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Mercator Ltd.

BSE: 526235 Sector: Infrastructure
NSE: MERCATOR ISIN Code: INE934B01028
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Mercator Ltd. (MERCATOR) - Director Report

Company director report

To

The Members

Mercator Limited

We hereby present the 37th (Thirty-Seventh) Annual Report of yourCompany for the year ended on March 312021.

In accordance with an application made by ICICI Bank FinancialCreditor of the Company the Hon'ble National Company Law Tribunal Mumbai Bench vide itsorder dated February 08 2021("Order") in Company Petition No. (IB) 4404/MB/2019("Insolvency Commencement Order") in the matter of ICICI Bank Ltd V. MercatorLtd & Anr. has initiated Corporate Insolvency Resolution Process ("CIRP")against Mercator Limited Corporate Debtor ("the Company") under Section 7 ofthe Insolvency and Bankruptcy Code 2016 ("the Code"). Pursuant to the Orderthe powers of the Board of Directors stand suspended and are vested with Mr. GirishSiriram Juneja who has been appointed as Interim Resolution Professional (IRP) by theNCLT and later confirmed as a Resolution Professional (RP) by the Committee of Creditors(CoC).

FINANCIAL HIGHLIGHTS:

The consolidated and standalone financial performance of the Companyfor the year ended March 312021 is summarized below:

(Rs in Crore)

Particulars Consolidated Standalone
Year ended Year ended
March 31 2021 March 31 2020 March 31 2021 March 31 2020
Income from operations 373.78 638.61 6.85 132.16
Other Income 38.81 15.38 33.65 19.01
Total Income 412.59 653.99 40.50 151.17
Operating Profit 52.78 (301.07) 18.12 (237.63)
Interest (290.79) (260.75) (210.12) (220.13)
Depreciation (39.45) (141.42) (0.12) (41.05)
Impairment (26.63) (41.04) (11.64) (41.04)
Exceptional Items - (154.19) - (485.47)
Profit/(Loss) before Tax (304.09) (898.48) (203.76) (1025.32)
Taxes
-Current Year (6.23) (11.18) - (0.45)
-Excess/(Short) provision of earlier years (9.35) - (9.35) -
-Deferred Tax - 0.13 - -
Net Profit/(Loss) After Tax (319.67) (909.53) (213.12) (1025.77)
Minority Interest 12.50 13.63 - -
Other Comprehensive Income Adjustment - (0.81) - 0.63

The Standalone & Consolidated financial statements of the Companyfor the financial year ended March 312021 have been prepared in accordance with theIndian Accounting Standards prescribed under Section 133 of the Companies Act 2013("the Act") read with relevant rules issued thereunder (IND AS) and otheraccounting principles generally accepted in India.

The comments of the Board of Directors on the financial performance ofthe Company along with state of Company affairs have been provided under the ManagementDiscussion and Analysis Report which is appended as Annexure I to this Report.

STATE OF COMPANY'S AFFAIRS & REVIEW OF BUSINESS OPERATIONS ANDEFFECT OF COVID-19:

During the year under review the income from operations

on a consolidated basis was Rs.373.78 crores against Rs.638.61 croresin the previous year. The consequential loss in revenue were on account of(i)Audited/Unaudited Financial Statements of all Indonesian subsidiaries for the quarterand year ended March 31 2021 not having been provided to the Parent Company and hencetheir financial statements for the 9 months period ended December 31 2020 have only beenconsidered for the purpose of preparation of Consolidated Financial Statements for theyear ended March 312021 (ii) sale of entire fleet of the ships during financial year2019-20 & 2020-21 and auction of 2 out of 4 dredgers during the financial year 2020-21(iii) remaining 2 dredgers remaining idle and in arrested condition and (iii) sharpdecline in shipping and dredging income during the year affected the revenue.

The consolidated EBIDTA is Rs.52.78 crores against Rs.301.08 crores inthe previous year. The consolidated loss before tax was Rs.304.09 crores against previousyear loss before tax of Rs.898.48 crores. The loss after tax was Rs.319.67 crores asagainst loss after tax of Rs.909.53 crores in the previous year.

On a standalone basis the income from operations for the year underreview was Rs.6.85 crores (Rs. 132.16 crores in the previous year). Depreciation wasRs.0.12 crores against Rs.41.05 crores in previous year and Interest was Rs.210.12 croresagainst Rs.220.13 crores in previous year; the Company had standalone loss after tax ofRs.213.11 crores (previous year loss after tax of Rs.1025.77 crores) after provision oftax of Rs.9.35 crores (previous year Rs.0.45 crores).

