Sub: Outcome of the Board Meeting of the Company held on Tuesday, September 15, 2020 for Approval of Un-audited Financial Results (Standalone and Consolidated) for the quarter ended June 30, 2020
This is to inform you that the Board of Directors of the Company at its meeting held on Tuesday, September 15, 2020, has inter-alia, approved the following:
Un-auditedStandalone and Consolidated Financial Results for the quarter ended June 30, 2020;
Appointment of Mr. Subhash Kishan Kandrapu as the Secretarial Auditors of the Company for the FY 2020-21.
Appointment of J. D. Jhaveri & Associates, Chartered Accountants as the Internal Auditors of the Company for the FY 2020-21.
Pursuant to Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), we are enclosing the Unaudited Financial Results (Standalone and Consolidated) of the Company for the quarter ended June 30, 2020, duly approved by the Board of Directors of the Company, at its meeting held today. Also enclosed, please find a copy of the Limited Review Report of the Statutory Auditors of the Company, as required under the said Regulations.
The meeting of the Board of Directors commenced at 1.10 p.m. and concluded at 7.50 p.m.
We request you to take the above on record and acknowledge receipt.
For MERCATOR LIMITED
CHIEF FINANCIAL OFFICER
Encl: as above
NOTES FORMING PART OF STANDALONE FINANCIAL RESULTS FOR THE QUARTER ENDED
JUNE 30, 2020
The unaudited standalone financial results of Mercator Limited (hereinafter referred as "the Company") for the quarter ended June 30, 2020 have been reviewed by the Audit Committee and approved at the meeting of the Board of Directors held on September 15, 2020. The same has been subjected to limited review by Statutory Auditors of the Company.
The financial results have been prepared in accordance with the recognition and measurement principles laid down in the applicable Indian Accounting Standards ("IND AS") prescribed under Section 133 of the Companies Act, 2013, read with the relevant rules thereunder and in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI Circular no. CIR/CFD/FAC/62/2016 dated July 5, 2016.
The Company has continued to follow the same accounting policies in preparation of financial results for the quarter ended June 30, 2020 as followed in the previous financial year ended March 31, 2020.
The Auditors have expressed an Adverse Conclusion on these Financial Results basis the following:
The financial results of the Company have been prepared on a going concern basis by the management. The Company has incurred significant losses and its net worth is substantially eroded in addition to delay, defaults with lenders and downgrading in credit rating of the Company. The current liabilities substantially exceed the current assets and large sums of money receivable are in dispute, which is not readily realisable. Further, few operational creditors and financial creditors have filed petition under Insolvency and Bankruptcy Code (IBC) 2016 respectively in National Company Law Tribunal (NCLT) against the Company. In case of one of the financial creditors, NCLT has kept order reserved after hearing. The Company had since disposed-off the substantial part of the Property, Plant and Equipment (PPE). As on June 30, 2020 the Company has only four non-operating dredgers of which three dredgers have been arrested by operational creditors and one is beached at the New Mangalore Port Trust (NMPT), for which the port authorities have issued public notice and the process of e-auctioning is currently progressing.
The management is of the view that they are making best efforts to achieve favourable order in ongoing litigations in order to protect the value of its assets and is making efforts to revive operations. Further, the Company believes that on the basis of existing business of capex light dredging at standalone level, its running coal business and proven oil block at the subsidiaries level and claims receivable for Rs.1,618 crore at the group level provides a reasonable sufficient opportunity for the repayment of loans from lenders and provide required resources for the development of business opportunities for the revival. The Company has monetized its fleet of ships and is in the process of concluding the monetization of its fleet of remaining 4 dredgers. Further, the Company had impaired several of its assets to fair value which is equivalent to net realizable value basis the transactions concluded and market estimates.
In view of these efforts, the management feels that the going concern assumption considered for the preparation of financial results has not been vitiated.
The Company had impaired investment amounting to USD 55.65 million in Non-Cumulative Redeemable Preference Shares (NCRPS) of its wholly owned subsidiary Mercator International Pte Ltd, Singapore (MIPL) in previous year. The step-down Subsidiary Company has carried out valuation of coal business taking cut-off date December 31, 2019 for the purpose local reporting requirement and the same has been considered for financial reporting as on June 30, 2020 as well. The valuation may get impacted due to variable cost escalation, reduction in absolute value of coal infrastructure service fees of major customer, terminal value assumption, exchange rate variation, assumption of automatic renewal of license etc. during this tenure.
Current Tax Assets (net) as on June 30, 2020 includes Rs. 69.19 crore which has not been settled due to ongoing tax assessment for the various Assessment Years from AY 2003-04 to AY 2015-16 against which net tax demand of Rs.63.18 crore has been received and contested by the Company. The management is taking steps to resolve the cases with the income tax department.
Mercator Oil & Gas Limited ('MOGL'), a subsidiary of the Company was engaged in EPC project awarded by ONGC for conversion of their Mobile Offshore Drilling Unit (MODU) 'Sagar Samrat' into a Mobile Offshore Production Unit (MOPU). On September 25, 2018, MOGL received a notice of termination from ONGC for Sagar Samrat Conversion Project after completing almost 96% of the project work. MOGL has since initiated arbitration proceedings against ONGC and appointed its Arbitrator and a Tribunal was formed. The proceedings are underway. In addition to above, based on the order of Hon'ble Bombay High Court dated July 29, 2019, ONGC had invoked Bank Guarantee amounting to Rs. 142.19 crore which had been accounted in the books of the accounts of MOGL in the quarter ended June 30, 2019. Considering involvement of time in the arbitration proceedings, being conservative, the Company has impaired in the quarter ended June 30, 2020, an additional amount of Rs. 1.38 crore towards accrued interest on loan given to MOGL and Rs. 0.41 crore towards other receivables.
In the view of the management and based on legal advice, a claim of Rs. 1,309.34 crore (USD
Mn) has been made by the subsidiary company on ONGC and any impact of the settlement will be known only after completion of arbitration proceedings.
During the quarter ended June 30, 2020, the Company has provided additional impairment of Rs. 1.07 crore towards accrued interest on loan to Mercator Petroleum Limited (MPL), Rs.
crore towards interest accrued on 6% optionally convertible debentures issued by MPL and Rs.0.19 crore towards other receivables, on evaluating following criteria -
In October, 2019, MPL has received notice of termination from the Ministry of Petroleum and Natural Gas (MOPNG) in compliance with Production Sharing Contract (PSC) for its non-operative oil Block (CB-3) and also has demanded costs and other dues to be determined as per terms and conditions of PSC. The management of MPL and the Company is confident of defending the amounts claimed by Directorate General of Hydrocarbon (DGH). In event of rejection of subsidiary's contention, estimated financial impact on the Company would be approx. Rs 35.80 crore.
The Board of Director has approved strategic sale of participating interest in oil block CB- ONN-205/9(CB-9) of MPL. The subsidiary company has executed Farm in Farm Out agreement dated December 26, 2019 with a prospective buyer at a sale price of Rs. 252
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