corporate Governance Clause 49 of the Listing Agreement with

Stock Exchanges. Further, the Company has also adopted

Remuneration committee requirements out of Non-mandatory

requirements of the Clause.

A certificate from the Auditors of the Company regarding

compliance of conditions of corporate governance is annexed to

the Directors' Report.

The Company does not have any plant.

As at March 31, 2008, the Company owns total thirteen vessels of

aggregate tonnage of 1,137,712 DWT consisting of a Very Large

Crude Carrier (VLCC); a Suezmax tanker; five Aframax tankers; two

MR Tankers; a Panamax and three dredgers. Seven vessels of

aggregate tonnage of 543,105 MT were owned by Subsidiary of the

Company consisting of four panamax and three Kansarmax

vessels. Further, as at March 31, 2008; the Company alongwith its

subsidiaries also had seven chartered vessels of aggregate

tonnage of 660,021 DWT comprising of four panamax; a VLCC;

an aframax and a chemical tanker. The consolidated capacity was

27 vessels of 2,340,838 DWT. All the vessels are deployed on various

sea-route.

Address for correspondence:


3rd Floor, Mittal Tower, B-wing,

Nariman Point, Mumbai-400 021

Tel Nos: 91-22-66373333

Fax Nos: 91-22-66373344

E-mail:[email protected] / [email protected]

Besides LOA for debentures amounting Rs. 25 crores issued during the year under ISIN INE934B08064; the Company has following series

of listed Redeemable Non-Convertible Debentures on private placement basis in dematerialized form:


32

Whistle blower policy

The Company does not have any formal whistle blower policy.

However, the employees are welcomed to report to the

management, their concerns about unethical behaviour, actual

or suspected fraud or violation of the company's code of

conduct and they are provided direct access to the Chairman

of the Audit Committee of Board of Directors of the Company.


H. K. MITTAL

Executive Chairman



Mumbai - 400021

Dtd: May 14, 2008

Compliance with Non-Mandatory Requirement

Company continuously strives for improving its Corporate

Governance practices. Besides following mandatory requirements;

the Company follows non-mandatory requirements also as under:

Office Space for Non-Executive Chairman

The Company's Chairman is an Executive Chairman and hence the

issue of providing office space for Non-executive Chairman is not

applicable.

There is no specific tenure specified for Independent Directors.

But, some of Independent Directors' tenure exceeds the period of

9 years. All the independent Directors have requisite qualifications

and experience which has been of use to the Company and which

enables them to contribute effectively to the Company in their

capacity as an independent Directors.

Remuneration Committee

The Company's Remuneration Committee details have already

been mentioned earlier in this Annual Report.

Rights of Shareholders to receive financial results

The Company's financial results for every quarter are published in

the newspapers and are put on the Company's website as well,

besides being made available on the SEBI website

www.sebiedifar.nic.in.

Audit Qualifications

There was no audit qualification in the Company's financial

statements during the year under review. The company continues

to adopt best practices to ensure the regime of unqualified

financial statements.

Board Members Training

The management and the working Directors give extensive

briefings to the Board members on the business scenario of the

company and factors affecting the business during the Audit and

Board meetings.

Evaluating Performance of non-executive Board Members

Based on the criteria of attendance at the Board / Committee

meetings as also the contributions made at the said meetings, the

performance evaluation of the non executive Board members is

done by the Board annually.

Paving the Ways

Dredging the Ways

(Forming part of Directors' report for

the year ended on 31st March 2008)

THE SHIPPING INDUSTRY

Shipping is a primary means of international transportation of

many essential commodities. In Indian context, it is all about

maritime transport as our country's international trade;

approximately 95% by volume and 70% by value is sea-borne.

Shipping as industry, though a component of service industry;

plays a pivotal role in shaping economy by facilitating international

trade. It is therefore an ideal candidate to enjoy the status of a

mother industry. The industry is classified globally in several ways;

such as capacity specific to route specific; however, in general it is

broadly classified into Wet bulk; Dry bulk and Liners. Sub sets of wet

bulk are Tankers and offshore; whereas Dry Bulk is mainly further

classified based on carrying capacities. Under Liners, it has

Containers, MPP and Ro-Ros type of vessels.

The Offshore Industry is a logical offshoot of the Shipping Industry.

The Offshore sector is further segmented into drilling, exploration

and production, development and maintenance of floating

production systems etc; essentially based on the services offered

to petroleum sector.

As with any other industry, the sub sectors are driven by a

combination of demand and supply with pricing and services

offered, being the key. The underlying trend for demand in

shipping is mainly driven by the strength of the global economy

and global trade. The tanker segment or even the offshore

segment, for example, is further driven by oil demand, while the

Dry Bulk segment is influenced by the commodity demand,

primarily iron ore and coal. In each segment; the freight rates and

consequently vessel values have exhibited volatility in varying

degrees at various points in time. These fluctuations have been

primarily due to changes in the level and pattern of global

economic growth, trade balance or trade deficits. The degree of

competition within the global shipping industry largely depends

on the changes in the availability of vessels.

RECENT DEVELOPMENTS

SHIPPING:

Tanker Markets (Wet Bulk):

All the segments of the tanker market were very stable for most

part of the year. In the last quarter of the financial year, a sudden

spurt in the tanker demand sent the VLCC freight rates soaring.

The Suezmax segment also enjoyed a boost in their earnings, as

charterers made efforts to control the VLCC rates by splitting the

parcel sizes. The demand was created by the flurry of cargos fixed

by the charterers before the Christmas holidays. However, the

Aframax segment did not see any increase in demand with the

year ending on a soft note. The last quarter ended very well, giving

the much required boost to the tanker earnings, which ensured

that tanker owners continued being bullish about this segment in

medium to even long term.

Dry Bulk Markets:

It was a historical year for bulk carriers with Baltic Dry Index (BDI)

touching an all time high of 11,039 points in November 2007. The

dry bulk market which has seen firm earnings over the last three

years is likely to continue to do so in future. The strength of the dry

bulk market is due to the large import of coal into India and iron

ore into China. Chinese economic progress; particularly

unprecedented growth in infrastructure sector; have given a fresh

impetus to steel production; therefore iron ore imports into China

and record steel exports from China have pushed the momentum

in dry bulk market. The foregoing commodity aspects, when

coupled with marine infrastructural limitations and ageing fleets,

slower deliveries of the new builts led to the above historical high

indices.

MANAGEMENT DISCUSSION &

ANALYSIS REPORT


34


This increased prices and the steady rising demand gave impetus

to exploration activities, resulting in greater demand for offshore

services like Seismic, Drilling Rigs etc. To bridge the increasing

'demand - supply' gap, there is an increased thrust on the

'Development and Production' from the existing fields which

further increases demand for 'versatile' and 'improved' technology

based Jack-Up Rigs. Also Oil companies revised their basis for

exploration & production cost from a level of USD 45 to an amount

in excess of USD 65-70 per barrel thereby becoming a driver for

increased drilling activity backed by an increased demand and

improved remunerative rates for service providers. Consequently

the offshore segment shall continue to remain bullish over

medium to even long term.

The company is into shipping operations, with its own fleet of

Tankers, Bulk Carriers and Dredgers. The consolidated income

from our shipping operations was Rs. 1,477 crores for the year

under review as compared to Rs. 1,138 crores in the previous year,

recording top line growth of about 30% year on year.

The company's tanker fleet consists of VLCC, Suezmaz, Aframax,

Product Tankers and Chemical Tankers. Within the tanker segment,

the Company had ten tankers owned by it totaling a capacity of

11,44,761 DWT at the beginning of the year. During the year, the

Company sold one of its tankers of 1,00,488 DWT; therefore, at the

end of the year, the Company had 9 tankers owned by it; with an

aggregate tonnage of 10,44,273 DWT. Further, during the year the

Company chartered in two tankers and one chemical tanker with

an aggregate capacity of 3,74,337 DWT through its subsidiary.

During the year, the Company achieved a turnover of Rs. 759 crores

as compared to Rs. 713 crores in the previous year, with gross

profits of Rs. 203 crores (Previous year Rs. 211 crores) from its

tanker division. An increase in the number of operating days by

about 16%, figuratively speaking to 5,589days in absolute terms;

resulted from better utilization of fleet. This efficiency was further

backed up by firm market during the last quarter of the year

consequently resulting in a satisfactory performance of this

division. Overall contribution from the tanker division was pegged

at 52% of the total shipping income.

The Company's bulk carrier fleet comprises of Geared and Gearless

Panamaxes and Kamsarmaxes.

DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT

TO OPERATIONAL PERFORMANCE:

Dredging:

The dredging industry is passing through a good phase as the

development of various ports the world over are offering

opportunities for the deployment of dredgers. The market fared

well in the financial year ended March 31st, 2008. Many ports in the

East Coast of India are being developed including Ganagavaram,

Krishnapatnam and Dhamra Ports. Extensive dredging works of

deepening and re-claiming are required in the preparation of

ports. The availability of dredgers or the supply side has been a real

concern in recent past; with new opportunities on the anvil; the

charter hire rates are getting firmer rather quickly.

In addition to the development of new ports, requirement of

extensive maintenance dredging works in the Hugli River, Kandla,

Mangalore and Cochin Port also presenting decent opportunities

to the owners.

Offshore :

Continuous rise in oil prices has resulted into an environment that

has never been witnessed before and therefore, one that was

almost unpredictable in the past is beginning to happen.

The trends presented here, clearly show while growth in

consumption has been rather consistent; the price of oil has been

moving up rather exponentially:

12000

10000

8000

6000

4000

2000

0

2/4

/2007

23/4

/2007

10/5

/2007

27/5

/2007

13/6

/2007

30/6

/2007

17/7

/2007

3/8

/2007

20/8

/2007

6/9

/2007

23/9

/2007

10/1

0/2

007

27/1

0/2

007

13/1

1/2

007

30/1

1/2

007

19/1

2/2

007

5/1

/2008

22/1

/2008

8/2

/2008

25/2

/2008

13/3

/2008

30/3

/2008

BDI

BTDI

01965 168 1971 1974 1977 1980 1983 186 189 1992 1995 1998 2001 2004 2007

Oil Consumption (million b/d)

Oil Price (USD per barrel)

World Oil Consumption and price 1965-2007

10

20

30

40

50

60

70

80

90

Source: BP Statistical Review of World Energy June 2007, EIA

35 ANNUAL REPORT 2007-2008

The Dry Bulk division was another major contributor to the

shipping income of the company.

At the beginning of the year, there were three bulk carriers

aggregating a tonnage of 2,25,126 DWT, owned by the Company

(including two through a subsidiary) and five bulk carriers

chartered in through the subsidiary with an aggregate capacity of

356,108 DWT. One of the chartered in bulk carriers of 70,424 DWT

met with an accident at the beginning of the year and became

inoperative. During the year, further five bulk carriers were

acquired through the company's subsidiary thereby increasing

aggregate capacity by 3,87,265 DWT. Consequently, at the end of

the year the Company had twelve bulk carriers with an aggregate

capacity of 8,98,075 DWT. With this enhanced capacity, an increase

in vessel operating days of about 19% over the last year; or up to

3,820 days was recorded. Further, at the strength of firm market

conditions, the bulk division performed extremely well during the

year. It achieved a turnover of Rs. 658 crores (Rs. 410 crores previous

year) from bulk carriers with gross profit of Rs.424 crores (Rs. 125

crores in the previous year). This division contributed about 45% of

the total shipping income.

During the year, the Company forayed into dredging by acquiring

three of our own dredgers aggregating 24,153 DWT. On 271 days of

operating, the Company achieved a turnover of Rs. 38crores from

dredgers with a gross profit of Rs. 19 crores. This contributed about

0.9% of total shipping income.

In our pursuit to gain customer delight; we have been offering

complete logistical solutions package by handling coal to deliver

the same to the end user. The turnover from coal handling was Rs.

22 crores (previous year Rs. 15 crores) with a profit of Rs. 13 crores.

This contributed about 1.50% of the total shipping income.

Review of Operations of Subsidiaries:

1) Mercator International Pte. Ltd. (MIPL) – (Wholly Owned

Overseas Subsidiary-WOS):

MIPL was incorporated in Singapore in January 2007, as an apex

Company. This company has multiple subsidiaries or fellow

subsidiaries in Singapore and other countries. MIPL had chartered

in a VLCC; an Aframax and a chemical tanker of aggregate capacity

of 374,337 DWT on standalone basis. MIPL is also contemplating

entry into commodity mining and trade business as a move

towards backward integration of the Company's business strategy.

Last year was the first full year of operation of MIPL. It achieved a

turnover of about Rs. 132.03 crores equivalent of USD 32.78mn (as

against Rs. 15.62 crores equivalent to USD 3.62mn in the previous

year) with a net profit of Rs. 3.90 crores equivalent to USD 0.97mn

(as against a previous year loss of Rs. 3.28 crores equivalent to USD

0.76mn) on standalone basis; that is excluding contribution from

its fellow subsidiaries.

2) Mercator Lines (Singapore) Ltd. (MLS)

This is a subsidiary of MIPL, which owns 72.35% controlling interest

in the company. The balance holding of 27.65% was diluted in

December 2007, when MLS concluded its maiden IPO successfully

and is listed on the Singapore Stock Exchange (SGX). MLS has three

fully owned subsidiaries; namely, Varsha Marine Pte. Ltd., Vidya

Marine Pte. Ltd. and Mercator Lines (Panama) Inc. MLS fleet as at

31st March 2008, comprised of seven owned vessels of aggregate

capacity of 5,43,373 DWT and four chartered-in vessels of

aggregate capacity of 285,684 DWT.

During the year, MLS achieved a turnover of Rs. 429.94 crores

equivalent of USD 106.74 mn on standalone basis (as against Rs.

349.05 crores equivalent to USD 80.86mn in the previous year) and

earned net profit after tax of Rs. 161.94 crores equivalent to USD

40.20mn (as against Rs. 47.14 crores equivalent to USD 10.92mn

previous year).

i) Varsha Marine Pte. Ltd.

This is a SPV of MLS, incorporated in December 2006. This

subsidiary owns 1 Kamsarmax vessel of 82,379 DWT partially

financed by financial assistance as a term loan from the bank.

During the year; this subsidiary achieved a turnover of Rs. 103.49

crores equivalent to USD 25.69mn (as against Rs. 18.51 crores

equivalent to USD 4.29mn in the previous year) with a net profit

thereon of Rs. 58.32 crores equivalent to USD 14.48mn (as against

Rs. 8.86 crores equivalent to USD 2.05mn in the previous year).

ii) Vidya Marine Pte. Ltd.

This is a SPV of MLS, incorporated in December 2006. In July 2007,

the subsidiary acquired 1 Kamsarmax vessel of 82,273 DWT

partially financed by financial assistance as a term loan from the

bank and achieved a turnover of Rs. 55.60 crores equivalent to USD

13.80 mn with a net profit thereon of Rs. 10.18 crores equivalent of

USD 2.53 mn.

iii) Mercator Lines (Panama) Inc.

This is a wholly owned subsidiary of MLS incorporated in Panama.

The subsidiary did not carry out any business other than holding

and assigning charter hire rights of 4 Panamax vessels on a back to

back basis and remained dormant during the year.

3) Mercator Offshore Ltd. (MOL)-WOS:

This is a 100% wholly owned overseas subsidiary of MIL. This

subsidiary was incorporated in May 2006 in Singapore with an

objective of exploring offshore business worldwide,

headquartered at Singapore. This subsidiary has placed an order

for construction of a premium jack-up rig suitable for worldwide

operations, which is expected to be delivered during the quarter

ending March 2009. The construction of the jack-up rig is

progressing well and is as per schedule. This rig has been

contracted for deployment with effect from its date of delivery.

36


During the year; this subsidiary earned interest income of Rs. 0.01

crore equivalent to USD 0.003mn (previous year Rs.0.02 crore

equivalent of USD 0.004mn) and suffered a loss of Rs. 0.14 crores

equivalent to USD 0.03mn (previous year Rs. 0.02 crore equivalent

to USD 0.005mn).

4) Mercator Oil & Gas Ltd. (MOGL)-WOS:

This is an Indian non-listed non-material subsidiary, with an object

to explore business opportunities in the oil and gas sector

domestically. The company has been participating in various

tenders floated by the Government and private organizations alike

and is hopeful of commencing business shortly.

During the year, this subsidiary recorded a notional turnover of Rs.

0.003 crore (previous year Rs.0.001 crore) by way of exchange

fluctuation gain; and suffered loss of Rs. 0.52 crore (previous year

Rs.0.27 crore). The carried forward loss was Rs. 0.80 crore.

5) Oorja Holdings Pte. Ltd. (OHPL)

This is a 100% fellow subsidiary of Mercator International Pte. Ltd.

(MIPL) incorporated in July 2007 in Singapore with the objective to

explore business opportunities in commodity mining and trade. As

at March 31, 2008, OHPL had four wholly owned subsidiaries

further; namely, Oorja 1 Pte. Ltd., Oorja 2 Pte. Ltd., Oorja 3 Pte. Ltd.

and Oorja Mocambique Minas Limitada.

Pending commencement of principal activities of business, OHPL

earned interest income of Rs. 0.14 crore (equivalent of USD

34,284/-) and suffered a loss of Rs. 1.42 crores (equivalent of USD

353,090/-) during the year.

I) Oorja 1 Pte. Ltd. (Oorja 1):

This is a SPV of Oorja Holdings Pte. Ltd., incorporated in July 2007 in

Singapore. This subsidiary has a joint venture by the name of Oorja

Indo Petangis Four incorporated in Indonesia in which it holds 50%

shareholding at a cost of Rs. 0.50 crore equivalent of USD 125,000.

This JV was dormant as at the end of the year.

Pending commencement of principal activities of business; Oorja 1

earned an interest income of Rs. 0.04 crore (equivalent of USD

9,008/-) and suffered a loss of Rs. 0.08 crore (equivalent of USD

15,267/-) during the year.

ii) Oorja 2 Pte. Ltd. (Oorja 2):

This is a SPV of Oorja Holdings Pte. Ltd., incorporated in August

2007 in Singapore. This subsidiary has a joint venture by the name

of Oorja Indo Petangis Three incorporated in Indonesia, in which it

holds 50% shareholding at a cost of Rs. 0.50 crore equivalent to

USD 125,000. This JV was dormant as at the end of the year.


earned interest income of Rs. 0.04 crore (equivalent of USD 9,008/-)

and suffered a loss of Rs. 0.06 crore (equivalent of USD 14,085/-)

during the year.

iii) Oorja 3 Pte. Ltd. (Oorja 3):

This is a SPV of Oorja Holdings Pte. Ltd., incorporated in August

2007. This subsidiary has a fellow subsidiary named Oorja Indo KGS

incorporated in Indonesia in February 2008 with 70% shareholding

at a cost of Rs. 0.70 crore equivalent of USD 175,000


earned interest income of Rs. 0.03 crore) equivalent of USD 6,959/-

and suffered a loss of Rs. 0.03 crore (equivalent of USD 7,125/-)

during the year.

iv) Oorja Mocambique Minas Limitada: (Oorja Mocambique):

This is a SPV of Oorja Holdings Pte. Ltd., incorporated in May 2007 in

Mozambique. OHPL holds 24,500 ordinary shares amounting to

USD 1017/- equivalent to Rs. 0.004 crores; representing 98% share

holding of Oorja Mocambique. As at March 31, 2008; Oorja

Mocambique had carried forward pre-operative expenses of Rs.

