It gives me immense pleasure to present to you the annual report for FY18. Despite theoperational challenges in a few business segments & the structural shifts in ouroperating environments our company has remained steadfast in its commitment to businessexcellence by staying true to our core values of doing things differently and honouringcommitments with great perseverance.
Our journey began in 1983 as a private shipping company and I seek great delight inwitnessing its transformation into an energy focused conglomerate. Over the last fewyears our company has faced certain headwinds on its path to success. I believehowever that the next few years will be truly remarkable for Mercator marked by improvedfinancials stronger corporate governance and better returns on capital. I am excitedlylooking forward to this very fulfilling journey of transformation and am thankful for yourcontinued support..
FY18 proved to be a year of deep introspection on my part and the consolidation of eachsegment of our business. We witnessed a few operational challenges in our business andstructural shifts in our operating environment in the period between FY16 and FY18. Inline with the changing business environment we decided to strategically modify ourbusiness model such that FY19 and FY20 become years of superior growth.
A key achievement in FY18 was the swift progress in developing our oil & gassegment for which we had declared commercially only in August 2017. The Field DevelopmentPlans (FDP) for 23 Miliion barrels of oil in the two oil fields in the Cambay Basin JyotiI & II were submitted and approved. We achieved trial production in the two fields atthe end of FY18 and have since received the mining lease to commence commercialproduction. Jyoti I & II will produce high-quality light-weight crude which will sellat a premium. We aim to close FY19 at a production rate of ~5500 barrels of oil per day.This segment is expected to be our largest growth driver in future with ~35% of FY20'sEBITDA contribution coming from oil & gas. With the MoU with Indian Oil CorporationLimited (IOCL) for crude oil sales already in place we are projecting a production of ~2Miliion barrels of oil by FY20.
Our coal business witnessed a roadblock in the first half of FY18 which led totemporary disruptions in operations. We had to replace the entire management team at ourIndonesian headquarters due to reports of business irregularities and misappropriations.We halted mining activities towards the middle of the 3rd quarter to ensure acomplete cleanup. However we are were able to resume operations within a short period andfully ramped up production
by the end of Q4. I am happy to report that we are currently achieving all-time highproduction and dispatch levels.
We expect FY19 coal production at close to 2 Million tonnes with a 60:40 split betweenthe 3700/3800 Kcal and the 4200 Kcal coal. By FY20 the higher quality of coal reservesi.e. the 4200 Kcal will have a 50% share in the total production bringing betterrealisations for the business. By end of FY19 we also expect to increase volumes ofdispatch from third-party customers using our coal infrastructure and jetty.
Dredging continues to be a key focus area for us we consciously moved towards biddingfor higher margin contracts in the dredging segment during FY18. We have a large orderpipeline of over ff156 Crore for FY19 and continue to maintain our bidding success rate ofmore than 50%.
The recent announcements by the Government of India with regards to National Waterwaysdevelopment building of new ports and dredging of key rivers like the Ganga augurs wellfor the dredging sector in India. In our quest for higher margin and long-term contractswe are also now bidding for contracts in other Asian countries.
In the shipping business we monetised our aged fleet during the year. While all ourvessels except the VLCC will remain 100% operational FY19 is still expected to be aslightly tough year for the shipping sector due to pressure on global charter and VLCCrates. By FY20 we expect the demand-supply gap in the global tanker industry to narrowsignificantly which will aid the rebound in VLCC charter rates and subsequently infusenew life into our shipping business.
After several years of considerable strategic efforts we are now a stronger welldiversified and a more productive organisation. The results of our efforts will be seenfrom H2 of FY19 onwards. We believe that FY20 will be the year of superior growth withtargeted revenues of ^1450-^1550 Crore EBITDA of ff600-ff630 Crore and EBITDA marginsof more than 35%. This growth will be supported by full stream operations of the oil andgas segment and scaling of our coal business.
I look forward to working with our committed and empowered management team andsupporting them as we pursue continued growth. We are focussed on high standards ofcorporate governance and creating meaningful sustainable value for our shareholders. Ilook forward to your continued support.
Shalabh Mittal Chief Executive Officer