Following are the key financial highlights for the financial year2020-21 (PY 2019-20):

• At standalone level Finance Costs of Rs.210.12 crores (PYRs.220.13 crores) includes Rs.101.02 crores (PY Rs.92.79 crores) for FY21 towards penalinterest charged by the lenders;

• At standalone level impairment provision was Rs.11.64 crores(PY Rs.41.04 crores);

• Loss on sale of assets in amounted to Rs.2.26 crores (PYRs.233.43 crores including Loss on assets held for sale amounted to Rs.22.36 crores);

• At the consolidated level Provision for Doubtful Debts amountedto Rs. Nil (PY Rs.20.95 Crores)

• At the consolidated level Expected Credit Loss (ECL) amountedto Rs. Nil (PY Rs.17.06 Crores).

• At the consolidated level loss on fair value of investmentsamounted to Nil (PY Rs.105.47 crores). The Group has last carried out valuation ofunderlying investment in coal mining and logistic company situated in Indonesia fordetermining of fair valuation of these financial assets as per local regulations as onDecember 31 2020. The Group had recognized reduction in fair value of such financialinstrument amounting to Rs. 24.56 Crore (USD 3.34 Mn) in the quarter ended March 31 2021.Such reduction was on account of sharp fall in coal prices reduction in absoluterealization of coal handling fees for one of major customer cost of production and changein assumption of terminal value based on extension of mining license. The fair value as onMarch 312021 can be substantially different in view of the valuation factors.

• At the standalone level Exceptional Items amounted to Rs. Nil(Rs.485.47 Crores representing impairment of inter company investment in equity sharesNCRPS other equity instruments and intercompany loans and advances). At the consolidatedlevel Exceptional Items amounted to Rs. Nil (Rs.154.19 crores representing write down ofCWIP in Mercator Petroleum Ltd. (MPL) a material subsidiary for the terminated oil blockCB-3 amounted to Rs.34.44 Crores and Rs.12.75 Crores in the oil block CB-9 on account ofthe proposed sale of the said oil block aggregating to Rs.47.19 crores and Rs.106.99crores towards invocation of bank guarantees (net) by ONGC in Mercator Oil and Gas Ltd.(MOGL) a material subsidiary).

• Other Income included sundry balances written back amounting toRs.2.71 crores (Rs.4.75 crores).

The Company has prepared its accounts for the year ended March 31 2021on a going concern basis rather than on liquidation value basis. The Company has incurreda net loss increasing its negative retained earnings as at March 31 2021 wherein assetsare insufficient in comparison to liabilities thereby resulting in erosion of itsNet-worth. Further the Company had since disposed-off the substantial part of theProperty Plant and Equipment (PPE). As on March 31 2021 the Company has only twononoperating dredgers which have been arrested by operational creditors. The currentliabilities substantially exceed the current assets and large sums of money receivable arein dispute which is not readily realisable. A Corporate Insolvency Resolution Process(CIRP) has been initiated by Hon'ble NCLT Mumbai. It may be further noted that inconsonance with the stipulations contained in Section 14 of the Insolvency and BankruptcyCode 2016 (Code) a moratorium has been declared in the aforesaid order passed by theHon'ble NCLT inter alia prohibiting the following:

a. the institution of suits or continuation of pending suits orproceedings against the Corporate Debtor including execution of any judgement decree orother in any court of law tribunal arbitration panel or other authority;

b. transferring encumbering alienating or disposing of by theCorporate Debtor any of its assets or any legal right or beneficial interest therein;

c. any action to foreclose recover or enforce any security interestcreated by the Corporate Debtor in respect of its property including any action under theSecuritization and Reconstruction of Financial Assets and Enforcement of Security InterestAct 2002;

d. the recovery of any property by an owner or lessor where suchproperty is occupied by or in the possession of the Corporate Debtor.

The Company's ability to continue as a going concern is dependent uponmany factors including continued support from the financial creditors operationalcreditors and submission of a viable resolution plan by the prospective investor. Underthe CIRP a resolution plan needs to be presented to and approved by the Committee ofCreditors (COC) and thereafter will need to be approved by the NCLT to keep the Company asa going concern. In view of the opinion of the Directors and KMPs resolution and revivalof the Company is possible in the foreseeable future. Further the RP is required to makeevery endeavour to protect and preserve the value of the property of the corporate debtorand manage the operations of the corporate debtor as a going concern.