0.01 crore equivalent of USD 3436/-

Oorja Mozambique has a fellow subsidiary named Broadtec

Mocambique Minas Limitada with 85% holding incorporated in

Mocambique at a cost of Rs. 0.004 crores.

Tanker Markets (Wet Bulk):

The tanker market is expected to remain steady during the year

2008-09. The demand for the crude oils is expected to remain firm

and the tanker owners are likely to witness another steady year of

earnings. The continuing conversion of single hull tankers to ore

carriers would have a positive impact on the supply and demand

scenario. The phasing out of the single hull carriers and the

addition of new tonnage in the market is also well balanced. The

availability of tonnage is also closely matched with the

requirement which should keep the rates at steady to firm levels.

Improvement in global economy, inconsistent weather and

political situations will result in further strengthening of the tanker

freight market.

OPPORTUNITIES & OUTLOOK


Dry Bulk Market:

Prospects for both coal and iron ore seaborne trades continue to

be extremely buoyant. Barring unforeseen circumstances,

developments in both trades will continue to contribute positively

to the Group's top and bottom lines in the next financial year.

Based on Drewry reports, India's growing position as a major coal

importer with its “Power for All” mission to achieve 100,000 MW of

power generation by 2012 will also boost dry bulk demand. China,

which accounted for 49% of seaborne iron ore imports in 2007, is

set to maintain its position as major importer as its share of

seaborne iron ore imports is expected to increase to around 55%

by 2012. The above factors clearly demonstrate that the dry bulk

market will remain very firm in short to medium term.

Dredging:

All major Indian ports are presently working to 100% capacity,

whereas India further expects an 8 to 9% growth rate. This would

translate the present seaborne trade of about 400mn tons to

900mn tones by 2013. To cope up with this new demand, the

Indian Government plans to develop new ports, as well as, deepen

the existing ports to absorb the requirements. Further, the

“Sethusamduram” project undertaken by the Government of India

would require about 96 million cubic capacity dredging.

In view of the above, the market outlook is very much promising

and the earnings in this sector are expected to remain strong.

Further developments in various ports around the world such as

extensive dredging and reclamation works in Singapore, China,

Vietnam and Taiwan would offer good opportunities to this

segment.

Offshore:

The Asian demand primarily from China and India has been one of

the main factors behind the volatility of world energy prices. With

the crude prices more than 'doubling' in the past 2 years, a

speculative merger and acquisition frenzy has gripped offshore Oil

& Gas services market. Globally, about 15% of Oil Companies' capital

expenditure is ear-marked for exploration, 35% to field

Development and 50% slated for production. With the global oil

majors competing for the scarce drilling rig charter services, the

offshore sector is booming and is set to become an important and

paying sector.

Also with the spiraling prices of Oil & Gas, exploration and

production has became a high priority area. In the recent past,

major 'strikes' have been made in NELP blocks in India resulting in

the discovery of oil & gas fields of fairly large size. These fields are

expected to go on 'stream' within the next 2 to 3 years

progressively and would also open up a huge market for

specialized offshore services.

THREATS, RISKS AND CONCERNS

Tanker

The rising steel prices could pose a very stiff challenge to the

renewal of the fleet. The shipyards had increased the new building

prices to retain their profit making status. The reduction in the

profit margins on orders under execution is also being

compensated by a sharp increase in the new building order prices.

The phasing out of the single hull carriers and marine casualty

involving a single hull tanker remains a big threat to the company's

earnings. The increase in the demolition activity caused by the

phasing out of the single hull tankers is likely to affect the rates.

The expected supply disruptions in Nigeria, Iraq and Mexico, rising

crude oil demand in the Middle East, China and India and the

continuing erosion of the U.S. dollar, the crude and bunker prices

are likely to hit a new high. Oil prices have risen by 35% and the U.S.

dollar has dropped 10% since the U.S Federal Reserve began

lowering rates commencing the third quarter of last year. The

slowing U.S. economy alone was not enough to reduce the global

energy demand. The political instability in Iraq on a short term has

had adverse effects on the fuel oil prices.

Bulk Carrier

There is a huge order book on dry bilk vessels which when

delivered will put pressure on freight rates.

The Chinese Government is focused on development of internal

infrastructure and is looking to squeeze steel and coke exports.

The sub-prime casualty which resulted in global financial crises has

still not been fully addressed and could worsen if United States

does not show improved economic indications soon.

All the above could result in a downtrend in the freight rate.

Dredging:

The down time of the China built vessels and the equipment may

be greater than normal. The availability of dredgers and their

purchase price advantage could be a matter of concern.

The Company's dredgers are currently employed in the

'Sethusamudram' Canal Project which is a politically sensitive issue.

The company does not have any past experience in dredging.

The sector does not offer detailed reports and it is difficult to

establish the correct level of charter rates. The competition in this

sector is currently limited amongst few big players.

38


Offshore :

Despite a major thrust through NELP, the National Oil Companies

viz. ONGC and Oil India Ltd, still hold large acreages for E&P

activities. Typically, National Oil Companies award contracts

through tenders which include encouraging local companies

through a policy of 'Price Preference' for Indian companies.

However, there is a resistance from some foreign offshore service

providers opposing such preference. Therefore, Indian companies

have taken up the issue with the National Oil Companies and

concerned Ministry individually and collectively through trade

associations like CII and INSA etc. for continuation of such policies

to encourage local companies.

Large Indian and MNCs having “deep pockets” are already

entrenched in the E&P activities in India. Therefore, mid sized

companies are strategically working towards 'partnering' with

National Oil Companies to play a role in the marginal and small

fields and to scale up their operations.

The Company has adequate internal control systems in place.

These systems ensure that all corporate policies are strictly

adhered to and absolute transparency is followed in accounting

and all of its business dealings.

The Internal Auditors appointed by the Company ensure that

adequate internal controls are in place and all mandatory

accounting policies are complied with. The Audit Committee

constituted by the Board of Directors assesses the financials of the

Company at regular intervals, in consultation with internal and

statutory auditors.

The Company gives utmost importance to its human capital and

recognizes the importance of organization building. The company

has embarked on several HR initiatives with a focus on improving

organizational and individual productivity and excellence. The

company implemented a performance linked incentive scheme

for the employees and organized several training programs in

order to motivate and help the employees to realize their

potential. Apart from productivity related initiatives, the company

also organized health and welfare related activities for the

employees.

Over the year the number of employees grew by 20 per cent. As on

March 31, 2008, there were 65 employees with an average age of

38 years.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

HUMAN RESOURCES POLICIES:

CAUTIONARY STATEMENT:

The Statement in this Management Discussion and Analysis

Report describing the Company's objectives, projections,

estimates, expectations or predictions may be 'forward looking

statements' within the meaning of applicable laws and

regulations. Actual results might differ substantially or materially

from those expressed or implied. Important developments that

could affect the Company's 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.


H. K. MITTAL

Executive Chairman



Mumbai - 400021

Dtd: May 14, 2008


For Mercator Lines Limited

H.K. Mittal

Chief Executive Officer

Place: Mumbai

Dated: May 14, 2008

For Mercator Lines Limited

A. J. Agarwal

Chief Financial Officer

CEO/CFO CERTIFICATION

To,

The Board of Directors


Mumbai

Dear Sir,

This is to certify that:

a) We have reviewed financial statement for the F. Y. ended on 31.03.2008 and the cash flow statement for the year (consolidated and

unconsolidated) and that to the best of our knowledge and belief:-

i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be

misleading;

ii) these statements together present a true and fair copy of the company's affairs and are in compliance with existing accounting

standards, applicable laws and regulations.

b) There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which are fraudulent,

illegal or violative of the company's code of conduct.

c) We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of the

internal control systems of the company and we have disclosed to the auditors and the Audit Committee, deficiencies in the

design or operation of internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify

these deficiencies.

d) We have indicated to the auditors and the Audit Committee:

i) significant changes in internal control during the year, whenever applicable;

ii) that there were no significant changes in accounting policies during the year and that the same have been disclosed in the notes

to the financial statements; and

iii) that there were no instances of significant fraud of which we have become aware and the involvement therein, if any, of the

management or an employee having such significant role in the company's internal control system.

We further declare that all board members and senior managerial personnel have affirmed compliance with the code of conduct for the

current year.

40


AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

To the members,

Mercator Lines Limited,

Mumbai

We have examined the compliance of conditions of corporate governance by Mercator Lines Limited for the year ended on 31st March

2008, as stipulated in Clause 49 of the Listing Agreement of the said company with stock exchange.

The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to

procedure and implementation thereof, adopted by the company for enduring the compliance of the conditions of the corporate

Governance. It is neither an audit nor an expression of the financial statement of the company.

We certify that the company has complied with the conditions of corporate Governance as stipulated in the above mentioned Listing

Agreement.

We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with

which the management has conducted the affairs of the company.

For and on behalf of

Contractor Nayak & Kishnadwala

Chartered Accountants

H. V. Kishnadwala

Partner,

Membership No 37391

Mumbai

14th May 2008


AUDITORS' REPORT

The Members of

MERCATOR LINES LIMITED

1. We have audited the attached Balance Sheet of MERCATOR

LINES LIMITED as at 31st March 2008, the related Profit and

Loss Account and the Cash Flow Statement of the Company

for the year ended on that date annexed thereto. These

financial statements are the responsibility of the Company's

management. Our responsibility is to express an opinion on

these financial statements based on our audit.

2. We conducted our audit in accordance with auditing

standards generally accepted in India. These Standards

require that we plan and perform the audit to obtain

reasonable assurance about whether the financial

statements are free of material misstatements. An audit

includes examining, on a test basis, evidence supporting the

amounts and disclosures in financial statements. An audit

also includes assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statement presentation. We

believe that our audit provides a reasonable basis for our

opinion.

3. As required by the Companies (Auditor's Report) Order, 2003,

issued by the Central Government in terms of Section 227(4A)

of the Companies Act, 1956, and on the basis of such checks as

considered appropriate and according to the information and

explanations given to us during the course of the audit, we

enclose in the Annexure hereto a statement on the matters

specified in Paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in above

paragraph, we report that:

a) We have obtained all the information and explanations,

which to the best of our knowledge and belief were

necessary for the purposes of our audit;

b) In our opinion, proper books of account, as required by

law have been kept by the Company so far as appears

from our examination of the books of the Company;

c) The Balance Sheet, Profit and Loss Account and the Cash

Flow Statement dealt with by the report are in

agreement with the books of account of the Company;

d) In our opinion, the Balance Sheet, Profit and Loss Account

and the Cash Flow Statement comply with the

mandatory Accounting Standards referred to in Section

211 (3C) of the Companies Act, 1956.

d) On the basis of written representations received from the

directors of the Company as on 31st March 2008, and taken

on record by the Board of Directors, we report that none of the

directors is disqualified as on 31st March 2008, from being

appointed as a director in terms of Section 274(1) (g) of the


f) In our opinion and to the best of our information and

according to the explanations given to us, the said accounts

read together with the Notes to Accounts in Schedule 'I' give

the information required by the Companies Act, 1956 in the

manner so required and give a true and fair view in conformity

with the accounting principles generally accepted in India:

a. In the case of the Balance Sheet, of the state of affairs of

the Company as at 31st March 2008;

b. In the case of the Profit and Loss Account, of the Profit for

the year ended on that date,

c. In the case of the Cash Flow Statement, of the cash flows

of the Company for the year ended on that date.




H. V. Kishnadwala

Partner,

Membership No 37391

Mumbai

14th May 2008

42


Statement referred to in paragraph 3 of the Auditors'

Report of even date to the Members of MERCATOR LINES

LIMITED on the accounts for the year ended 31st March

2008.

On the basis of such checks as considered appropriate and in

terms of the information and explanations given to us, we state as

under:

1(a) The company has maintained proper records showing full

particulars including quantitative details and situation of the

fixed assets;

1(b) As explained to us, the management at reasonable intervals

carries out the physical verification of the fixed assets. The

discrepancies noticed on such verification, which were not

material, have been appropriately dealt with in the accounts

1(c) The fixed assets disposed off by the company were not

substantial and does not affect the going concern

assumption.

2(a) As explained to us, the inventories of bunker and lube have

been physically verified during the year by the management.

In our opinion, having regard to the nature and location of

stocks, the frequency of the physical verification is reasonable.

2(b) In our opinion and according to the information and

explanations given to us, the procedures of physical

verification of the above mentioned inventory followed by the

management are reasonable and adequate in relation to the

size of the Company and the nature of its business.

2(c) In our opinion, the Company is maintaining proper records of

inventory and no material discrepancies were noticed on

physical verification.

3(a) As per the information and explanations given to us, the

Company has granted unsecured loans to 6 parties covered in

the register maintained under section 301 of the Companies

Act, 1956. The outstanding balance as on 31st March 2008 is

Rs. 43,103.40 Lacs and maximum balance outstanding during

the year is 61,428.28 lacs.

3(b) In case of the aforesaid unsecured loans granted to the

parties covered in the register maintained under Section 301

of the Companies Act, 1956, looking to the long term

involvement of the company in the subsidiaries and their

businesses, the rate of interest and the other terms and

conditions are not prima-facie prejudicial to the interests of

the Company.

3(c) In case of the aforesaid unsecured loan granted to the parties

covered in the register maintained under Section 301 of the

Companies Act, 1956, the repayment of principal amount and

interest, where applicable is regular.

3(d) In case of the aforesaid unsecured loans granted to the

parties covered in the register maintained under Section 301

of the Companies Act, 1956, the company is taking reasonable

steps for the timely recovery of the principal and interest.

3(e) As per the information and explanations given to us, the

Company has not taken unsecured loans from a Company or

any other party covered in the register maintained under

section 301 of the Companies Act, 1956, the provisions of

Clause 3(f) and 3(g) are not applicable.

4 In our opinion and as explained to us, there are adequate

internal control procedures commensurate with the size of

the Company and the nature of its business with regard to

purchase of inventory and fixed assets and for the sale of

goods and services. During the course of our audit, no major

weakness has been noticed in the internal controls and there

is no continuing failure for the same.

5(a) Based on the audit procedures applied by us and according to

the information and explanations provided by the

management, we are of the opinion that the particulars of

contracts or arrangements referred to in section 301 of the

Companies Act, 1956 have been entered in register required

to be maintained under that section.

5(b) In our opinion and as explained to us, the transactions made

in pursuance of such contracts or arrangements have been

made at prices which are reasonable having regard to the

prevailing market prices at the relevant time.

6 The Company has not accepted any deposits from public

during the year

7 In our opinion, the Company has an internal audit system

commensurate with the size of the Company and the nature

of its business.

8 The maintenance of cost records has not been prescribed by

the Central Government under section 209 (1) (d) of the

Companies act, 1956.


9(a) According to the information and explanations given to us

and the records examined by us, the Company is regular in

depositing with appropriate authorities undisputed statutory

dues including provident fund, investor education and

protection fund, employees' state insurance, income-tax,

sales-tax, wealth-tax, service tax, custom duty, excise-duty,

cess and other statutory dues and there are no undisputed

statutory dues outstanding as at 31st March 2008, for a

period of more than six months from the date they became

payable.

9(b) According to the information and explanations given to us,

there are no dues of income-tax, sales tax, wealth tax, service

tax, custom duty, excise duty and cess which have not been

deposited on account of any dispute.

10 The company does not have any accumulated losses as on

31st March 2008 and has not incurred any cash losses during

the financial year and in the immediately preceding financial

year.

11 Based on the information and explanations given to us, the

Company has not defaulted in repayment of any dues to

financial institutions and banks.

12 Based on our examination of the records and as explained to

us, the Company has not granted any loans and/or advances

on the basis of security by way of pledge of shares, debentures

and other securities.

13 In our opinion, the company is not a chit fund, nidhi/mutual

benefit fund/society. The provisions of clause 4(xiii) are

therefore not applicable to the company.

14 During the year, the Company does not have any transactions

in respect of dealing and trading in shares, securities,

debentures and other investments. All shares, debentures

and other investments held by the company are held by the

Company in its own name.

15 According to the information and explanations given to us,

the terms and conditions on which the Company has given

guarantees for loans taken by subsidiaries and others from

banks and financial institutions are, considering the long term

involvement of the company in these entities, not prejudicial

to the interests of the company.

16 According to the information and explanations given to us,

the term loans raised were used for the purpose for which

they were raised.

17 As explained to us and on an overall examination of the

balance sheet of the Company, in our opinion there are no

funds raised on short-term basis which have been used for

long-term investment by the Company.

18 According to the information and explanation given to us, the

Company has made preferential allotment of shares/warrants

to parties covered in the register maintained under section

301 of the Companies Act, 1956 at prices not prejudicial to the

interests of the company.

19 During the period covered by our audit report the Company

has issued unsecured debentures and there is no question of

creating any security for the same.

20 The Company has not raised any money by public issues

during the period covered by our report.

21 Based upon the audit procedures performed for the purpose

of reporting the true and fair view of the financial statements

and as per the information and explanations given by the

management, we report that no fraud on or by the company

has been noticed or reported during the course of our audit.




H. V. Kishnadwala

Partner,

Membership No 37391

Mumbai

14th May 2008

44


BALANCE SHEET AS AT MARCH 31, 2008

As per our report of even date

For Contractor, Nayak & Kishandwala


Himanshu Kishanadwala

Partner

M No. 37391

Mumbai - 14th May 2008

Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director

As at As atParticulars Schedule 31, March 2008 31, March 2007

SOURCES OF FUNDS Shareholders’ Funds Share Capital A 2,348.95 5,892.43Warrants against Share Capital A 1 1,667.25 488.00Reserves and Surplus B 87,863.64 50,292.47

91,879.84 56,672.90Loan Funds Secured Loans C 91,293.82 107,532.52Unsecured Loans D 5,909.35 26,262.00

97,203.17 133,794.52

Total 189,083.01 190,467.42

APPLICATION OF FUNDS Fixed Assets EGross Block 158,187.86 148,335.12Depreciation (28,392.27) (19,920.58) Net Block 129,795.59 128,414.54Capital work in progress 10,010.47 -

139,806.06 128,414.54Investments F 2,014.93 10,292.34

Current Assets, Loans & Advances GInventories 2,244.33 1,491.00Sundry Debtors 10,377.96 13,329.61Cash and Bank Balances 5,642.17 11,814.87Loans and Advances 51,053.93 35,567.69

69,318.40 62,203.17Current Liabilities and Provisions HCurrent Liabilities 18,797.11 7,249.80Provisions 3,071.25 2,246.59Incomplete Voyages (Net) 188.02 946.24

22,056.38 10,442.63

Net Current Assets 47,262.02 51,760.54

Total 189,083.01 190,467.42Significant Accounting Policies I& Notes to the Accounts

(Amount Rs. in Lacs)


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2008





Partner

M No. 37391


Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


INCOMEShipping Income J 78,114.26 78,326.25Other Income K 4,913.91 1,388.19Profit on Sale of Investments (Net) 325.80 89.74Profit on Sale of Assets (Net) 2,953.95 310.91

Total 86,307.92 80,115.10

ExpensesShip Operating Expenses L 49,221.93 54,509.21Administrative and Other Expenses M 3,170.85 2,028.19 Finance Charges N 5,856.87 6,337.94Depreciation 10,382.84 9,753.73

Total 68,632.49 72,629.07

Profit Before Taxes 17,675.43 7,486.03Provision for TaxationCurrent (770.00) (310.00)Deferred Tax - -Fringe Benefit Tax (21.00) (13.50)Profit After Taxes 16,884.43 7,162.53

Prior Year Expenses / Income (Net) (119.54) (42.74)Short Provision for Tax of earlier Year (130.00) -Balance brought forward from last year 15,305.96 13,115.09

Available for Appropriations 31,940.86 20,234.88Less/(Add): AppropriationsTransfer to General Reserve 1,770.00 750.00 Transfer to Tonnage Tax Reserve 3,300.00 1,600.00Dividend on Preference Shares 307.76 320.00Dividend On Equity Shares (for Previsous Year) 80.00 -Proposed Dividend on Equity Shares 2,583.85 1,892.43Tax on Dividend (including for previous year Rs. 13.60 Lacs 505.03 366.50Balance Carried to Balance Sheet 23,394.22 15,305.96Earning Per Share (Equity Share of Re. 1/- Each) Basic Rs. 7.26 3.12Diluted Rs. 6.91 3.02Significant Accounting Policies I& Notes to the Accounts


46


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2008

Particulars Current Year Previous Year

Cash Flow from Operating Activities Net Profit Before Tax 17,675.43 7,486.03Adjustment for: Depreciation 10,382.84 9,753.73Interest Paid 5,856.87 6,337.93(Profit)/Loss on Fixed Assets Scrapped / Sold (2,953.95) (310.91)(Profit)/Loss on Sale of Investment (325.80) (89.74) Dividend Income (406.91) (624.38)Operating Profit before Working Capital Changes 30,228.48 22,552.66Adjustment for: Trade and Other Receivables (13,351.36) (11,639.10)Trade Payables 11,613.75 4,478.23Cash Generated from Operations 28,490.87 15,391.79Direct Taxes Paid (921.00) (323.50)

Total Cash Generated from Operating Activities 27,569.87 15,068.29 Cash Generated from Prior Period Items (119.54) (42.74)Net Cash from Operating Activities 27,450.33 15,025.54Cash flow from Investing ActivitiesIncrease in Fixed Assets including Capital Work in Progress (25,005.12) (28,631.58)Sale of Fixed Assets 6,184.70 25,312.03 Proceed from sale of Non Trade Investments 325.80 89.74(Purchase)/sale of Investment 8,277.41 (306.95)Dividend Income 406.91 624.38Net Cash from Investing Activities (9,810.30) (2,912.38)Cash Flow from Financing ActivitiesProceeds from issue of Share Capital from conversion of Bonds and warrants 22,048.69 -Proceeds from Long Term Borrowing (36,591.35) 2,763.52Interest Paid (5,856.87) (6,337.93)Dividends Paid including tax thereon (3,476.63) (2,578.92)Net Cash from Financing Activities (23,876.16) (6,153.33)

Net Increase in Cash and Cash Equivalents (6,236.13) 5,959.84Cash and Cash Equivalents as at beginning of the year 11,966.33 6,006.50Cash and Cash Equivalents as at end of the year 5,730.18 11,966.33

Cash and Cash Equivalents comprise of: Cash and Bank Balances 5,642.17 11,814.87Accrued Interest on fixed deposit with banks 88.01 151.46


47





Partner

M No. 37391


Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


SCHEDULE FORMING PART OF ANNUAL ACCOUNTS


SCHEDULE ‘A’Share Capital Authorised 35,00,00,000 Equity Shares of Re 1/- each. 3,500.00 3,500.00200,00,000 Preference Shares of Rs. 100 each. 20,000.00 20,000.00

23,500.00 23,500.00Issued Capital 23,48,95,387 (19,40,42,500) Equity of Re. 1/- each fully paid up 2,348.95 1,940.43NIL (40,00,000)-8% Cumulative Redeemable Preference Shares of Rs.100/- each fully paid up - 4,000.00

2,348.95 5,940.43Subscribed and Paid Up CapitalEquity23,48,95,387(18,92,42,500) Equity Shares of Re. 1/- each fully paid up. 2,348.95 1,892.43(a) 11,83,45,500 shares of Re 1/- each were allotted as bonus Shares by capitilisation of Securities Premium Account. (b) 32,00,000 shares of Re. 1/- each are issued on preferential basis on conversion of warrants during the year.

(c) 37, 652,887 Shares of Re. 1/- each are issued on conversion of FCCBs during the Year.

PreferenceNIL (40,00,000)-8% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid up. (redeemed during the year on maturity) - 4,000.00

2,348.95 5,892.43SCHEDULE ‘A1’Warrants against Share Capital NIL (32,00,000) Warrants (Each Warrant carry option/ entitlement to subscribe to 1 number of equity share of Re. 1/- each on or before July 31, 2007 at a price not less then Rs. 137.50 per share, (converted during the Year). - 440.00

NIL (48,00,000) bonus equity shares of Re. 1/- each relating to bonus entitlement to the above warrant holders was kept in abeyance till the time the warrant holder exercises the option to subscribe to the above (allotted during the year) - 48.002,85,00,000 Warrants (Each Warrant carry option / entitlement to subscribe to 1 number of equity sahre of Re. 1/- each on or before April 24,2009 at a price not less than Rs. 58.50 per share.) 1,667.25 -

1,667.25 488.00SCHEDULE ‘B’Reserves and Surplus

Capital ReserveAs per last Balance Sheet 26.24 26.24

26.24 26.24Capital Redemption ReserveAs per last Balance Sheet - -Add: Transferred From General Reserve on redemption of Preference Shares 4,000.00 -

4,000.00 -Securities Premium Account As per last Balance Sheet 7,532.61 7,532.61Add: Received during the year on conversion of warrants and FCCBs 24,439.88 -Less: Share Issue Expenses (26.97) -

31,945.52 7,532.61


48




Tonnage Tax ReserveAs per last Balance Sheet 1,600.00 6,924.83Add: Transferred from Profit and Loss Account 3,300.00 1,600.00Less: Transferred to Utilised Account (1,600.00) (6,924.83)

3,300.00 1,600.00Tonnage Tax Reserve (Utilised) As per last Balance Sheet 6,924.83 -Add: Trasnfer from Tonnage Tax Reserve 1,600.00 6,924.83

8,524.83 6,924.83Debenture Redemption Reserve As per last Balance Sheet 8,000.00 13,980.00Transferred to General Reserve on redemption of debentures (1,800.00) (5,980.00)

6,200.00 8,000.00General Reserve As per last Balance Sheet 10,902.83 4,172.83Add Transferred from Debentures Redemption Reserve 1,800.00 5,980.00Add: Transferred From Profit and Loss Account 1,770.00 750.00 Less: Transferred to Capital Redemption Reserve on redemption ofPreference Shares (4,000.00) -

10,472.83 10,902.83

Surplus in Profit and Loss Account 23,394.22 15,305.96 87,863.64 50,292.47

SCHEDULE ‘C’ Secured Loans (a) Debentures (1) NIL (12,00,000), 12.50% Non Convertible Secured Debentures Series I of Rs. NIL (Rs. 25/-) each, redeemable at the end of 3rd, 4th, 5th and 6th year from the date of allotment i.e. January 30, 2002 in equal installments towards face value - 300.00

(2) 30,00,000 - 10.00% Non Convertible Secured Debentures Series IV of Rs. 10/- (Rs. 30/-) each, redeemable in 10 half yearly instalments of Rs. 300 lacs each commencing from six months after the date of allotment i.e. July 29, 2003 towards face value 300.00 900.00

(3) 30,00,000 - 10.00% Non Convertible Secured Debentures Series V of Rs. 20/-, (Rs. 40/-) each redeemable in 10 half yearly instalments of Rs. 300 lacs each commencing from six months after the date of allotment i.e. October 10,2003 towards face value 600.00 1,200.00

(4) 1,600 - 7.50% Non Convertible Secured Debentures of Rs. 6,87,500/-(Rs. 8,12,500/-) each, redeemable in 12 half yearly instalments of 6.25%and last two of 12.50% of face value each commencing from six monthsafter one year from the date of allotment i.e. June 30, 2004 toward face value Series VII A. There is a put/call option at the end of 4th Year & 6th year from the date of allotment. 11,000.00 13,000.00

(5) 50 - 7.50% Non Convertible Secured Debentures Series VII B of Rs. 7,50,000 (8,75,000/-) each, redeemable in 12 half yearly instalments of 6.25% and last two of 12.50% of face value each commencing from six months after one year from the date of allotment i.e. February 10,2005toward face value. There is a put/call option at the end of 4th Year & 6thyear from the date of allotment. 375.00 437.50


49ANNUAL REPORT

2007-2008



(b) Foreign Currency Loans from Banks

(1) External Commercial Borrowings 10,829.70 13,568.70

(2) Foreign Currency Non-Resident (B) Loan Scheme 17,982.12 22,585.32

(c) Term Loans from Scheduled Banks 50,207.00 55,541.00

91,293.82 107,532.52

Note 1) Debentures referred in (a) above are secured by first mortgage on specified vessels of the company on pari-passu basis with other lendersand first charge on the specified immovable properties together with structure thereon.

2) Debentures refered in a (2) & a (3) above are further secured by way of Personal Guarantee from Mr. H.K. Mittal Executive Chairman and Mr. Atul J Agarwal Mg. Director

3) Foreign Currency Loan refered in (b) above are secured by 1st Charge on specified vessels of the company on pari-passu basis with other lenders.

4) Term Loan refered in (c) above are secured by 1st charge on specified vessels, on pari passu basis with other lenders.

5) Working capital facilities from Schedule Banks are secured by second charge on specified vessels and 1st charge on all receivables and other current assets of the company on pari-passu basis.

SCHEDULE ‘D’ Unsecured Loans 1) 850 (6,000) 1.50% Foreign Currency Convertible Bonds of USD 10,000each 3,409.35 26,262.00During the year, pursuant to notices received from Bondholders 5150FCCBs of aggregate amount of USD 51,500,000 were converted into 37,652,887 equity shares of Re. 1/- each at a predetermined price of Re. 59.812 per share at a fixed exchange rate of Rs. 43.73 per USD

The balance bonds are convertible at any time up to the close of Business on 20 April 2010 by holders into newly issued ordinary shares of Re. 1 each at agreed conversion price. The Bonds may be redeemed in whole atthe option of the Company at any time on or after 15 May 2008 and or prior to 20 April 2010 at the accreted principal amount together with accrued interest. 2) Other Loans 2,500.00 -(Amount repayable within one year Rs. 2500.00 Lacs)

5,909.35 26,262.00


50


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ice a

nd

Com

pu

ter

Eq

uip

men

t

Furn

itu

re a

nd

Fix

ture

s

Veh

icle

s

Tota

l

Pre

viou

s Ye

ar

Cap

ital W

ork

In

Pro

gre

ss

344.2

8

147,402.7

5

166.8

2

281.

96

139.3

1

148,3

35.1

2

147,831

.06

-

14,8

85.7

8

12.6

0

35.2

6

61.0

1

14,9

94.6

5

28,6

31.5

8

-

5,13

3.9

2 - -

7.98

5,14

1.90

28,12

7.54

344.2

8

157,1

54.6

1

179.4

2

317.22

192.3

4

158,18

7.86

148,3

35.1

2

76.9

0

19,7

06.5

3

47.7

4

33.0

4

56.3

7

19,9

20.5

8

13,2

93.2

8

-

1,907.05 - -

4.1

0

1,911

.15

3,12

6.4

2

13.3

7

10,2

53.5

1

27.65

57.78

30.5

3

10,3

82.8

4

9,7

53.7

3

90.2

7

28,0

52.9

9

75.3

9

90.8

2

82.8

0

28,3

92.2

7

19,9

20.5

8

254.0

1

129,10

1.62

104.0

3

226.4

0

109.5

4

129,7

95.5

9

128,4

14.5

4

10,0

10.4

7

267.37

127,696.2

2

119.0

7

248.9

2

82.9

5

128,4

14.5

3

134,5

37.79

Co

stD

ep

recia

tio

nN

et

Blo

ck

Ne

t B

lock

Pa

rtic

ula

rsA

s a

t

Ap

ril

1, 2

00

7

Ad

dit

ion

for

the

ye

ar

De

du

cti

on

for

the

ye

ar

As

at

Ma

rch

31, 2

00

8

Up

to

Ma

rch

31, 2

00

7

Ad

just

me

nt

in r

esp

ect

of

Ass

ets

So

ld /

Dis

ca

rd

Fo

r th

e Y

ea

rU

p t

o

Ma

rch

31,2

00

8

As

at

Ma

rch

31, 2

00

8

As

at

Ma

rch

31, 2

00

7

(Am

ou

nt

Rs.

in

Lacs

)

Note

1.In

clu

des

cost

of 1

0 s

hare

s of R

s. 5

0/-

each

fully

paid

in M

itta

l Tow

er Pre

mis

es

Co-o

p. S

oci

ety

Ltd

.

2.

The o

ffic

e p

rem

ises

(Gro

ss V

alu

e R

s. 3

43.17La

cs a

nd

Acc

um

ula

ted

Dep

reci

ati

on

Rs.

90 L

acs

) is

giv

en

on

op

era

tin

g Lease

.

3.

Incl

ud

es

exc

han

ge fl

uct

uati

on

on

fore

ign

cu

rren

cy lo

an

s on

vess

els

acq

uir

ed

ou

tsid

e In

dia

Rs.

NIL

(Rs.

1379

.87 L

acs

)

4.

Cap

ital w

ork

in P

rog

ress

Incl

ud

es

Rs.

873

. 35 la

cs tow

ard

s ad

van

ces

for Cap

ital G

ood

s.



Schedule F Investments

Items Current Year Previous Year Nos Cost Nos. Cost

Non-Trade

Long Term

In shares of Subsidiaries (Unquoted) Mercator Oil and Gas Ltd 150,000 15.00 107,140 10.71Mercator International Pte Ltd. 100,000 28.80 100,000 28.80Mercator Offshore Ltd. 5,226,070 1,546.13 5,226,070 1,546.13Note: The Company has given an undertaking to the lenders of one of its fellow subsidiary ie Mercator Lines Singapore Ltd. (MLS) that the company will continue to hold majority shares of MLS (directly or indirectly) till the term of the respectivefacilities to MLS.

1,589.93 1,585.64

In Units of Mutual Funds (Quoted) Reliance Equity Fund - - 1,106,501 110.65Prudential ICICI Fusion Fund - - 5,000,000 500.00Franklin India Flexi Cap Fund - - 371,034 57.44HDFC Equity Fund - - 161,279 57.06Prudential ICICI Discovery Fund - - 287,550 55.19 Prudential ICICI Emerging Staf Fund - - 488,059 106.36Reliance Equity Opportunity Fund - - 348,760 60.59Standard Chartered Ent Equity Fund - - 1,000,000 100.00 Sundaram BNP Paribas Select Midcap-Fund - - 307,499 60.80Lotus FMP - Series I (Quoted) 3,000,000 300.00 3,000,000 300.00DBS Chola Hedged Equity Fund - - 10,000,000 100.00

300.00 1,508.10

In others (Unquoted)Vijaya Bank Bonds - - 1,000,000 1,000.00 Indian Real Opportunity Venture Capital Fund 12,500 125.00 - -

125.00 1,000.00(Repurchase Value of quoted investments on 31.3.08 is Rs. 458.51 Lacs (Previous Year Rs. 1300 lac)

2,014.93 4,093.74

Current Investments (at lower of cost and Market value In units of Mutual Funds

Quantum Liquid Fund - - 5,151,487 515.15 Lotus India Liquid Plus Fund - Institutional Weekly Dividend - - 5,001,224 500.12J P Morgan International Investment Fund - - 11,624,413 5,183.33 Sub Total - - - 6,198.60 (Repurchase Value of quoted investments on 31.3.08 is NIL (Previous Year Rs6198.59 Lacs)

Grand Total 2,014.93 10,292.34


52




SCHEDULE ‘G’Current AssetsSundry Debtors(Unsecured, Considered Good) Debts Outstanding over Six Months 1,337.32 1,517.35 Other Debts 9,040.64 11,812.26

10,337.96 13,329.61

Cash and Bank Balances Balances with Scheduled BanksIn fixed Deposit Accounts 2,088.98 6,301.65In current Accounts 3,402.11 3,168.49In Exchange Earners Foreign Currency Account 8.57 160.76In Dividend Accounts 39.40 39.40Bank Balance / Fixed Deposits with Foreign Banks (Refer Note B (9) of Schedule I) 93.54 2,142.03 Cash hand 9.57 2.54

5,642.17 11,814.87

Loans and Advances (Unsecured Considered Good) Loan to Subsidiary Companies 43,094.24 29,831.28Advances recoverable in cash or in kindor for value to be received 5,388.76 3,250.00 Deposits with Government and semi Government Bodies 16.78 15.78Inter Coroporate Deposits 689.43 413.03Other Deposits 959.79 796.97Accrued Interest on fixed deposit with banks 88.01 151.46Advance payment of tax (Net of provisions) 816.92 1,109.17

51,053.93 35,567.69

SCHEDULE ‘H’ Current Liabilities Sundry Creditors For Services and expenses

Due to Micro, Small and Medium Enterprises (Previous Year-Due to Small Scale Undertaking) (Refer Note B7 of Schedule I) - -Others 3,379.48 3,956.84(Includes Rs. 664.78 Lacs (Rs. NIL) to subsidiary companies) Acceptances 7,580.79 -Advances from Customers 4,206.14 -Deposits 85.26 127.75Unclaimed Dividend* 39.40 39.40Other liabilities 3,506.03 3,125.81*(There is no amount due and outstanding to be credited to InvestorEducation and Protection Fund) 18,797.11 7,249.80

Provisions For Proposed Dividend 2,583.85 1,892.43For Tax on Dividend 439.13 321.62For Employees Retirement Benefits 48.27 32.54

3,071.25 2,246.59






SCHEDULE ‘J’Shipping IncomeFreight 47,543.59 50,311.04Charter Hire 26,998.65 25,111.78Dispatch and Demurrage 3,572.02 2,903.43

78,114.26 78,326.25

SCHEDULE ‘K’Other Income Cargo Handling Services 2,197.80 1,477.40Dividend from Investments 406.91 624.38Rent Received 113.87 -Exchange Fluctuations Net 2,194.76 (732.34) Miscellaneous Income 0.57 18.75

4,913.91 1,388.19 SCHEDULE ‘L’Ship Operating Expenses Bunker Consumed 14,400.57 9,203.51Vessel/Equipment Hire Charges 15,702.48 26,696.59Technical, Service expenses 4,089.44 3,622.21Agency, Professional and Service Charges 620.65 467.43Crew Expenses 535.81 596.27Communication Expenses 135.62 157.43Miscellaneous Expenses 216.26 208.62Commission 1,566.54 910.68Insurance 827.86 1,096.25Port Expenses 3,694.05 2,850.88Repairs and Maintenance 6,927.26 8,382.37Stevedoring, Transport and Freight 505.41 316.96

49,221.93 54,509.20 SCHEDULE ‘M’Administrative and Other Expenses Advertisement 8.89 8.16Auditors Remuneration 17.00 13.65Conveyance, Car Hire and Traveling 145.32 117.75Communication expenses 31.59 29.07Donation 11.26 35.61Directors’ Remuneration 1,615.79 805.56Miscellaneous expenses 273.19 268.52Insurance 8.77 4.50Legal, Professional and Consultancy expenses 109.23 101.57Rents, Repairs and Maintenance 427.16 191.20 Salary, Wages, Bonus etc. 421.18 364.67Staff Welfare, Training etc. 22.17 6.14Contribution to Provident and other funds 24.75 18.68Bad Debts and other amounts written off (Net) 54.55 63.11

3,170.85 2,028.19 SCHEDULE ‘N’Finance Charge Interest on Debentures 1,108.40 1,927.28Fixed Loans 6,518.76 5,100.18

7,627.16 7,027.46Less : Interest received (TDS Rs. 60.85 Lacs Previous Year 95.12 Lacs) (1,504.06) (729.54)Less: (Profit)/Loss on Derivative Transactions (266.23) 40.02

5,856.87 6,337.94

54


SCHEDULE 'I’

A.SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting

The financial statements are prepared under the historical

cost convention, on the accrual basis of accounting and in

conformity with Generally Accepted Accounting Principles in

India, Accounting Standards as notified by the Companies

(Accounting Standards) Rules, 2006 and the other relevant

provisions of the Companies Act, 1956.