The management / RP is of the view that they are making best efforts toachieve favourable order in ongoing litigations in order to protect the value of itsassets and is making efforts to revive operations. As per rules and regulations of theCIRP stipulated under the Code RP has invited Resolution Plans from the eligibleProspective Resolution Applicants (PRA). Further the Company believes that the claimsreceivable for Rs. 1580 crores at the group level could if realised provide areasonable sufficient opportunity for the repayment of loans from lenders and providerequired resources for the development of business opportunities for the revival.

In view of the aforesaid details and pending outcome of the CIRP thefinancial statements of the Company have been prepared on going concern basis.

Updates on Debts Position:

Total Debts at standalone levels and consolidated levels as on March31 2021 stands at Rs.942.92 crores and Rs.1608.87 crores respectively. We have furtherdeleveraged Long-term debts by selling the Floating Storage and Offloading Unit (FSO)'Prem Pride' in the previous financial year 2019-20 on January 16 2020 for Rs.49.54crores and Vessel M. T. Hansa Prem on March 23 2020 through an e- auction process for aconsideration of USD 3.60 Mn plus taxes and in the financial year 2020-21 sold the VesselM. T. Prem Mala vide Hon'ble Bombay High Court's order dated May 26 2020 confirmed thesale of the Vessel under the auction process to the highest bidder at a consideration ofRs.36.40 Crores.

As per the Code the RP has to receive collate and admit all theclaims submitted by the creditors of the Company. Such claims can be submitted to the RPduring the CIRP till the approval of a resolution plan by the COC. The RP is still in theprocess of collating and verifying such claims as and when they are received and shallsubsequently admit such verified claims against the Company as per the Code. Pendingadmission of the claims received the impact of such claims if any that may arise hasnot been considered in the preparation of the audited financial statements. At thestandalone level Principal portion of loans from financial creditors in the books of theCorporate Debtor have been restated with the amounts admitted by RP as on InsolvencyCommencement Date i.e. February 8 2021 ("ICD date") (Rs.920.49 crore). Totalamount of claims towards principal dues of the financial creditors as on March 312021stand as under:

a. Principal amount of Loans admitted by RP Rs.920.49 crore
b. Claims under verification by RP/Not filed Rs.22.43 crore
Total Rs.942.92 crore*

*In addition Contingent Claims arising out of Corporate Guaranteeissued by the Company has been admitted by RP for Bank of Baroda (Principal amount ofRs.95.29 crores plus Interest amount of Rs.37.17 crore aggregating to Rs.132.46 crore) andDBS Bank India Ltd. (Principal amount of Rs. 21.66 crore and interest of Rs.2.08 croreaggregating to Rs.23.74 crore).

Operations & Finance:

Shipping:

The Company does not have any tonnage now. The Company may explorechartering in tonnage in the future.

Dredging:

Slowdown of dredging business has been in place on account of businessdownturn contributed largely by majority stake buyout of DCI by government owned majorports. The core management team will continue to focus on developing low capex businessesin the Dredging Business. An example of asset light model for dredging contracts could bewherein the work can be accomplished by chartering dredgers. One of such contracts isunder execution with Mumbai Port Trust. The Company shall continue to explore suitableopportunities in the asset light model where the experience and expertise of the Companycan be leveraged. The Company did not participate in any fresh tenders during financialyear 2020-21.

The status of various dredgers of the Company is as under:

Veera Prem: In respect of Veera Prem the crew abandoned the vesselin the previous financial year on 29th April 2019. The company issued Notice ofAbandonment in favour of the insurer on 21st May 2019. Necessary insurance proceedings arebeing initiated for filling an insurance claim for the total constructive loss of dredgerVeera Prem and the same shall be recognized in books as per applicable accounting policyduring subsequent quarters when reasonable certainty is established based on theaccounting policy of the Company.

Tridevi Prem: The dredger developed a leak in the forward pump roomleading to flooding and it capsized in early September 2019 in the previous financial yearwhilst at New Mangalore Port Trust anchorage.

Uma Prem: The Company has belatedly received the order of Hon'bleHigh Court of Bombay passed on September 15 2020 with respect to the appropriation ofcourt deposit of Rs.2.70 crores towards payments to be made to the claimants. The Companyhas passed necessary accounting entries in this regard and the court deposit of Rs.2.70crores stands fully appropriated as on March 312021.