2. Use of Estimates

The preparation of financial statements in conformity with

Generally Accepted Accounting Principles requires the

management to make estimates and assumptions that affect

the reported balances of assets and liabilities as of the date of

the financial statements and reported amounts of income

and expenses during the period. The management believes

that the estimates used in the preparation of financial

statements are prudent and reasonable.

3. Fixed Assets

a) Fixed assets are stated at cost less accumulated

depreciation.

b) Cost includes cost of acquisition or construction

including attributable interest, duties and other

incidental expenses related to the acquisition of the

asset.

c) Operating costs and other incidental costs including

initial stores and spares of newly acquired vessels till the

port of first loading are included in the cost of the

respective vessels.

d) Exchange differences arising on repayment of foreign

currency loans and year end translation of foreign

currency liabilities relating to acquisition of assets from a

country outside India including substitution of one

foreign currency loan by another are from this year

charged to the Profit and Loss Account following

notification of Accounting Standard 11 “Effects of

changes in Foreign Exchange Rates” during the year as

against the earlier policy of adjusting the same to the

carrying cost of the respective assets.

e) Individual fixed assets costing up to Rs. 25,000 are fully

written off under the head fixed assets written off.

4. Depreciation

a) Depreciation on all the vessels is computed on Straight

Line Method so as to write off the original cost as reduced

by the expected/estimated scrap value over the balance

useful life of the vessels. If however, the rates as

prescribed under the Schedule XIV of the Companies Act,

1956, are higher; the said higher rate is applied, which

ranges from 5% to 12% of the original cost of the vessel.

b) Depreciation on all assets other than vessels is computed

on the Written Down Value method in the manner and at

the rates prescribed under schedule XIV of the


c) On additions made to the existing vessels depreciation is

provided for the full year over the remaining useful life of

the ships.

d) Depreciation on furniture, fixtures and electrical fittings

installed at office premises taken on lease is provided

over the initial period of lease.

5. Capital Work in Progress

All expenditure, including advances given to contractors and

borrowing cost incurred during the vessel acquisition period,

are accumulated and shown under this head till the vessel is

put to commercial use.

6. Retirement and Disposal of Ships

a) Profits on sale of vessels are accounted for on completion

of sale thereof.

b) Assets which are retired from active use and are held for

disposal are stated at the lower of their net book value or

net realisable value.

7. Inventories

Bunker and Lubes on vessels are valued at lower of cost and

net realisable value ascertained on first in first out basis.

8. Investments

a) Investments are classified into Long Term and Current

investments.

b) Long Term Investments are stated at cost of acquisition

and related expenses. Provision for diminution, if any, in

the value of such investments is made to recognise a

decline, other than of a temporary nature.


c) Current Investments are stated at cost of acquisition

including incidental / related expenses or at fair value as

at 31st March 2008, whichever is less and the resultant

decline, if any, is charged to revenue.

d) Investment in shares of subsidiaries outside India is

stated at cost by converting at the rate of exchange at

the time of their acquisition.

9. Incomplete Voyages

Incomplete voyages represent freight received and direct

operating expenses on voyages which are not complete as at

the Balance sheet date.

10. Borrowing Costs

Borrowing costs incurred for the year for acquisition of vessels

are capitalized till first loading of cargo, only if the time gap

between date of Memorandum of Agreement and “Date when

vessel is ready for use” is more than three months.

11. Revenue Recognition

a) Income on account of freight earnings is recognised in all

cases where loading of the cargo is completed before the

close of the year. All corresponding direct expenses are

also provided.

b) Where loading of the cargo is not completed before the

close of the year, revenue is not recognised and the

corresponding expenses are carried forward to the next

accounting year.

c) Income from charter hire and demurrage are recognised

on accrual basis.

d) Income from services is accounted on accrual basis as per

the terms of the relevant agreement.

e) Dividend on investments is recognised when the right to

receive the same is established.

12. Foreign Exchange Transactions

a) Monetary Current assets and liabilities denominated in

foreign currency outstanding at the end of the year are

valued at the rates prevalent on that date.

b) Differences in translation of monetary assets and

liabilities and realised gains and losses on foreign

currency transactions are recognised in the Profit and

Loss Account.

c) Contracts in the nature of foreign currency swaps, are

converted at the exchange rate prevailing as on 31st

March 2008 and the profits or losses thereon are charged

to the Profit and Loss account.

d) Differences on account of swap contracts for interest

payable in foreign currency are accounted on accrual

basis and the profit or loss thereon are charged to the

Profit and Loss account.

13. Employees Benefits

a) Short – term employee benefits

All employee benefits payable wholly within twelve

months of rendering the service are classified as short

term employee benefits. Benefits such as salaries, wages,

performance incentives, etc. are recognised at actual

amounts due in the period in which the employee

renders the related service.

b) Post – employment benefits

i. Defined Contribution Plans

Payments made to defined contribution plans such

as Provident Fund are charged as an expense as they

fall due.

ii. Defined Benefit Plans

The cost of providing benefit i.e. gratuity is

determined using the Projected Unit Credit Method,

with actuarial valuation carried out as at the balance

sheet date. Actuarial gains and losses are recognised

immediately in the Profit and Loss Account.

c) Other Long – term employee benefits

Other Long–term employee benefit viz. leave

encashment is recognised as an expense in the profit and

loss account as and when it accrues. The company

determines the liability using the Projected Unit Credit

Method, with actuarial valuation carried out as at the

balance sheet date. The Actuarial gains and losses in

respect of such benefit are charged to the profit and loss

account.

14. Lease Accounting

a) In respect of operating lease agreements entered into by

the Company as a lessee, the lease payments are

recognised as expense in the profit and loss account over

the lease term.

b) In respect of operating lease agreement entered into by

the Company as a lessor, the initial direct costs are

recognised as expenses in the year in which they are

incurred.

56


B] NOTES TO THE ACCOUNTS

1. Contingent Liabilities not provided for

15. Earning per share:

The company reports basic and diluted earnings per share

(EPS) in accordance with Accounting Standard – 20. The Basic

EPS has been computed by dividing the income available to

equity shareholders by the weighted average number of

equity shares outstanding during the accounting year. The

diluted EPS have been computed using the weighted average

number of equity shares and dilutive potential equity shares

outstanding at the end of the year.

16. Provision for Taxation :

a) The company has opted for the Tonnage Tax scheme and

provision for tax has been accordingly made under the

relevant provisions of the Income Tax Act, 1961.

b) Tax on incomes on which the Tonnage Tax is not

applicable is provided as per the other provisions of the

Income Tax Act, 1961.

c) Deferred tax resulting from timing differences, if any,

between book and tax profits for income other than that

covered under Tonnage Tax scheme is accounted for

under the liability method, at the current rate of tax, to

the extent that the timing differences are expected to

reverse in future.

17. Impairment of assets

The Company reviews the carrying values of tangible and

intangible assets for any possible impairment at each balance

sheet date. Impairment loss, if any, is recognized in the year in

which impairment takes place.

18. Provisions and Contingent Liabilities:

Provisions are recognized in the accounts in respect of

present probable obligations, the amount of which can be

reliably estimated. Contingent Liabilities are disclosed in

respect of possible obligations that arise from past events but

their existence is confirmed by the occurrence or non

occurrence of one or more uncertain future events not wholly

within the control of the Company.

2. Estimated amount of contracts remaining to be

executed on capital accounts and not provided for (net

of advances) as at March 31, 2008 Rs. 14,928.51 Lacs (Rs.

NIL).

Amount Rs in Lacs

885.00Counter guarantees issued by

the Company for guarantees

obtained from the bank

Name Current Year

1,456.54

Previous Year


the company for guarantees

obtained from the bank on

behalf of subsidiaries

458.89

6,725.83Corporate guarantees issued

by the company on behalf of

wholly owned subsidiaries

29,962.17


by the company on behalf

of business associates

19,400.00

5,500.00Letter of comforts issued by

the company on behalf of

wholly owned / fellow

subsidiaries

45,123.75

TOTAL 96,401.35 27,075.32


3. Investments purchased and sold during the financial year 2007-08

Name of the Company

Amount Rs in Lacs

Purchase

Amount

Sold AmountSr. No. Quantity (Units)

Birla Sun Life

Mutual Fund

Canbank Mutual Fund

DBS Chola

Mutual Fund

DSP Merrill Lynch

Mutual Fund

Deutche Asset

Management

Mutual Fund

DWS Investments

Franklin Templeton

Investments

Mutual Fund

HDFC Mutual Fund

JM Money Manager

Fund

1.

2.

3.

4.

5.

6.

7.

8.

9.

Nature of Investment

Birla Cash Plus-Instl. Prem

(Daily Dividend)

Birla Sun life Liquid Plus-Instl.Prem

(Daily Dividend)

Canliquid Fund-Institutional

(Daily Dividend)

DBS Chola Short Term Floating Rate Fund

(Equity)

DBS Chola Short Term Floating Rate Fund

(Daily Dividend)

DBS Chola Liquid Inst.Prem

(Daily Dividend)

DSP Merrill Lynch Liquid Institutional Fund

(Daily Dividend)

DWS Insta Cash Plus Institutional Plan

(Daily Dividend)

DWS Money Plus Fund - Institutional Plan

(Daily Dividend)

DWS Alpha Equity Fund- Dividend option

Franklin India FLEXI CAP FUND

Dividend Reinvestment(Equity)

Templeton India Treasury Management

Account Insti Plan

(Daily Dividend)

HDFC Equity Fund-Dividend

JM Money Manager Fund Super Plus Plan

(Daily Dividend)

92,314,916.02

(32,632,110.97)

15,010,463.15

(NIL)

NIL

(26,764,226.35)

1,000,000.00

(NIL)

1,516,501.36

(NIL)

20,154,392.12

(14,177,403.46)

160,885.04

(423,049.78)

25,066,111.43

(NIL)

46,664,160.01

(47,118,377.24)

NIL

(283,929.59)

57,870.66

(247,960.56)

NIL

(391,078.36)

NIL

(141,295.00)

32,719,504.02

(23,639,354.34)

9,249.49

(3,269.58)

1,502.07

(NIL)

NIL

(2,687.37)

100.00

(NIL)

151.90

(NIL)

2,021.83

(1,422.22)

1,609.17

(4,231.34)

2,511.50

(NIL)

4,670.24

(4,720.46)

NIL

(50.00)

9.28

(42.56)

NIL

(3,911.76)

NIL

(50.00)

3,272.81

(2,363.94)

9,249.49

(3,269.57)

1,502.07

(NIL)

NIL

(2,687.40)

123.80

(NIL)

151.90

(NIL)

2,021.83

(1,422.23)

1,609.17

(4,231.34)

2,511.50

(NIL)

4,669.14

(4,720.46)

NIL

(52.21)

10.55

(50.13)

NIL

(3,911.76)

NIL

(60.23)

3,272.99

(2,363.09)

58


Name of the Company

Amount Rs in Lacs

Purchase

Amount


Kotak Mutual Fund

Lotus India Mutual

Fund

LIC Mutual Fund

Prudential ICICI

Mutual Fund

Quantum Mutual

Fund

Reliance Mutual Fund

10.

11.

12.

13.

14.

15.


Kotak Liquid Fund Inst. Premium

(Daily Dividend)

Lotus India Short Term Plan -Institutional

(Daily Dividend)

Lotus India Liquid Fund Institutional Plus

(Daily Dividend)

Lotus India Liquid Plus Fund-Inst. Weekly

Dividend

LIC MF Liquid Fund Dividend Plan

LIC MF FMP Series 7 - 3 Months Dividend

Plan

LIC MF Floating rate Fund

ICICI Prudential Emerging STAR Fund-

Dividend(Equity)

ICICI Prudential Discovery Fund-Dividend

(Equity)

ICICI Prudential Institutional Liquid Plan

Super Institutional DD

Quantum Mutual Fund Daily Dividend

Reliance Liquid Fund-Daily Dividend

Reinvestment

RLF Treasury Plan - Institutional Option

(Daily Dividend)

Reliance Equity Fund-Dividend Plan

4,114,788.25

(21,431,669.34)

5,194,862.39

(NIL)

15,205,266.53

(17,092,415.34)

NIL

(10,121,144.45)

NIL

(42,843,378.55)

NIL

(20,301,372.10)

NIL

(39,539.00)

32,183.22

(254,453.00)

33,730.21

(259,740.00)

9,169,764.17

(20,797,215.11)

11,000,000.00

(NIL)

1,641,334.09

(NIL)

NIL

(7,941,957.52)

NIL

(286,682.00)

503.16

(2,512.75)

519.56

(NIL)

1,521.02

(1,709.24)

NIL

(1,012.12)

NIL

(4,702.99)

NIL

(2,030.14)

NIL

(4.00)

7.09

(50.90)

5.75

(50.00)

916.98

(207.97)

1,123.63

(NIL)

250.91

(NIL)

NIL

(1,213.73)

NIL

(50.00)

503.16

(2,515.61)

522.40

(NIL)

1,520.71

(1,709.24)

NIL

(1,013.33)

NIL

(4,703.43)

NIL

(2,030.14)

NIL

(3.95)

6.86

(54.58)

5.76

(54.70)

917.02

(2,079.72)

1,123.63

(NIL)

250.91

(NIL)

NIL

(1,213.86)

NIL

(55.29)


Name of the Company

Amount Rs in Lacs

Purchase

Amount


Standard Chartered

Mutual Fund

SBI Mutual Fund

TATA Mutual Fund

ING VYSYA Mutual

Fund

Sundaram BNP

Paribas Mutual

HSBC Mutual Fund

16.

17.

18.

19.

20.

21.


Standard Chartered Liquidity Manager

Plus

(Daily Dividend)

SBI Premier Liquid Fund -Institutional-

Daily Dividend

SBI Infrastructure Fund-I-Dividend(Equity)

Magnum Institutional Income-Savings-

Dividend

TATA Liquid Super High Investment Fund

DD

TATA Floter Fund-DD-Reinvestment

TATA Tresury Manager Fund-SHIP-Gr.

UTI Liquid Cash Plan Institutional Daily

Income

UTI Money Market Fund

(Daily Dividend)

UTI Liquid Plus Institutional Daily Income

Optimix Active Debt Multi- Manager FOF

Scheme-Dividend

Sundaram BNP Paribas Select Midcap-

Dividend

HSBC Cash Fund -Institutional Plan

(Daily Dividend)

NIL

(217,276.74)

8,100,367.43

(NIL)

5,000,000.00

(NIL)

NIL

(24,978,990.42)

194,307.30

(36,027.82)

25,994,949.56

(NIL)

47,708.91

(NIL)

316,173.50

(770,313.03)

NIL

(4,899,730.93)

102,885.08

(NIL)

NIL

(2,000,000.00)

NIL

(307,498.00)

NIL

(19,877,332.66)

NIL

(2,014.23)

812.67

(NIL)

500.00

(NIL)

NIL

(2,506.02)

2,165.59

(401.54)

2,608.75

(NIL)

500.08

(NIL)

3,223.22

(7,850.97)

NIL

(854.06)

1,028.85

(NIL)

NIL

(200.00)

NIL

(68.16)

NIL

(2,012.90)

NIL

(2,014.23)

812.67

(NIL)

555.00

(NIL)

NIL

(2,506.02)

2,165.59

(401.54)

2,608.75

(NIL)

500.61

(NIL)

3,223.22

(7,852.22)

NIL

(854.07)

1,028.85

(NIL)

NIL

(202.04)

NIL

(54.98)

NIL

(2,012.90)

60

4. The Company has made preferential issue of equity shares,

and warrants aggregating to Rs. 5,627.25 Lacs (including

premium) (Rs. Nil) The said funds have been utilized for

Working Capital requirements.

5. The company has raised Foreign Currency Loans aggregating

to Nil (Rs. 20,108 Lacs). The same has been utilized for

acquisition of vessels.

6. The Company has established Letters of Credit aggregating to

Rs. 7,580.79 Lacs (Nil). The same has been utilized for

acquisition of vessel.

7. The company has not received any intimation from its

vendors regarding the status under the Micro, Small and

Medium Enterprises Development Act 2006 and hence

disclosures required under this act have not been made.

8. The balance in the Exchange Earners Foreign Currency

account is maintained in US Dollars and shown in equivalent

Indian Rupees. The balance in the said account as at the

Balance Sheet date was USD 0.217 Lacs (Previous Year USD 3.72

Lacs)

9. Details of bank balances with Foreign Banks

Amount Rs in Lacs

Name of the Bank Balance as at March 31, 2008 Maximum Balance during the year

Citibank NA New York NIL

(NIL)

NIL

(53.90)

HSBC Bank Singapore 72.22

(12.24)

6,428.73

(23,042.85)

HSBC Bank Singapore

(Fixed Deposit)

21.32

(2,079.32)

2,086.38

(37,671.60)

Name of the Company

Amount Rs in Lacs

Purchase

Amount


Fidelity International

Principle Asset

Management

22.

23.


Fidelity India Special Situations Fund-

Dividend

Principal Cash Prem Inst

(Daily Dividend)

NIL

(1,955,990.22)

NIL

(9,233,202.00)

NIL

(200.00)

NIL

(923.38)

NIL

(238.98)

NIL

(923.38)


61

10.

11.

12.

13.

Value of material imported by the company on CIF basis during the

accounting year in respect of

Stores & Spares

Capital Goods (including CWIP)

Details of Spare Parts consumed

Raw Material

Imported Spares

Indigenous Spares

Expenditure in foreign currency during the year

On Repairs / Renovations and expenses of Vessels

On Charter Hire

On Vessel Expenses

On Travelling

On Interest

Disclosure as required under clause 32 of the listing agreement

Loans and Advances include amount receivable from

Amount Receivable from Subsidiaries

Mercator International (Pte) Ltd.

Balance outstanding at year end

Maximum amount Outstanding during the year.

Mercator Lines Singapore (Pte) Ltd.



Mercator Oil & Gas Limited



Mercator Offshore Limited



Companies in which some directors were directors

Mercator Mechmarine Limited



Mercator Petroleum Limited



Amount Rs in Lacs

Sr. No. Current Year Previous Year

451.35

21,726.12

451.35

22.88%

1,521.32

77.12%

354.30

14,414.54

21,243.73

25.36

1,996.62

37,990.66

42,330.33

NIL

31,401.51

76.27

76.27

5,291.35

5,514.01

9.00

9.00

0.16

0.16

267.83

28,257.51

267.83

15.07%

1,508.83

84.93%

4,363.77

25,357.04

16,901.45

27.31

2,618.14

267.78

273.64

27,992.16

33,525.45

18.19

18.19

1,553.15

3,042.56

NIL

1.64

NIL

NIL


62


18. Disclosures in accordance with Revised Accounting Standard (AS) -15 on “Employee Benefits”:

AS – 15 (Revised 2005) on “Employee Benefits” has been adopted by the Company effective from April 1, 2007. The disclosures are as

required by the said AS are given hereunder.

63

14.

15.

16.

17.

a) Remuneration to Directors

Executive Chairman and Managing Directors

Salary

Perquisites

Commission

Non-Executive Directors

Commission

b) Computation of Net Profit in accordance with section 349 of

the Companies Act, 1956 for calculation of commission payable to

Executive Chairman and Managing Director

Profit before Tax

Add: Remuneration paid to Directors

Less: Gain on sale of Fixed Assets

Less: Prior years adjustments

Net Profit on which remuneration is payable

Directors' Commission within overall Remuneration

Executive Directors

Non Executive Directors

Payment to Auditors

Audit Fees

Tax Audit Fees

For Quarterly Limited Review

For certification and other matters

Service Tax

Total

Earnings in foreign currency on account of

Shipping Income

Other Income

Dividend remitted in foreign currency

Amount Rs in Lacs

Sr. No. Current Year Previous Year

96.00

17.29

1,492.50

10.00

17,675.43

1,615.79

(2,953.95)

(162.27)

16,175.00

1,605.79

10.00

10.00

1.50

1.50

4.00

2.10

19.10

25,725.52

1,174.67

NIL

48.00

21.83

728.23

7.50

7,486.03

805.56

(310.91)

NIL

7,980.68

798.06

7.50

8.00

1.25

0.90

3.50

1.66

15.31

20,098.72

73.79

NIL


Amount Rs in Lacs

For the year ended March 31, 2008

(ii) Contribution to Employees' Family Pension Fund NIL

(iii) Contribution to Employees' Superannuation Fund

(I) Contribution to Employees' Provident Fund 22.02

NIL

Total 22.02

(B) Defined Benefit Plans:

(I) Changes in the Present Value of Obligation

(II) Expenses recognized in the Profit and Loss Account

For the Year Ended March 31, 2008

Gratuity Leave

Encashment

Total

(a) Current Service Cost 13.67 8.87 22.54

(b) Past Service Cost NIL NIL NIL

(c) Interest cost 1.43 1.17 2.6

(d) Curtailment Cost/ (Credit) NIL NIL NIL

(e) Settlement Cost/ (Credit) NIL NIL NIL

(f) Net Actuarial (Gain)/ Loss 1.78 5.72 7.5

(g) Employees' Contribution NIL NIL NIL

(h) Total Expenses recognized in Profit and Loss A/C 13.32 4.32 17.64

Amount Rs in Lacs

64

(A) Defined Contribution Plans:

The Company has recognized the following amounts in the Profit and Loss Account for the year:

For the year ended March 31, 2008

(a) Present Value of Obligation as at April 1, 2007

(b) Interest cost

(c) Past Service Cost

(d) Current Service Cost

Gratuity Leave Encashment Total

17.91

1.43

NIL

13.67

14.64

1.17

NIL

8.87

32.55

2.6

NIL

22.54

Amount Rs in Lacs

(e) Curtailment Cost / (Credit)

(f) Settlement Cost / (Credit)

(g) Benefits Paid

(h) Actuarial (Gain) / Loss

NIL

NIL

0.33

1.78

NIL

NIL

1.58

5.72

NIL

NIL

1.91

7.5

(I) Present Value of Obligation as at March 31, 2008 30.89 17.38 48.27


(iii) Following are the Principal Actuarial Assumptions used as at the balance sheet date:

Particulars Gratuity Leave Encashment

(a) Discount Rate 8% 8%

(b) Salary Escalation Rate – Management Staff 7% 7%

(c) Turnover Rate 3% 3%

(d) Mortality Table LIC (1994-96) Ultimate LIC (1994-96) Ultimate

The estimates of future salary increases considered in actuarial

valuation takes into account inflation, seniority, promotion and

other relevant factors.

(iv) This being the first year of implementation of AS-15

(Revised) previous year figures have not been given.

19. Segment Reporting

As the company principal business activities fall within the single

segment viz Shipping and related activities there is no reportable

segment pursuant to Accounting Standard 17 'Segment

Reporting; issued by Institute of Chartered Accountants of India

are not applicable.

65

20

A)

i)

a)

b)

c)

d)

e)

f)

g)

h)

i)

j)

k)

l)

m)

n)

o)

p)

ii)

a)

b)

c)

d)

e)

Related Party Disclosures:

List of Related Parties

Subsidiaries

Mercator International (Pte) Limited (MIPL)

Mercator Oil and Gas Limited

Mercator Offshore Limited

Mercator Lines ( Singapore) Limited (MLS) (subsidiary of MIL)

Oorja Holdings Pte. Limited. (OHL) Singapore - subsidiary of MIL

Mercator Lines (Panama) Inc (subsidiary of MLS)

Varsha Marine Pte Limited (subsidiary of MLS)

Vidya Marine Pte Limited (subsidiary of MLS)

Oorja 1 Pte Limited - (Oorja 1) - Singapore - Subsidiary of OHL



Oorja Mocambique Minas Limitada - (Oorja Mocambique) -

Mocambique- Subsidiary of OHL

Oorja Indo KGS - Indonesia- Subsidiary of Oorja 3

Broadtec Mocambic Minas Limitada - Mozambique -

Subsidiary of Oorja Mozambique

Oorja Indo Petangis Three (Indonesia)

Oorja Indo Petangis Four (Indonesia)

Companies in which the directors/relatives of directors

have substantial interest

MLL Logistics Private Limited

Mercator Petroleum Private. Limited (MPPL) - INDIA


Mercator Healthcare Limited

Ankur Fertilizers Private Limited

f)

g)

iii)

a)

b)

c)

d)

e)

f)

iv)

a)

b)

v)

a)

Rishi Holding Private Limited

AHM Investments Private Limited.

Directors of the Company

H.K Mittal

A. J. Agarwal

Manohar Bidaye

Anil Khanna

M. G. Ramakrishna

K. R. Bharat (w.e.f. 30th july,2007)

Key Management Personnel

H. K. Mittal

A. J. Agarwal

Relative of Key Management Personnel

Adip Mittal


66

B)

De

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of th

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com

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4724.2

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Na

me

of

the

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(Am

ou

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Rs.

in

Lacs

)

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67

C)

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68

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69

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Ba

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31

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old

ing

Pri

vate

Lim

ited

MLL

Log

isti

cs P

riva

te L

imit

ed

To

tal

-

664.8

96

64

.89

3409.3

53

40

9.3

5 - -

667.72

66

7.72 - - - -

1170

.25

1170

.25 - -

500.0

05

00

.00

500.0

05

00

.00

1256.2

2

125

6.2

2 - - -

15.0

0

15.0

0

1170

.25

66

4.8

9

34

09

.35

50

0.0

0

50

0.0

0

192

3.9

4 - - -

15.0

0

Na

me

of

the

Tra

nsa

cti

on

(Am

ou

nt

Rs.

in

Lacs

)

Su

bsi

dia

ry C

om

pa

nie

sC

om

pa

nie

s in

wh

ich

the

dir

ecto

rs /

re

lati

ve

s

of

dir

ecto

rs h

ave

su

bst

an

tia

l

inte

rest

Tota

l

Cu

rre

nt

Yr

Pre

vio

us

Yr

Cu

rre

nt

Yr

Pre

vio

us

Yr

Cu

rre

nt

Yr

Pre

vio

us

Yr

D)

R

em

un

era

tio

n p

aid

to

Ke

y M

an

ag

em

en

t P

ers

on

ne

l16

05

.78

79

8.0

6

E)

C

om

mis

sio

n P

aid

to

No

n-E

xe

cu

tive

Dir

ecto

rs10

.00

7.5

0

F)

R

em

un

era

tio

n t

o r

ela

tive

of

Ke

y M

an

ag

em

en

t P

ers

on

ne

l2

.81

-


70

22. Disclosure in respect of operating lease (as Lessor):

(a) Operating Leases

Disclosures in respect of cancellable agreements for office and

residential premises taken on lease

(I) Lease payments recognized in the Profit and Loss Account NIL

(ii) Significant leasing arrangements

The Company has given refundable interest free security

deposits under the agreements.

The lease agreements are for a period of ninety months.

These agreements are non cancelable by both the parties for

12 months except in certain exceptional circumstances.

(iii) Future minimum lease payments under non-cancellable agreements

Not later than one year NIL

Later than one year and not later than five years NIL

Later than five years NIL

113.87

113.87

113.87

NIL

NIL NIL

Amount Rs in Lacs


(a) Operating Leases

Disclosures in respect of cancelable agreements for office and

residential premises taken on lease

(I) Lease payments recognized in the Profit and Loss Account

(ii) Significant leasing arrangements

The Company has given refundable interest free security

deposits under the agreements.

The lease agreements are for a period of sixty months.

These agreements also provided for increase in rent.

These agreements are non cancellable by both the parties

except in certain exceptional circumstances.

(iii) Future minimum lease payments under non-cancellable agreements

Not later than one year

Later than one year and not later than five years

Later than five years

118.01

314.71

1,715.14

NIL

Amount Rs in Lacs

Current Year

314.71

314.71

1844.46

NIL

Particulars Previous Year

21. Disclosure in respect of operating lease (as Lessee):


71

23. Earning Per Share

24. Derivative Instruments

The Company uses foreign currency forward contracts to hedge its risks associated with foreign Currency fluctuations relating to certain

firm commitments and forecasted transactions. The use of foreign currency forward contracts is governed by the Company's strategy

approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company's Risk

Management Policy. The Company does not use forward contracts for speculative purposes.

Net Profit after Tax and preference dividend including tax thereon

Basic 16,274.83 6,754.92

Diluted 16,333.56 7,195.31

Number of Shares used in computing Earning Per Share

Basic 224,225,062 216,634,232

Diluted 236,414,299 237,909,951

Earning per share (equity shares of face value Re 1/-)

Basic 7.26 3.12

Diluted 6.91 3.02

Amount Rs in Lacs


Outstanding Forward Exchange Contracts entered into by the Company:-


(a) Interest Rate Swap Contracts

Total No. of Contract - 3

Loan Value US Dollar (Million) - 4.54

- 5717.45Loan Value JPY (Million)

(b) Currency Swap Contracts

Total No. of Contract - 1

- 4.54Loan Value


72

25. Foreign Currency Exposures

The year end exposure in a currency other than the financial currency of the Company that were not hedged by a derivative instrument or

otherwise are given below:

32221.17 $80.92 62416.02 $142.60

2006-072007-08

Rs. Lacs Fx.Million Rs. Lacs Fx.Million

Account Receivable 968.95 $2.44 2272.14 $5.19

Loan & Advances 43017.97 $108.04 29813.09 $68.11

Accounts Payable/Acceptance

(including capital commitments made but not provided for)

27771.82 $666.04 440.46 $8.13

J¥ 3250

Borrowings

26. The Company did not have full-time company secretary

for the period 29th January'2008 till date as required under

section 383A of the Companies Act, 1956. Company is in the

process of appointing company secretary.

27. Previous years figures have been regrouped /

rearranged wherever necessary.


73

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 31/03/2008

1. Registration Details

Registration No. 11-31418 State Code 011

Balance Sheet Date 31/03/2008 Date Month Year

31 3 2008

II. Capital Raised during the year (Amount in Rs. Thousand)

Public Issue NIL Right Issue NIL

Bonus Issue NIL Private Placement` NIL

III. Position of Mobilsation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities 18,908,301.50 Total Assets 18,908,301.50

Source of Funds

Paid-up Capital 401,620.39 Reserves & Surplus 8,786,364.56

Secured Loans 9,129,381.52 Unsecured Loans 590,935.00

IV. Application of Funds

Net Fixed Assets 13,980,605.93 Investments 201,492.91

Net Current Assets 4,726,202.66 Misc. expenditure NIL

Deferred Tax Asst.

V. Performance of Company (Amount of Rs. Thousands)

Turnover 8,630,791.58 Total Expenditure 6,863,248.54

Profit/(Loss) Before tax 1,767,543.03 Profit/(Loss) after tax 1,688,443.03

Earning per Share 7.26 Dividend Rate % 110%

VI. Generic Name of the Principal Products /Services of the Company (As per monetary terms)

Item Code No. : NA

Product Description : Shipping Services

Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


74

STA

TEM

EN

T P

UR

SU

AN

T T

O S

EC

TIO

N 2

12 O

F T

HE C

OM

PA

NIE

S A

CT,

19

56

RELA

TIN

G T

O S

UB

SID

IAR

Y C

OM

PA

NIE

S

Pro

fit

Rs.

16,0

06.6

0 L

acs

Fin

an

cia

l

Yea

r

En

de

d

Sr.

No

.

Na

me

of

Co

mp

an

y

Merc

ato

r Li

nes

(Sin

gap

ore

) Lt

d.

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

Merc

ato

r Li

nes

(Pan

am

a) In

c.

Merc

ato

r In

tern

ati

on

al Pte

. Ltd

.

Merc

ato

r O

ffsh

ore

Ltd

.

Vid

ya M

ari

ne P

te. L

td.

Vars

ha M

ari

ne P

te.

Ltd

.

Merc

ato

r O

il &

Gas

Ltd

.

1

Oorj

a H

old

ing

s Pte

. Ltd

.

Oorj

a 1

Pte

. Ltd

..

2 3 4 5 6 7 8

Exte

nt

of

inte

rest

of

the

Ho

ldin

g C

om

pa

ny

in t

he

ca

pit

al o

f

sub

sid

iary

No

. of

Sh

are

s

he

ld b

y

Co

mp

an

y d

ire

ctl

y

or

thro

ug

h its

sub

sid

iary

Ne

t a

gg

reg

ate

of

the

pro

fit

or

loss

es

of

the

su

bsi

dia

ry

for

the

cu

rre

nt

pe

rio

d s

o f

ar

as

it c

on

ce

rns

the

me

mb

ers

of

the

ho

ldin

g c

om

pa

ny

Ne

t a

gg

reg

ate

of

pro

fits

or

loss

es

for

pre

vio

us

fin

an

cia

l

ye

ars

of

the

su

bsi

dia

ry s

o f

ar

as

it c

on

ce

rns

the

me

mb

ers

of

the

ho

ldin

g c

om

pa

ny

Not

dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nts

of th

e h

old

ing

com

pan

y

Dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nt

of th

e h

old

ing

com

pan

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wit

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vid

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for

in t

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ccou

nt

of th

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com

pan

y

Not

dealt

wit

h

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pro

vid

ed

for

in t

he a

ccou

nts

of th

e h

old

ing

com

pan

y

9,0

08,8

50

10,0

00

100,0

00

74,9

22,8

50

2 2 2 2 2 700

25,0

00

2 150,0

00

Loss

Rs.

0.0

1 L

acs

Pro

fit

Rs.

385.4

9 L

acs

Loss

Rs.

13.6

9 L

acs

Pro

fit

Rs.

5,7

64.5

6 L

acs

Pro

fit

Rs.

1,0

07.49 L

acs

Loss

Rs.

52.0

0 L

acs

Loss

Rs.

140.5

8 L

acs

Loss

Rs.

6.0

8 L

acs

NIL

NIL

NIL

NIL

Loss

Rs.

10.3

7 L

acs

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

Loss

Rs.

19.3

9 L

acs

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

Pro

fit

Rs.

5857.11

Lacs

100%

72.3

5%

100%

100%

100%

100%

70%

85%

100%

100%

100%

100%

100%

100%

Loss

Rs.

345.9

7 L

acs

Loss

Rs.

2.6

0 L

acs

Loss

Rs.

0.6

8 L

acs

Pro

fit

Rs.

830.4

6 L

acs

9 10 11 12 13 14

Oorj

a 2

Pte

. Ltd

.

Oorj

a 3

Pte

. Ltd

.

Oorj

a In

do K

GS

Oorj

a M

oca

mb

iqu

e M

inas

Lim

itad

a

Bro

ad

tech

Moca

mb

iqu

e M

inas

LDA

Loss

Rs.

5.6

1 L

acs

Loss

Rs.

1.3

7 L

acs

Loss

Rs.

2.8

4 L

acs


75

31-M

ar-

08

31-M

ar-

08

1,000

1,000

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

50%

50%

15 16

Oorj

a In

do P

eta

ng

is T

hre

e

Oorj

a P

eta

ng

is F

ou

r

Fin

an

cia

l

Yea

r

En

de

d

Sr.

No

.