Darshani Prem: Darshini Prem is under arrest by a few operationalcreditors crew and port authorities. The cases filed against Darshini Prem in High courtof Andhra Pradesh was listed on July 12021 in which the Court has ordered the sale of thedredger and fixed the Reserve Price at Rs.12 crores and publication of the auction is tobe made by August 5 2021. The bids shall be submitted by the interested parties tillAugust 20 2021 and opening of the bids is on September 2 2021. The successful biddershall pay for the complete bid amount on or before September 16 2021

Yukti Prem: The dredger has been under arrest by an OperationalCreditor. The matter was last listed on July 8 2021 before the High Court of Kerala atErnakulam. The counsel of RP appeared before the Court and submitted that it has noobjection to the sale. Accordingly the Court ordered the sale of the dredger to be madeon August 27 2021.

Vivek Prem: The dredger has been arrested by an OperationalCreditor. This Dredger has been sold under court auction (order dated 18.02.2021 ofGujarat High Court) for a price of Rs.3.60 crores. The appropriation of the proceeds shallfollow in due course of time. The sale proceeds of Rs.3.60 crores as deposited by thebuyer in court has been classified as 'Sale of Vivek Prem - Court Deposit' under 'OtherCurrent Assets' as on March 312021. The High Court of Gujarat at Ahmedabad vide itsorders dated July 8 2021 has allowed part appropriation of the court deposit to theextent of Rs.6.01 Lakhs towards payment of costs related to the initial expenses incurredby Plantiff i.e. ICICI Bank Ltd. for the sale process to be refunded to ICICI Bank Ltd.The balance appropriation of the proceeds of Rs.3.54 crores shall follow in due course oftime.

Bhagvati Prem: The dredger was beached at New Mangalore Port Trust(NMPT). Notice for auctioning Bhagwati Prem dated 30.01.2020 was issued by NMPTauthorities. Vide letters dated March 6 2021 and March 22 2021 NMPT informed theCompany that it has served public notice to sell by way of an e-auction the vessel'Bhagwati Prem' by exercising the powers vested with NMPT under Section 42 of the IndianPorts Act 1908 to recover the Port Dues Fees and other charges. NMPT informed that ithas auctioned the dredger 'Bhagwati Prem' through MSTC Limited Bangalore on September 302020 vide MSTC Order No. MSTC/BLR/20-21/890 in terms of Section 14 and Section 42 of theIndian Ports Act 1908 as per the directions given by Ministry of Shipping and that it hasreceived an amount of Rs.4.81 crores from the sale of the said dredger and the availableamount with Port after all the recoveries towards the expenses suffered in to risk imposedby the sunk dredger 'Tridevi Prem' and dredger 'Bhagwati Pem' is Rs.1.67 crores. TheCompany has provided for the sum of Rs.3.14 crores towards Port Charges during thefinancial year 202021 and the amount receivable from NMPT has been accounted at Rs.4.81crores.

Coal

Oorja Holdings Pte Ltd. ('Oorja Holdings") a wholly ownedsubsidiary of the Company along with other investors owns an operational open cut thermalcoal asset in the entity named PT Karya Putra Borneo (KPB) and logistics infrastructureservices in coal business in another entity named PT Indo Perkasa (IPK). KPB is located inButuah village province of Kalimantan Timur Indonesia covering c.914 hectares of licensearea with all requisite licenses consisting of an operational coal mine since 2012 havingc.26.30 MMT of present reserves with 3600/4200 GAR thermal coal. The local logisticsinfrastructure services business includes haul road logistics and load port handlingsupported by own logistics and infrastructure facilities.

Audited/Unaudited Financial Statements of all Indonesian subsidiariesfor the quarter and year ended March 312021 have not been provided to the Parent Companyand hence their financial statements for the 9 months period ended December 31 2020 haveonly been considered for the purpose of preparation of Consolidated Financial Statementsfor the quarter and year ended March 312021.

Total production of coal for the 9 months period ended December 312020 in the year 2020-21 stands at 1688625 MT against 2133355 MT of PY. The companyhas made dispatches of 5766425 MT in the 9 months period ended December 312020 in theyear 2020-21 against 6951765 MT in PY through its coal handling infrastructure including3rd party dispatches. The operations of coal business are running at the usual operationallevels. The business is trying its best to reduce costs.

During period of COVID19 coal prices have fluctuated and has affectedEBITDA margin of KPB. The Company has been delivering regular production. Profitabilitywill have an impact due to fluctuations in prices due to pandemic situation.