Na

me

of

Co

mp

an

yExte

nt

of

inte

rest

of

the

Ho

ldin

g C

om

pa

ny

in t

he

ca

pit

al o

f

sub

sid

iary

No

. of

Sh

are

s

he

ld b

y

Co

mp

an

y d

ire

ctl

y

or

thro

ug

h its

sub

sid

iary

Ne

t a

gg

reg

ate

of

the

or

loss

es

of

the

su

bsi

dia

ry

for

the

cu

rre

nt

pe

rio

d s

o f

ar

as

it c

on

ce

rns

the

me

mb

ers

of

the

ho

ldin

g c

om

pa

ny

Ne

t a

gg

reg

ate

of

pro

fits

or

loss

es

for

pre

vio

us

fin

an

cia

l

ye

ars

of

the

su

bsi

dia

ry s

o f

ar

as

it c

on

ce

rns

the

me

mb

ers

of

the

ho

ldin

g c

om

pa

ny

Not

dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nts

of th

e h

old

ing

com

pan

y

Dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nt

of th

e h

old

ing

com

pan

y

Dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nt

of th

e h

old

ing

com

pan

y

Not

dealt

wit

h

or

pro

vid

ed

for

in t

he a

ccou

nts

of th

e h

old

ing

com

pan

y

Date

d: M

um

bai

14th

May

2008

Fo

r a

nd

on

be

ha

lf o

f th

e B

oa

rd

H.K

. Mit

tal

Exe

cuti

ve C

hair

man

A.J

. Ag

arw

al

Man

ag

ing

Dir

ect

or

An

il K

ha

nn

a

Dir

ect

or

M. G

. Ra

mk

rish

na

Dir

ect

or


76

STA

TEM

EN

T R

ELA

TIN

G T

O S

UB

SID

IAR

Y C

OM

PA

NIE

S F

OR

TH

E Y

EA

R E

ND

ED

31

ST,

MA

RC

H 2

00

8

Date

d:

Mu

mb

ai

14th

May

2008,

Fo

r a

nd

on

be

ha

lf o

f th

e B

oa

rd

H.K

. Mit

tal

Exe

cuti

ve C

hair

man

A.J

. Ag

arw

al

Man

ag

ing

Dir

ect

or

An

il K

ha

nn

a

Dir

ect

or

M. G

. Ra

mk

rish

na

Dir

ect

or

12 13 14

Merc

ato

r Li

nes

(Sin

gap

ore

) Lt

d.

Merc

ato

r Li

nes

(Pan

am

a) In

c.

Merc

ato

r In

tern

ati

on

al Pte

. Ltd

.

Merc

ato

r O

ffsh

ore

Ltd

.

Vid

ya M

ari

ne P

te. L

td.

Vars

ha M

ari

ne P

te.

Ltd

.

Merc

ato

r O

il &

Gas

Ltd

.

1

Oorj

a H

old

ing

s Pte

. Ltd

.

Oorj

a 1

Pte

. Ltd

..

2 3 4 5 6 7 8 9 10 11

Oorj

a 2

Pte

. Ltd

.

Oorj

a 3

Pte

. Ltd

.

Oorj

a In

do K

GS

Oorj

a M

oca

mb

iqu

e L

DA

Bro

ad

tech

Moca

mb

iqu

e M

inas

LDA

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

31-M

ar-

08

1,233 15 99 10

-

20,2

33

209,12

3

-1

(14)

-(1

4)

-

1,233 91

100

-

76

80,2

28

108,6

6142,4

98

16,10

716

,007

100

4(1

89)

(185)

---

--

--

-

24

81

53,6

86

53,5

81

-13

,050

39

0385

- -

01,

007

18,2

02

17,19

6-

5,4

96

1,017

101,

007

- -5,7

65

-5,7

65

10,2

30

-19

,630

21,

400

1,77

00

-- -------

- ---

14

(52)

(52)

-

(1)

(1)

-

(3)

(3)

(6)

(6)

(6)

(6)

(141)

(141)

- -------

--

- -------0 0 0 0 10

(141)

(6)

(6)

(3) -

148

1,951

705

705

562

158

158

2,0

92

711

710

565 0 -

148

4 4 3

Sr.

No

.

Na

me

of

Co

mp

an

yFin

an

cia

l

Yea

r

En

de

d

Ca

pit

al

Re

serv

eTo

tal

Ass

et

Tota

l

Lia

bilit

y

Inve

st-

me

nt

Turn

ove

rP

rofi

t /

(Lo

ss)

aft

er

tax

Pro

fit

/

(Lo

ss)

aft

er

tax

Pro

po

sed

div

ide

nd

Pro

vis

ion

for

tax

(Am

ou

nt

Rs.

in

Lacs

)

3,7

79


77

Auditors' report to the Board of Directors on the

consolidated financial statements of Mercator Lines

Limited and its subsidiaries

1. We have audited the attached consolidated balance sheet of

Mercator Lines Limited (the Company) and its subsidiaries

(collectively called 'the Mercator Group') as at March 31, 2008,

the consolidated profit and loss account and the

consolidated cash flow statement for the year ended on that

date, annexed thereto. These financial statements are the

responsibility of the Company's management. Our

responsibility is to express an opinion on these financial

statements based on our audit.

2. We conducted our audit in accordance with the auditing

standards generally accepted in India. Those Standards

require that we plan and perform the audit to obtain

reasonable assurance about whether the financial

statements are free of material misstatements. An audit

includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statement presentation. We

believe that our audit provides a reasonable basis for our

opinion.

3. We did not audit the financial statements of subsidiaries,

whose financial statements reflect total assets (net) of Rs.

2,015.63 crores as at 31st March, 2008, and total revenues of

Rs. 773.23 crores. These financial statements and other

financial information have been audited by other auditors

whose reports have been furnished to us, and our opinion is

based solely on the report of the other auditors.

4. We report that the consolidated financial statements have

been prepared by the Company's management in

accordance with the requirements of Accounting Standard

(AS) 21, Consolidated Financial Statements, as notified by the

Companies (Accounting Standards) Rules, 2006.

In our opinion and to the best of our information and according to

the explanations given to us, the consolidated financial

statements give a true and fair view in conformity with the

accounting principles generally accepted in India:

a. in the case of the consolidated balance sheet, of the state of

affairs of the Mercator Group as at March 31, 2008;

b. in the case of the consolidated profit and loss account, of the

profit of the Mercator Group for the year ended on that date;

and

c. in the case of the consolidated cash flow statement, of the

cash flows of the Mercator Group for the year ended on that

date.




H. V. Kishnadwala

Partner,

Membership No 37391

Mumbai

14th May 2008


78

Consolidated Balance Sheet as at March 31, 2008

As at Particular Schedule 31, March 2008 31, March 2007

As at

SOURCES OF FUNDS Shareholders’ Funds Share Capital A 2,348.95 5,892.43Warrants against Share Capital A 1 1,667.25 488.00Reserves and Surplus B 158,051.71 56,456.25Minority Interest 15,483.39 -

177,551.31 62,836.62Loan Funds Secured Loans C 198,832.01 150,208.27Unsecured Loans D 12,280.55 33,265.20

211,112.56 183,473.47

Total 388,663.87 246,310.09

APPLICATION OF FUNDS Fixed Assets EGross Block 314,196.02 189,446.46Depreciation (35,286.91) (20,547.24)Net Block 278,909.11 168,899.22Capital work in progress 45,101.72 9,585.51

324,010.83 178,484.73

Investments F 425.00 8,706.70

Current Assets, Loans & Advances GInventories 2,704.68 2,499.74Sundry Debtors 20,795.84 18,593.30Cash and Bank Balances 85,314.49 37,646.34Loans and Advances 41,954.77 21,109.90

150,769.77 79,849.28

Current Liabilites and Provisions HCurrent Liabilities 83,126.34 16,614.64Provisions 3,071.25 2,246.59Incomplete Voyages (Net) 344.15 1,869.39

86,541.74 20,730.62

Net Current Assets 64,228.04 59,118.66

Total 388,663.87 246,310.09Significant Accounting Policies I& Notes to the Accounts






Partner

M No. 37391


Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


79

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH MARCH 31, 2008



INCOMEShipping Income J 145,487.29 112,275.75Other Income K 10,131.45 1,592.63Profit on Sale of Investments (Net) 325.80 89.74Profit on Sale of Assets (Net) 2,953.95 310.91

Total 158,898.49 114,269.03

EXPENSESShip Operating Expenses L 81,871.63 79,471.09Administrative and Other Expenses M 4,877.58 2,506.26Finance Charges N 14,464.28 8,076.84Depreciation 16,749.92 10,380.39

Total 117,963.41 100,434.58

Profit Before Taxes 40,935.08 13,834.46Provision for TaxationCurrent (880.89) (327.53)Deferred Tax - -Fringe Benefit Tax (21.00) (13.50)Profit After Taxes 40,033.19 13,493.43

Minority Interest (2,988.90) (7.87)Prior Year Expenses / Income (Net) (4,148.60) (42.74)Short Provision for Tax of earlier Year (130.00) -Balance brought forward from last year 23,612.86 15,098.97

Available for Appropriations 56,378.55 28,541.79Less/(Add): AppropriationsTransfer to General Reserve 1,770.00 750.00 Transfer to Tonnage Tax Reserve 3,300.00 1,600.00Dividend on Preference Shares 307.76 320.00Dividend On Equity Shares (for Previous Year) 80.00 -Proposed Dividend on Equity Shares 2,583.85 1,892.43Tax on Dividend (including for previous year Rs. 13.60 Lacs) 505.02 366.50Balance Carried to Balance Sheet 47,831.92 23,612.86Earning Per Share (Equity Share of Re. 1/- Each) Basic (Rs.) 14.45 6.04Diluted (Rs.) 13.73 5.68Significant Accounting Policies I& Notes to the Accounts





Partner

M No. 37391


Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


80

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED ON MARCH MARCH 31, 2008



Cash Flow from Operating Activities Net Profit Before Tax 37,946.18 13,826.59Adjustment for: Depreciation 16,749.92 10,380.39Interest Paid 14,464.28 8,076.84(Profit)/Loss on Fixed Assets Scrapped / Sold (2,953.95) (310.91)(Profit)/Loss on Sale of Investment (325.80) (89.74) Dividend Income (406.91) (624.38)Interest Income - -Foreign Currency Translation Adjustment 1,839.23 (2,124.84)Operating Profit before Working Capital Charges 67,312.95 31,258.79Adjustment for: Trade and Other Receivables (23,162.76) (6,458.75)Trade Payables 65,811.12 14,010.19Cash Generated from Operations 109,961.31 36,685.39Direct Taxes Paid (1,031.89) (341.03)

Total Cash Generated from Operating Activities 108,929.42 36,344.36Cash Generated from Prior Period Items (4,148.60) (42.74)Net Cash from Operating Activities 104,780.82 36,301.62Cash flow from Investing ActivitiesIncrease in Fixed Assets including Capital Work in Progress (165,407.63) (79,328.45)Sale of Fixed Assets 6,085.61 25,312.03 Proceed from sale of Non Trade Investments 325.80 89.74Purchase/sale of Investment 8,281.69 1,271.30Interest Income - -Dividend Income 406.91 624.38Net Cash from Investing Activities (150,307.62) (52,031.00)Cash Flow from Financing ActivitiesProceeds from issue of Share Capital from conversion of Bonds and warrants 83,586.35 -Proceeds from Long Term Borrowings 27,639.09 52,442.47Proceeds from issue of Equity Shares to Promoters - -Adjustment for Minority Interest - (0.06)Interest Paid (14,464.28) (8,076.84)Dividends Paid including tax thereon (3,476.63) (2,578.92)Net Cash from Financing Activities 93,284.53 41,786.65

Net Increase in Cash and Cash Equivalents 47,757.74 26,057.26Cash and Cash Equivalents as at beginning of the year 37,877.56 11,820.30Cash and Cash Equivalents as at end of the year 85,635.30 37,877.56

Cash and Cash Equivalents comprise of: Cash and Bank Balances 85,314.49 37,877.56Accrued Interest on fixed deposit with banks 302.81 -





Partner

M No. 37391


Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


81

SCHEDULE FORMING PART OF CONSOLIDATED ANNUAL ACCOUNTS



SCHEDULE ‘A’Share Capital Authorised 35,00,00,000 Equity Shares of Re 1/- each. 3,500.00 3,500.00200,00,000 Preference Shares of Rs. 100 each. 20,000.00 20,000.00

23,500.00 23,500.00Issued Capital 23,48,95,387 (19,40,42,500) Equity of Shares Re. 1/- each fully paid up 2,348.95 1,940.43NIL (40,00,000)-8% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid up - 4,000.00

2,348.95 5,940.43Subscribed and Paid Up Capital Equity 23,48,95,387(18,92,42,500) Equity Shares of Re. 1/- each fully paid up. 2,348.95 1,892.43(a) 11,83,45,500 shares of Re 1/-were allotted as bonus shares by capitilisation of Securities Premium Account. (b) 32,00,000 shares of Re. 1/- each are issued on preferential basis on conversion of warrants during the year. (c) 37, 652,887 Shares of Re. 1/- each are issued on conversion of FCCBs during the Year.

PreferenceNIL (40,00,000)-8% Cumulative Redeemable Preference Shares of Rs. 100/- each fully paid up. (redeemed during the year on maturity) - 4,000.00

2,348.95 5,892.43SCHEDULE ‘A1’Warrants against Share Capital NIL (32,00,000) Warrants (Each Warrant carry option/ entitlement to subscribe to 1 number of equity share of Re. 1/- each on or before July 31, 2007 at a price not less than Rs. 137.50 per share, (converted during the Year). - 440.00

NIL (48,00,000) bonus equity shares of Re. 1/- each relating to bonus entitlement to the above warrant holders was kept in abeyance till the time the warrant holder exercises the option to subscribe to the above - 48.00

2,85,00,000 Warrants (Each Warrant carry option / entitlement to subscribe to 1 number of equity share of Re. 1/- each on or before April 24, 2009 at a price not less than Rs. 58.50 per share.) 1,667.25 -

1,667.25 488.00SCHEDULE ‘B’Reserves and Surplus

Capital ReserveAs per last Balance Sheet 26.24 26.24

26.24 26.24Capital Redemption ReserveAs per last Balance Sheet - -Add: Transferred From General Reserve on redemption of Preference Shares 4,000.00 -

4,000.00 -


82




Securities Premium Account As per last Balance Sheet 7,532.61 7,532.61Add: Received during the year on conversion of warrants and FCCBs 24,439.88 -Less: Share Issue Expenses (26.97) -

31,945.52 7,532.61Tonnage Tax ReverseAs per last Balance Sheet 1,600.00 6,924.83Add: Transferred from Profit and Loss Account 3,300.00 1,600.00Less: Transferred to Utilised Account (1,600.00) (6924.83)

3,300.00 1,600.00Tonnage Tax Reserve (Utilised)As per last Balance Sheet 6,924.83 -Add: Transfer from Tonnage Tax Reserve 1,600.00 6,924.83

8,524.83 6,924.83Debenture Redemption ReserveAs per last Balance Sheet 8,000.00 13,980.00Transferred to General Reserve on redemption of debentures (1,800.00) (5,980.00)

6,200.00 8,000.00General Reserve As per last Balance Sheet 10,902.83 4,172.83Add: Transferred from Debenture Redemption Reserve 1,800.00 5,980.00Add: Transferred From Profit and Loss Account 1,770.00 750.00 Less: Transferred to Capital Redemption Reserve on redemption ofPreference Shares (4,000.00) -

10,472.83 10,902.83

Profit / (Loss) on cash flow hedging reserve account (5,701.31) -

Capital Reserve (on consolidation) 54,459.24 -

Foreign currency Translation Reserve (3,007.57) (2,143.13)Surplus in Profit and Loss Account 47,831.92 23,612.86

158,051.71 56,456.25

SCHEDULE ‘C’ Secured Loans (a) Debentures (1) NIL (12,00,000) - 12.50% Non Convertible Secured Debentures Series I of Rs. NIL (Rs. 25/-) each, redeemable at the end of 3rd, 4th, 5th and 6th year from the date of allotment i.e. January 30, 2002 in equal installments towards face value - 300.00

(2) 30,00,000 - 10.00% Non Convertible Secured Debentures Series IV of Rs. 10/- (Rs. 30/-) each, redeemable in 10 half yearly instalments of Rs. 300 lacs each commencing from six months after the date of allotment i.e. July 29, 2003 towards face value 300.00 900.00

(3) 30,00,000 - 10.00% Non Convertible Secured Debentures Series V of Rs. 20/-, (Rs. 40/-) each redeemable in 10 half yearly instalments of Rs. 300 lacs each commencing from six months after the date of allotment i.e. October 10, 2003 towards face value 600.00 1,200.00


83




(4) 1,600 - 7.50% Non Convertible Secured Debentures of Rs. 6,87,500/-(Rs. 8,12,500/-) each, redeemable in 12 half yearly instalments of 6.25%and last two of 12.50% of face value each commencing from six monthsafter one year from the date of allotment i.e. June 30, 2004 toward face value Series VII A. There is a put/call option at the end of 4th Year & 6th year from the date of allotment. 11,000.00 13,000.00

(5) 50 - 7.50% Non Convertible Secured Debentures Series VII B of Rs.

7,50,000 (8,75,000/-) each, redeemable in 12 half yearly instalments of

6.25% and last two of 12.50% of face value each commencing from six

months after one year from the date of allotment i.e. February 10,2005

toward face value. There is a put/all option at the end of 4th Year & 6th

year from the date of allotment. 375.00 437.50

(b) Foreign Currency Loans from Banks 136,350.01 63,510.27

(c) Rupee Term Loans 50,207.00 55,541.00

(d) USD 35,000,000 Zero % Convertible Bonds A - 15,319.50

198,832.01 150,208.27

Note

1) Debentures referred in (a) above are secured by first mortgage on specified vessels of the company on pari-passu basis with other

lenders and first charge on the specified immovable properties together with structure thereon.

2) Debentures referred in a (2) & a (3) above are further secured by way of Personal Guarantee from Mr. H. K. Mittal Executive Chairman

and Mr. Atul J. Agarwal Managing Director

3) Foreign Currency Loan referred in (b) above are secured by 1st Charge on specified vessels of the company on pari-passu basis with

other lenders.

4) Term Loan referred in (c) above are secured by 1st charge on the specified vessels, on pari passu basis with other lenders.

5) Working capital facilities from Schedule Banks are secured by second charge on specified vessels and 1st charge on all receivables

and other current assets of the company on pari-passu basis.

6) Bonds A are Zero coupons secured convertible bonds due in 2009. Bonds A are only mandatory convertible on and after April 2, 2007

in the event of an IPO by the company on or closure of the business on March 30, 2009. The initial conversion price of Bonds A will be at

a discount which is higher of (a) such amount so as to yield 15% IRR to the bondholders or (b) 10% discount to the IPO Price.


84




SCHEDULE ‘D’

Unsecured Loans

1) 850 (6,000) 1.50% Foreign Currency Convertible Bonds of USD 10,000

each 3,409.35 26,262.00

During the year, pursuant to notices received from Bondholders 5150

FCCBs of aggregate amount of USD 51,500,000 were converted into

37,652,887 equity shares of Re. 1/- each at a predetermined price of

Rs. 59.812 per share at a fixed exchange rate of Rs. 43.73 per USD

The balance bonds are convertible at any time up to the close of Business

on 20 April 2010 by holders into newly issued ordinary shares of Re. 1

each at agreed conversion price. The Bonds may be redeemed in whole at

the option of the Company at any time on or after 15 May 2008 and or

prior to 20 April 2010 at the accreted principal amount together with

accrued interest.

b) USD 16,000,000 - 2.50% Convertible Bonds B 6,371.20 7,003.20

Bonds B are 2.50% unsecured convertible bonds due 2012.

Bonds B are optionally convertible on and after 45 days from

the date of listing of the ordinary shares of the after 45 days from

the date of listing of the ordinary shares of the company in the SGX

or alternative stock Exchange pursuant to the IPO and on or before

the close of business on March 12,2012. the conversion price is now fixed

at SG$ 0.76 per Share.

2) Other Loans 2,500.00 -

(Amount repayable within one year Rs. 2500.00 Lacs)

12,280.55 33,265.20


85

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86



Schedule F Investments

Items Current Year Previous Year Nos Cost Nos. Cost

In Units of Mutual Funds (Quoted) Reliance Equity Fund - - 1,106,501 111.00Prudential ICICI Fusion Fund - - 5,000,000 500.00Franklin India Flexi Cap Fund - - 371,034 57.44HDFC Equity Fund - - 161,279 57.06Prudential ICICI Discovery Fund - - 287,550 55.19 Prudential ICICI Emerging Star Fund - - 488,059 106.36Reliance Equity Opportunity Fund - - 348,760 60.59Standard Chartered Ent Equity Fund - - 1,000,000 100.00 Sundaram BNP Paribas Select Midcap-Fund - - 307,499 60.80Lotus FMP - Series (Quoted) 3,000,000 300.00 3,000,000 300.00DBS Chola Hedged Equity Fund - - 10,000,000 100.00(Repurchase Value as on 31.3.08 is Rs. NIL (Previous Year Rs. 1276.84 Lacs) 300.00 1,508.10

In others (Unquoted) Vijaya Bank Bonds - - 1,000,000 1,000.00 Indian Real Opportunity Venture Capital Fund 12,500.00 125.00

125.00 1000.00(Repurchase Value of quoted investments on 31.3.08 is Rs. 458.51 Lacs (Pvevious Year Rs. 1300 Lacs)

425.00 2,508.10

Current Investments (at lower of cost and Market value) In units of Mutual Funds

Quantum Liquid Fund - - 5,151,487 515.15 Lotus India Liquid Plus Fund - Institutional Weekly Dividend - - 5,001,224 500.12J P Morgan International Investment Fund - - 11,624,413 5,183.33 Sub Total - - - 6,199.00 (Repurchase Value of quoted investments on 31.3.08 is NIL (Previous Year Rs. 6198.59 Lacs)

Grand Total 425.00 8,706.70


87




SCHEDULE ‘G’Current AssetsSundry Debtors(Unsecured, Considered Good) Debts Outstanding over Six Months 1,337.32 1,548.01 Other Debts 19,458.52 17,045.29

20,795.84 18,593.30Cash and Bank Balances Balances with Scheduled Banks In fixed Deposit Accounts 76,919.69 6,301.65 In current Accounts 8,243.11 3,173.16 In Exchange Earners Foreign Currency Account 8.57 160.76 In Dividend Accounts 39.40 39.40Bank Balance / Fixed Deposits with Foreign Banks (Refer Note B (9) of Schedule I) 93.54 27,968.75Cash in hand 10.17 2.62

85,314.48 37,646.34Loans and Advances (Unsecured Considered Good) Advances recoverable in cash or in kindor for value to be received 15,893.73 15,813.87Deposits with Government and semi Government Bodies 16.78 2,764.02Inter Corporate Deposits 689.43 413.03Other Deposits 960.52 796.97Accrued Interest on fixed deposit with banks 320.81 231.22Advance payment of tax (Net of provisions) 704.58 1,090.78Derivative Financial Instrument 23,368.91 -

41,954.77 21,109.90

SCHEDULE ‘H’ Current Liabilities Sundry Creditors For Services and expenses 10,006.76 12,597.71 Due to Micro, Small and Medium Enterprises (Previous Year - Due to Small Scale Undertaking) (Refer Note B7 of Schedule I) - -Others 6,777.65 3,849.78Acceptances 37,905.27 -Advances from Customers 796.79 -Deposits 85.26 127.75Unclaimed Dividend* 39.40 39.40Derivative Financial Instrument 27,515.21 -*(There is no amount due and outstanding to be credited to InvestorEducation and Protection Fund) 83,126.34 16,614.64

Provisions For Proposed Dividend 2,583.85 1,892.43For Tax on Dividend 439.13 321.62For Employees Retirement Benefits 48.27 32.54

3,071.25 2,246.59


88




SCHEDULE ‘J’Shipping IncomeFreight 81,549.86 68,457.89Charter Hire 59,996.57 40,166.53Dispatch and Demurrage 3,940.86 3,651.33

145,487.29 112,275.75SCHEDULE ‘K’Other Income Cargo Handling Services 2,197.80 1,477.40Dividend from Investments 406.91 624.38Rent Received 121.96 -Exchange Fluctuations 4,333.55 (733.40)Gain on Derivatives of FFA 3,079.70 -Miscellaneous Income (8.47) 224.24

10,131.45 1,592.63SCHEDULE ‘L’Ship Operating Expenses Bunker Consumed 23,010.93 14,584.78Vessel/Equipment Hire Charges 31,761.88 43,179.56Technical, Service expenses 5,598.66 3,680.91Agency, Professional and Service Charges 620.65 585.79Crew Expenses 846.18 824.32Communication Expenses (Ships) 188.86 164.95Miscellaneous Expenses (Ships) 254.68 238.90Commission 4,276.02 2,005.11Ship Insurance 1,425.98 1,209.43Port Expenses 5,478.93 4,205.39Repairs and Maintenance 7,887.30 8,469.55Stevedoring, Transport and Freight 521.55 322.40

81,871.63 79,471.09 SCHEDULE ‘M’Administrative and Other Expenses Advertisement 11.74 8.16Auditors Remuneration 68.16 33.75Conveyance, Car Hire and Traveling 229.27 144.70Communication expenses 50.53 35.37Donation 11.26 35.62Directors’ Remuneration 1,615.79 984.26Miscellaneous expenses 644.97 373.79Insurance 10.27 6.11Legal, Professional and Consultancy expenses 252.11 129.43Rents, Repairs and Maintenance 551.00 193.83Salary, Wages, Bonus etc. 1,326.31 473.21Staff Welfare, Training etc. 26.89 6.22Contribution to Provident and other funds 24.75 18.68Bad Debts and other amounts written off (Net) 54.55 63.12

4,877.58 2,506.26SCHEDULE ‘N’Finance Charge Interest on Debentures 1,108.39 1,927.28Fixed Loans 12,955.07 7,004.18Others 2,137.62 40.02

16,201.08 8,971.48Less : Interest received (TDS Rs. 60.85 Lacs Previous Year 95.12 Lacs) (1,470.57) (894.64)Less: (Profit)/Loss on Derivative Transactions (266.23) -

14,464.28 8,076.84


89

SCHEDULE 'I’

A. Basis of Consolidation

The Consolidated Financial Statements relate to Mercator

Lines Limited (the company), its subsidiary companies and

associates. The Company and its subsidiaries constitute the

Group.

a) Basis of Accounting

I. The financial statements of the subsidiary companies

used in the consolidation are drawn upto the same

reporting date as of the Company i.e. year ended 31st,

March 2008.

II. The financial statements of the Group have been

prepared in accordance with the principles and

procedures required for the preparation and

presentation of consolidated financial statements as laid

down under the Accounting Standard 21 “Consolidated

Financial Statements” as notified by the Companies

Accounting Statements Rules 2006.

b) Principles of consolidation

The Consolidated Financial Statements have been prepared

on the following basis:

I. The Financial statements of the Company and its

subsidiary companies have been combined on a line by

line basis by adding together book values of similar items

of assets, liabilities income and expenses. The intra-group

balances and intra-group transactions have been fully

eliminated.

II. Minority Interest in the net assets of consolidated

subsidiaries consists of the amount of equity attributable

to the minority shareholders at the date on which

investments are made by the company in the subsidiary

companies and further movements in their share in

equity, subsequent to the date of the investment as

stated above.

III. Consolidated Financial Statements are prepared by

applying uniform accounting policies in use at the group.

For the consolidation of the foreign subsidiaries, items of

revenue and expenses are consolidated at the mean rate

prevailing during the period. All assets and liabilities are

consolidated at the closing mean rate as on 31st March,

2008. Exchange difference resulting from the differences

due to translation of foreign currency assets and

liabilities in subsidiaries are disclosed as “Foreign

Currency Translation Adjustment”

c) The following subsidiary companies are considered in

the Consolidated Financial Statements:

Mercator International Pte. Ltd. (MIPL) Singapore

Name of the Subsidiary Company Country of

incorporation

% of holding either

directly or through

subsidiary as at

March 31, 2008

% of holding either

directly or through

subsidiary as at

March 31, 2007

100 100

Mercator Offshore Ltd. Singapore

Singapore

100 100

Mercator Oil & Gas Ltd. India 100

100

71

Mercator Lines (Singapore) Ltd. 72.35 100

SingaporeVarsha Marine Pte. Ltd. 100

100SingaporeVidya Marine Pte. Ltd. 100

100PanamaMercator Lines (Panama) Inc. 100

100SingaporeOorja Holdings Pte. Ltd. N. A.

100SingaporeOorja 1 Pte. Ltd. N. A.



100MocambiqueOorja Mocambique Minas, Limitada N. A.

50*MocambiquePt Oorja Indo Petangis Four N. A.

50*IndonesiaPt Oorja Indo Petangis Three N. A.

70IndonesiaPt Oorja Indo KGS N. A.

85Broadtec Mocambique Minas, Lda. N. A.

* Considered as subsidiaries for consolidation purposes on account of control as per principles of AS-21.


90

B .SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting

The financial statements are prepared under the historical cost

convention, on the accrual basis of accounting and in conformity

with Generally Accepted Accounting Principles in India, Accounting

Standards as notified by the Companies (Accounting Standards)

Rules, 2006 and the other relevant provisions of the Companies

Act, 1956.

2. Use of Estimates

The preparation of financial statements in conformity with

Generally Accepted Accounting Principles requires the

management to make estimates and assumptions that affect the

reported balances of assets and liabilities as of the date of the

financial statements and reported amounts of income and

expenses during the period. The management believes that the

estimates used in the preparation of financial statements are

prudent and reasonable.

3. Fixed Assets

a) Fixed assets are stated at cost less accumulated depreciation.

b) Cost includes cost of acquisition or construction including

attributable interest, duties and other incidental expenses

related to the acquisition of the asset.

c) Operating costs and other incidental costs including initial

stores and spares of newly acquired vessels till the port of first

loading are included in the cost of the respective vessels.

d) Exchange differences arising on repayment of foreign

currency loans and year end translation of foreign currency

liabilities relating to acquisition of assets from a country

outside India including substitution of one foreign currency

loan by another are from this year charged to the Profit and

Loss Account following notification of Accounting Standard 11

“Effects of changes in Foreign Exchange Rates” during the

year as against the earlier policy of adjusting the same to the

carrying cost of the respective assets.

e) Individual fixed assets costing up to Rs. 25,000 are fully written

off under the head fixed assets written off.

4. Depreciation

a) Depreciation on all the vessels is computed on Straight Line

Method so as to write off the original cost as reduced by the

expected/estimated scrap value over the balance useful life of

the vessels. If however, the rates as prescribed under the

Schedule XIV of the Companies Act, 1956, are higher; the said

higher rate is applied, which ranges from 5% to 12% of the

original cost of the vessel.

b) Depreciation on all assets other than vessels is computed on

the Written Down Value method in the manner and at the

rates prescribed under schedule XIV of the Companies Act,

1956.

c) On additions made to the existing vessels depreciation is

provided for the full year over the remaining useful life of the

ships.

d) Depreciation on furniture, fixtures and electrical fittings

installed at office premises taken on lease is provided over the

initial period of lease.

5. Capital Work in Progress

All expenditure, including advances given to contractors and

borrowings cost incurred during the vessel acquisition period, are

accumulated and shown under this head till the vessel is put to

commercial use.

6. Retirement and Disposal of Ships

a) Profits on sale of vessels are accounted for on completion of

sale thereof.

b) Assets which are retired from active use and are held for

disposal are stated at the lower of their net book value or net

releasable value.

7. Inventories

Bunker and Lubes on vessels are valued at lower of cost and net

Realisable value ascertained on first in first out basis.

8. Investments

a) Investments are classified into Long Term and Current

Investments.

b) Long Term Investments are stated at cost of acquisition and

related expenses. Provision for diminution, if any, in the value

of such investments is made to recognise a decline, other

than of a temporary nature.

c) Current Investments are stated at cost of acquisition

including incidental/related expenses or at fair value as at

31st March 2008, whichever is less and the resultant decline, if

any, is charged to revenue.

d) Investment in shares of subsidiaries outside India is stated at

cost by converting at the rate of exchange at the time of their

acquisition.

9. Incomplete Voyages

Incomplete voyages represent freight received and direct

operating expenses on voyages which are not complete as at the

Balance sheet date.

10. Borrowing Costs

Borrowing costs incurred for the year for acquisition of vessels are

capitalized till first loading of cargo, only if the time gap between

date of Memorandum of Agreement and “Date when vessel is

ready for use” is more than three months.


91

11. Revenue Recognition

a) Income on account of freight earnings is recognised in all

cases where loading of the cargo is completed before the

close of the year. All corresponding direct expenses are also

provided.

b) Where loading of the cargo is not completed before the close

of the year, revenue is not recognised and the corresponding

expenses are carried forward to the next accounting year.

c) Income from charter hire and demurrage are recognised on

accrual basis.

d) Income from services is accounted on accrual basis as per the

terms of the relevant agreement.

e) Dividend on investments is recognised when the right to

receive the same is established.

12. Foreign Exchange Transactions

a) Monetary Current assets and liabilities denominated in

foreign currency outstanding at the end of the year are valued

at the rates prevalent on that date.

b) Differences in translation of monetary assets and liabilities

and realised gains and losses on foreign currency

transactions are recognised in the Profit and Loss Account.

c) Contracts in the nature of foreign currency swaps, are

converted at the exchange rate prevailing as on 31st March

2008 and the profits or losses thereon are charged to the

Profit and Loss account.

d) Differences on account of swap contracts for interest payable

in foreign currency are accounted on accrual basis and the

profit or loss thereon are charged to the Profit and Loss

account.

13. Employees Benefits

a) Short – term employee benefits

All employee benefits payable wholly within twelve months of

rendering the service are classified as short term employee

benefits. Benefits such as salaries, wages, performance

incentives, etc. are recognised at actual amounts due in the

period in which the employee renders the related service.

b) Post – employment benefits

i. Defined Contribution Plans

Payments made to defined contribution plans such as

Provident Fund are charged as an expense as they fall

due.

ii. Defined Benefit Plans

The cost of providing benefit i.e. gratuity is determined

using the Projected Unit Credit Method, with actuarial

valuation carried out as at the balance sheet date.

Actuarial gains and losses are recognised immediately in

the Profit and Loss Account.

c) Other Long – term employee benefits

Other Long – term employee benefit viz. leave encashment is

recognised as an expense in the profit and loss account as

and when it accrues. The company determines the liability

using the Projected Unit Credit Method, with actuarial

valuation carried out as at the balance sheet date. The

Actuarial gains and losses in respect of such benefit are

charged to the profit and loss account.

14. Lease Accounting

a) In respect of operating lease agreements entered into by the

Company as a lessee, the lease payments are recognised as

expense in the profit and loss account over the lease term.

b) In respect of operating lease agreement entered into by the

Company as a lessor, the initial direct costs are recognised as

expenses in the year in which they are incurred.

15. Earning per share:

The company reports basic and diluted earnings per share (EPS) in

accordance with Accounting Standard–20. The Basic EPS has been

computed by dividing the income available to equity shareholders

by the weighted average number of equity shares outstanding

during the accounting year. The diluted EPS have been computed

using the weighted average number of equity shares and dilutive

potential equity shares outstanding at the end of the year.

16. Provision for Taxation :

a) The company has opted for the Tonnage Tax scheme and

provision for tax has been accordingly made under the

relevant provisions of the Income Tax Act, 1961.

b) Tax on incomes on which the Tonnage Tax is not applicable is

provided as per the other provisions of the Income Tax Act,

1961.

c) In case of subsidiaries companies incorporated in Singapore,

no provision is made for taxation on qualifying shipping

income derived which is exempt form taxation under section

13 A of the Singapore Income Tax Act and the Singapore

Approved International shipping enterprise Tax Incentive.

d) Deferred tax resulting from timing differences, if any, between

book and tax profits for income other than that covered

under Tonnage Tax scheme is accounted for under the liability

method, at the current rate of tax, to the extent that the

timing differences are expected to reverse in future.

17. Impairment of assets

The Company reviews the carrying values of tangible and

intangible assets for any possible impairment at each balance

sheet date. Impairment loss, if any, is recognized in the year in

which impairment takes place.


92

18. Provisions and Contingent Liabilities:

Provisions are recognized in the accounts in respect of present

probable obligations, the amount of which can be reliably

estimated. Contingent Liabilities are disclosed in respect of

possible obligations that arise from past events but their existence

is confirmed by the occurrence or non occurrence of one or more

uncertain future events not wholly within the control of the

Company.

19. Derivative instruments and hedge accounting

The Group uses foreign currency forward contracts; forward

freight agreements, options on forward freight agreements and

currency options to hedge its risks associated with foreign

currency fluctuations and fluctuations in freight rates relating to

certain firm commitments and forecasted transactions. The

Company has designated these hedging instruments as cash flow

hedges or economic hedges applying the recognition and

measurement principles set out in the Accounting Standard 30

“Financial Instruments : Recognition and Measurement” (AS – 30).

The use of hedging instruments is governed by the Company's

policies approved by the board of directors, which provide

principles on the use of such financial derivatives consistent with

the Company's risk management strategy.

Derivatives are initially recognised at fair value at the dates the

derivative contracts are entered into and are subsequently re-

measured to their fair values at each balance sheet date.

The resulting gain or loss is recognised in the profit and loss

statement immediately unless the derivative is designated and

effective as a hedging instrument, in which event the timing of the

recognition in the profit and loss statement depends on the

nature of the hedge relationship.

Hedge accounting

Hedges which include derivatives, embedded derivatives and non-

derivatives in respect of price risk, are designated as either hedges

of fair value of recognised assets or liabilities or fair commitments

(fair value hedges) or hedges of highly probable forecast

transactions (cash flow hedges).

Some forward freight agreements that the Group has entered into

fall within the definition of fair value hedge. Some other forward

freight agreements fall within the definition of cash flow hedge as

described below.

At the inception of the hedge relationship, the relationship

between the hedging instrument and hedged item is determined,

along with its risk management objectives and the strategy for

undertaking the hedge. At the inception of the hedge and on a

quarterly basis, the effectiveness of the hedging relationship in

offsetting changes in fair values or cash flows of the hedged item is

determined.

Fair value hedge

Changes in the fair value of derivatives that are designated and

qualify as fair value hedges will be recorded in the profit and loss

statement immediately, together with any changes in the fair

value of the hedged item that is attributable to the hedged risk.

Hedge accounting will be discontinued when the Group revokes

the hedging relationship, the hedging instrument expires or is

sold, terminated, or exercised, or no longer qualifies for hedge

accounting. The adjustment to the carrying amount of the hedged

item arising from the hedged risk will be amortised to the profit

and loss statement from that date.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that

are designated as and qualify as cash flow hedges are deferred in

equity. The gain or loss relating to the ineffective portion of the

hedge, if any, is recognised immediately in the profit and loss

statement.

Amounts deferred in equity will be recycled in the profit or loss in

the periods when the hedged item is recognised in the profit and

loss statement. However, when the forecast transaction that is

hedged results in the recognition of a non-financial asset or a non-

financial liability, the gains and losses previously deferred in equity

will be transferred from equity and included in the initial

measurement of the cost of the asset or liability.

Hedge accounting will be discontinued when the Group revokes

the hedging relationship, the hedging instrument expires or is

sold, terminated, or exercised, or no longer qualifies for hedge

accounting. Any cumulative gain or loss deferred in equity at that

time will remain in equity and will be recognised when the forecast

transaction is ultimately recognised in the profit and loss

statement. When a forecast transaction is no longer expected to

occur, the cumulative gain or loss that had been deferred in equity

will be recognised immediately in the profit and loss statement.


93

2. Estimated amount of contracts remaining to be

executed on capital accounts and not provided for (net

of advances) as at March 31, 2008 Rs. 14,928.51 Lacs (Rs.

NIL).

Amount Rs in Lacs


the Company for guarantees

for guarantees obtained

the bank

Name Current Year

1,456.54

Previous Year


by the company on behalf

of business associates

19,400.00

TOTAL 20,856.54 14,244.50

B] NOTES TO THE ACCOUNTS

1. Contingent Liabilities not provided for

Amount Rs in Lacs

Executive Chairman and

Managing Directors

3. Remuneration to Holding Company Directors

Current Year Previous Year

Salary 96.00 48.00

Perquisites 17.29 21.83

Commission 1,492.50

1,615.79

728.23

805.56

Commission 10.00 7.50

Non-Executive Directors

Total

4. Disclosures in accordance with Accounting Standard

(AS) -15 on “Employee Benefits”:

AS – 15 (Revised 2005) on “Employee Benefits” has been

adopted by the Company effective from April 1, 2007. The

disclosures are as required by the said AS are given hereunder.

(A) Defined Contribution Plans:

The Company has recognized the following amounts in the Profit

and Loss Account for the year:

Amount Rs in Lacs

For the year ended

March 31, 2008

(I) Contribution to Employees'

Provident Fund

(ii) Contribution to Employees' Family

Pension Fund

22.02

NIL

(B) Defined Benefit Plans:

a. Changes in the Present Value of Obligation

b. Expenses recognized in the Profit and Loss Account

Amount Rs in Lacs


Gratuity Leave En-

cashment

Total

(a) Present Value of

Obligation as at

April 1, 2007

(i) Present Value of

Obligation as at

March 31, 2008

17.91

30.89

1.43

NIL

NIL

NIL

13.67

14.64

17.38

1.17

NIL

NIL

NIL

8.87

32.55

48.27

2.6

NIL

NIL

NIL

22.54

(b) Interest cost

(c) Past Service Cost

(d) Current Service Cost

0.33

1.78

1.58

5.72

1.91

7.5

(g) Benefits Paid

(h) Actuarial (Gain) / Loss

(e) Curtailment Cost /

(Credit)

(f) Settlement Cost /

(Credit)

Amount Rs in Lacs


Gratuity Leave En-

cashment

Total

a) Current Service Cost

(b) Past Service Cost

(c) Interest cost

(d) Curtailment Cost /

(Credit)

(e) Settlement Cost /

(Credit)

(f) Net Actuarial (Gain) /

Loss

(g) Employees'

Contribution

(h) Total Expenses

recognized in Profit

and Loss A/c

13.67

NIL

1.43

NIL

NIL

1.78

NIL

13.32

8.87

NIL

1.17

NIL

NIL

5.72

NIL

4.32

22.54

NIL

2.6

NIL

NIL

7.5

NIL

17.64

(iii) Contribution to Employees'

Superannuation Fund

Total 22.02

NIL

Amount Rs in Lacs

For the year ended

March 31, 2008


94

c. Following are the Principal Actuarial Assumptions used as

at the balance sheet date:

iv) Key Management Personnel

a) H. K. Mittal

b) A. J. Agarwal

c) Shalabh Mittal

v) Relative of Key Management Personnel

a) Adip Mittal

b) Shruti Mittal

B) Details of the transaction with above parties

C) Details in respect of material transactions with parties

referred to in item A of the above

The estimates of future salary increases considered in actuarial

valuation takes into account inflation, seniority, promotion and

other relevant factors.

(iv) This being the first year of implementation of AS-15 (Revised)

previous year figures have not been given.

5. Segment Reporting

As the company principal business activities fall within the single

segment viz Shipping and related activities there is no reportable

segment pursuant to Accounting Standard 17 'Segment

Reporting; issued by Institute of Chartered Accountants of India

are not applicable.

6. Related Party Disclosures

i) List of Related Parties (Refer Schedule 'I' (A) (c)

ii) Companies in which the directors/relatives of directors

have substantial interest

a) MLL Logistics Private Limited

b) Mercator Petroleum Private. Limited (MPPL) – INDIA

c) Mercator Mechmarine Limited

d) Mercator Healthcare Limited

e) Ankur Fertilizers Private Limited

f) Rishi Holding Private Limited

g) AHM Investments Private Limited.

iii) Directors of the Company

a) H. K. Mittal

b) A. J. Agarwal

c) Manohar Bidaye

d) Anil Khanna

e) M. G. Ramakrishna

f) K. R. Bharat (w.e.f. 30th july,2007)

Amount Rs in Lacs

Particulars Gratuity Leave

Encashment

8%

7%

3%

LIC (1994-96)

Ultimate

8%

7%

3%

LIC (1994-96)

Ultimate

Discount Rate

Salary Escalation Rate-

Management Staff

Turnover Rate

Mortality Table

(a)

(b)

(c)

(d)

Amount Rs in Lacs

Name of the Transaction Companies in which the

directors / relatives of

directors have substantial

interest

Current Yr Previous Yr

Services Rendered 232.84

Expenses recharged by

other companies

Expenses Charged by

the company

Finance Provided

(Including Loans & Equity

Contributions)

Loans Given during the Year

Outstanding balances as

on 31.03.2008

Loans, Advances and

Receivables

Sundry Debtors

Deposit

Deposit given during

the year

Balance as on 31/03/2008

24.24

0.66

9.00

268.29

1,170.25

500.00

505.00

1,376.99

19.44

-

1.64

770.75

1,256.22

-

15.00

Amount Rs in Lacs




interest


Services Rendered

232.84

232.84

1,376.99

1,376.99


Total


95

D) Remuneration Paid to Key Management Personnel

1,658.78 (969.17)

E) Commission paid to Non – Executive Directors

10.00 (7.50)

F) Remuneration to Relative of Key Management

Personnel

6.04 (-)

7. Disclosure in respect of operating lease (as Lessee):

Amount Rs in Lacs




interest


Expenses recharged by

other companies

Ankur Fertilizers Private

Limited

Total

Expenses Charged by

the company


Total

24.24

24.24

0.66

0.66

17.64

17.64

-

-

Finance Provided

(Including Loans & Equity

Contributions)

Loans

Loans Given during the Year


Total

9.00

9.00

1.64

1.64

Outstanding balances as

on 31.03.2008

Loans ,Advances and

Receivables

Advances


(Advance)

Total

Sundry Debtors


Total

Deposit

Deposit given during

the year


Total

Balance as on 31/03/2008

Rishi Holding Private Limited


Total

268.13 770.75

770.75

1,256.22

1,256.22

-

-

-

15.00

15.00

268.13

1,170.25

1,170.25

500.00

500.00

-

500.00

500.00

Amount Rs in Lacs

Year Ended

31st March,

2008

Year ended

31st March,

2007

(a)

-

-

-

-

-

-

Operating Leases

Disclosures in respect of

cancelable agreements

for office and residential

premises taken on lease

(I) Lease payments

recognized in the

Profit and Loss

Account

(ii) Significant leasing

arrangements

The Company has

given refundable

interest free security

deposits under the

agreements.

The lease agreements

are for a period of

sixty months.

These agreements

also provided for

increase in rent.

These agreements

are non cancellable

by both the parties

except in certain

exceptional

circumstances.

(iii)Future minimum

lease payments

under non-

cancellable

agreements

Not later than one

year

Later than one year

and not later than

five years


375.62

510.99

1979.04

NIL

118.01

314.71

1,715.14

NIL


96

8. Disclosure in respect of operating lease (as Lessor):

Amount Rs in Lacs

Year Ended

31st March,

2008

Year ended

31st March,

2007

(a)

-

-

-

-

-

-

Operating Leases

Disclosures in respect of

cancellable agreements

for office and residential

premises taken on lease

(I) Lease payments

recognized in the

Profit and Loss

Account

(ii) Significant leasing

arrangements

The Company has

given refundable

interest free security

deposits under the

agreements.

The lease

agreements are for

a period of ninety

months.

These agreements

are non cancelable by

both the parties for

12 months except in

certain exceptional

circumstances.

(iii)Future minimum

lease payments

under non-

cancellable

agreements

Not later than one

year

Later than one year

and not later than

five years


113.87

NIL

113.87

113.87

NIL

NIL

NIL

NIL

NIL

NIL

Amount Rs in Lacs

Year Ended

31st March,

2008


31st March,

2007

Number of Shares used in

computing Earning Per Share

-Basic

-Diluted

Earning per share (equity

shares of face value Re 1/-)

-Basic (in Rs.)

-Diluted (in Rs.)

224,225,062

236,414,299

14.45

13.73

216,634,232

237,909,951

3.14

3.04

Amount Rs in Lacs

As on 31st

March 2008

Contract Foreign Forwards

As on 31st

March 2007

Total No. of Contracts

Value of Contracts

(In US$ Millions)

22

341.33

NA

NA

10. Derivative Instruments

a) The Company uses foreign currency forward contracts to

hedge its risks associated with foreign currency fluctuations

relating to certain firm commitments and forecasted

transactions. The use of foreign currency forward contracts is

governed by the Company's strategy approved by the Board

of Directors, which provide principles on the use of such

forward contracts consistent with the Company's Risk

Management Policy. The Company does not use forward

contracts for speculative purposes.

Outstanding Forward Exchange Contracts entered into by

the Company:-

Amount Rs in Lacs

Current Year Previous Year

Total No. of Contract

Loan Value US Dollar (Million)

Loan Value JPY (Million)

(a) Interest Rate Swap

Contracts

(b) Currency Swap

Contracts

NIL

NIL

NIL

3

4.54

5717.45

Total No. of Contract

Loan Value

NIL

NIL

1

4.54

(b) The recognition and measurement principles for the cash

flow hedges as set out in

AS-30 has been adopted by the company for 2007-08. Due to this

the profit for the year is higher by Rs. 1,555.01Lacs.

9. Earning Per Share

Amount Rs in Lacs

Year Ended

31st March,

2008


31st March,

2007

Net Profit after Tax and

preference dividend including

tax thereon

-Basic

-Diluted

32,405.63

32,464.36

6,797.65

7,238.05


97

11. Foreign Currency Exposures

The year end exposure in a currency other than the functional

currency of the Company that were not hedged by a derivative

instrument or otherwise are given below:

12. Previous years figures have been regrouped / rearranged wherever necessary.

2006-072007-08

Rs. Lacs Fx.Million Rs. Lacs Fx.Million

Account Receivable

Loan & Advances

Accounts Payable/Acceptance

(including capital commitments made but not provided for)

Borrowings

968.95

43,017.97

97,423.87

32,221.16

U$ 2.44

$ 108.04

U$ 746.04

S$ 131.00

J¥ 325.00

U$ 80.92

2,272.14

29,813.09

72,981.41

62,416.02

U$ 5.19

U$ 68.11

U$ 88.13

S$ 131.00

U$ 142.6

Dated:

Mumbai

14th May 2008


H.K. Mittal

Executive Chairman

A.J. Agarwal

Managing Director

Anil Khanna

Director

M. G. Ramkrishna

Director


98

FINANCIAL SUMMARY

120,000

100,000

80,000

60,000

40,000

20,000

-

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

140,000

160,000

24,223

56,065

82,624

112,275

145,487Shipping Income

Continual Growth!

Net Profit

Year Wise Cash!

Dividend

Benefitting Shareholders Consistently!

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

2400

2600

2200

2000

1800

1600

1400

1200

1000

800

600

400

200

0

340

1,613

1,891

2,214

3,023

2800

3000

3200

-

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

5008.63

17443.5419803.02

13493.43

40033.19

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000


99

Net Worth

Building Confidence!

Per Share Data

Raising The Bar!

Fixed Assets And Net Worth

Creating Value For The Long Term!

-

20,283

87,316

147,831

199,032

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

320,000

280,000

240,000

200,000

160,000

120,000

80,000

40,000

359,298360,000

380,000

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

80,000

0

60,000

20,000

40,000

100,000

120,000

140,000

160,000

180,000

62,836

162.068

54,097

34,336

9,037

Financial Year

04-05 05-06 06-07 07-080.00

Ru

pees

10.00

20.00

30.00

40.00

50.00

60.00

70.00

11.13

16.60

Basic Earnings (Rs.) Cash Earnings (Rs.) Book Value (Rs.)

03-04

4.296

9.75

3.33

10.42

15.41

26.21

6.04

12.62

33.20

14.45

30.33

69


Financial Year

Tonnage viz-a-vis!

100

FINANCIAL PERFORMANCE RATIO

Improving Efficiencies!

Balance Sheet Ratio

Leveraging For Future!

Year 04-05 05-06

Operational Profit Turnover (%)

Net Profit/Total Turnover (%)

RONW (PAT/Shareholders fund (%)

39.54

30.94

50.80

43.30

23.48

36.1

28.26

11.81

21.46

06-07 07-08

45.41

25.19

24.70

03-04

30.86

20.66

55.42

Debt Equity Ratio

Current Ratio

Year

0.77

1.74

07-08

2.39

3.85

06-07

1.53

1.83

1.12

2.12

1.92

7.04

04-0503-04 05-06

03-04 04-05 05-06 06-07 07-08

Financial Year

Rs.

In

Lacs

0

461,657

1,031,400

1,338,621

2,029,908

2,347,130

500,000

1,000,000

2,000,000

3,000,000

461,657

1,031,400

1,338,6211,369,887

1,656,664

Owned Chartered

660,021

687,174


101

Tankers - 53%

Dry Bulk - 45%

Coal Handling - 1% Dredging - 1%

TURNOVER BREAK-UP

Adding Segments!

COMPOSITION OF FLEET (As on May 14, 2008)

Rationalising The Fleet!

VLCC - 24%

Suezmax - 6%

Aframax - 26%

Panamax - 27%

Chemical Tanker - 1%

Kamsarmax - 11% Dredgers - 1%

MR Tankers - 4%


102

Consolidated Balance Sheet as at March 31, 2008

As at Particular 31, March 2008 31, March 2007

As at

SOURCES OF FUNDS Shareholders Funds Share Capital 5.90 13.56Warrants against Share Capital 4.19 1.12Reserves and Surplus 396.97 129.87Minority Interest 38.89 -

445.94 144.55Loan Funds Secured Loans 499.39 345.54Unsecured Loans 30.84 76.52

530.23 422.07

Total 976.17 566.62

APPLICATION OF FUNDS Fixed Assets Gross Block 789.14 435.81Depreciation (88.63) (47.27)Net Block 700.51 388.54Capital work in progress 113.28 22.05

813.79 410.59

Investments 1.07 20.03

Current Assets, Loans & AdvancesInventories 6.79 5.75Sundry Debtors 52.23 42.77Cash and Bank Balances 214.28 86.60Loans and Advances 105.37 48.56

378.68 183.69

Current Liabilites and ProvisionsCurrent Liabilities 208.78 38.22Provisions 7.71 5.17Incomplete Voyages (Net) 0.86 4.30

217.36 47.69

Net Current Assets 161.32 136.00

Total 976.17 566.62

Rate of conversion 1 USD = Rupees 39.815 43.47

(Amount in USD Million)


AUDIT COMMITTEE

SHAREHOLDERS’ GRIEVANCE COMMITTEE

REMUNERATION CUM SELECTION COMMITTEE

EXPANSION COMMITTEE

AUDITORS

BANKERS

DEBENTURE AND SECURITY TRUSTEE

Anil Khanna Chairman

Manohar Bidaye Member

M.G. Ramkrishna Member

Manohar Bidaye Chairman

Anil Khanna Member

Atul J. Agarwal Member

Manohar Bidaye Chairman

Anil Khanna Member

M. G. Ramkrishna Member

H. K. Mittal Chairman

Atul J. Agarwal Member

Anil Khanna Member

K. R. Bharat Member

M/s. Contractor, Nayak & Krishnadwala

State Bank of India, ICICI Bank, Axis Bank, HDFC Bank

Axis Bank Limited

REGISTERED OFFICE

REGISTRAR & TRANSFER AGENTS

3rd Floor, Mittal Tower, B-Wing,

Nariman Point, Mumbai - 400 021

Tel: +91-22-66373333

Fax: +91-22-66373344

Website: www.mercator.in

Email: [email protected]

Intime Specturm Registry Ltd.

C-13, Pannalal Silk Mills Compound,

LBS Road, Bhandup West,

Mumbai - 400078.

Tel: 022-25963838

Fax: 022 25946969

e-mail: [email protected]


103

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH MARCH 31, 2008

As at As atParticulars 31, March 2008 31, March 2007

INCOMEShipping Income 365.41 258.28Other Income 25.46 3.66Profit on Sale of Investments (Net) 0.82 0.21Profit on Sale of Assets (Net) 7.42 0.72

Total 399.10 262.87

EXPENSESShip Operating Expenses 205.63 182.82Administrative and Other Expenses 12.26 5.77Finance Charges 36.33 18.58Depreciation 42.07 23.88

Total 296.29 231.04

Profit Before Taxes 102.81 31.83Provision for TaxationCurrent (2.21) (0.75)Deferred Tax - -Fringe Benefit Tax (0.05) (0.03)Profit After Taxes 100.55 31.04

Minority Interest (7.51) (0.02)Prior Year Expenses / Income (Net) (10.42) (0.10)Short Provision for Tax of earlier Year (0.33) -Balance brought forward from last year 59.31 34.73

Available for Appropriations 141.60 65.66Less/(Add): AppropriationsTransfer to General Reserve 4.45 1.73 Transfer to Tonnage Tax Reserve 8.29 3.68Dividend on Preference Shares 0.77 0.74Dividend On Equity Shares (for Previous Year) 0.20Proposed Dividend on Equity Shares 6.49 4.35Tax on Dividend 1.27 0.84Balance Carried to Balance Sheet 120.14 54.32Earning Per Share (Equity Share of Re. 1/- Each) Basic (USD) 0.36 0.14Diluted (USD) 0.34 0.13

Rate of conversion 1 USD = Rupees 39.815 43.47

(Amount in USD Million)

Documents

Mercator Reort All Pages without pgnationmercator.in/investors/AnnualReport/AnnualReport2007-08.pdf · M. A., L. L. B. & CAIIB, has over 35 years of experience in handling treasury,