A minority shareholder of one of our step-down subsidiary PT KaryaPutra Borneo based at Indonesia has raised a frivolous claim with respect to theshareholding of the said subsidiary Company. On account of frivolous claim filed byminority shareholder of KPB by allegedly accessing Legal Entity Accessibility System(LEAS) and resultant to that existing directors and shareholders have been changed inrecords of Ministry of Law and Human Rights (MoLHR) which was not in compliance withapplicable mining law prescribed by Ministry of Energy and Mineral Resources (MEMR)seeking prior consent of the MEMR for any change in directors and/or shareholders ofmining company. As per information available until date of reporting matter is sub-judice and under review cum discussion at court. Management of the Company is anticipatingpositive outcome as per their judgment and other compliance under applicable Mining Law inIndonesia.The Company is taking all legal steps to protect its rights and interests.Meanwhile the control of the operations are continuing normally.

Loss on fair value of investments amounted to Rs.24.56 crores (PYRs.105.47 crores). Panther Resources Pte Ltd (Panther) is a step down subsidiary ofMercator International Pte Ltd. (MIPL) the Singapore based holding company. Panther hasinvested in coal companies in Indonesia. The valuation of underlying investment has beenconducted by an independent valuation firm from Indonesia

Some of the key risks for the coal business are:

1) Coal prices have always been volatile. As on date amongst severalreasons including Covid Pandemic have causes the coal prices to crash threateningsustainable cash flows.

2) Coal subsidiaries have a running default on their loan obligationsand lenders are now seeking legal recourse.

3) Legal cases continue to distract management and incur high expenses.

4) Internationally most countries are encouraging move to cleanerenergy sources and this remains a threat for the long term price sustainability of thecoal prices.

5) India opening mining sector to private sector does pose a threat tocoal prices as India may reduce import of coal over a period of time.

6) Change of regulations in Indonesia with respect to taxes annualproduction and exports poses an unseen risk.

Oil and Gas

Mercator Petroleum Limited ('MPL') has Production Sharing Contractswith the Government of India for exploration of petroleum in two blocks viz. CB-ONN-2005/9('CB-9') and CB- ONN-2005/3 ('CB-3') under the Seventh New Exploration Licensing Policyround (NELP-VII). MPL has 100% participating interest ('PI') in both the above blocks.These 'S- Type' blocks are situated onshore in the prolific Cambay Basin in Gujarat Indiaand together cover an area of 180.22 kms.

Ministry of Petroleum and Natural Gas Government of India vide theirletter dated October 24 2019 has issued a termination notice referring to ProductionSharing Contract (PSC) dated December 22 2008 for the Block CB-ONN- 2005/3 executedbetween Government of India and Mercator Petroleum Limited. There was no oil discovery inthe said Block CB-ONN-2005/3 ('CB-3'). However PSC for the Block CB-ONN-2005/9 ('CB-9')remains in force.

Minutes of Meeting (MoM) of the 5th Expert Appraisal Committee (EAC)for the Environmental Clearance (EC) presentation held on March 27 2019 were issued of3rd April 2019 recommending grant of EC for Development of PML area of the BlockCB-ONN-2005/9. Work over rig was deployed at Jyoti-2 from March 25 2019 to May 7 2019for cement repairs but the operations had to be terminated because of technical problems.The well Jyoti-1 was also closed because of non-grant of (EC) which has since been grantedon January 7 2020. Management Committee has approved completion of Minimum Work Program(MWP) of Exploration Phase-I which is a pre-requisite for transfer of PI. Formalcommunication to this effect is awaited.

The application for initiation of Corporate Insolvency ResolutionProcess (CIRP) under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) filed byan Operational Creditor before the National Company Law Tribunal (NCLT) Mumbai Benchagainst the material subsidiary of the Company Mercator Petroleum Limited (MPL) wasadmitted vide the order of NCLT dated August 31 2020 (Order). In terms of Section 17 ofthe IBC the power of the Board of Directors stand suspended and all such powers standvested in an Interim Resolution Professional (IRP) appointed vide the said Order. Furtherin terms of stipulations contained in Section 14 of the Code a moratorium has beendeclared vide the Order prohibiting certain stipulated actions.

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

During the previous financial year MPL made efforts to Farm-out (infull or in part) its Participating Interest (PI) in the Block CB-ONN-2005/9. To thiseffect MPL signed a Sale Purchase Agreement (SPA) with an identified buyer on 26thDecember 2019. Further Deed of Assignment for transfer of 100% PI was signed on 14thJanuary 2020. Application for transfer of PI along with requisite documents has beensubmitted to Director General of Hydrocarbon (DGH) for approval and the same was beingreviewed by them. We had signed an addendum to extend the completion date to 31st August2020 and further extending the long stop date to October 312020. In terms of the updatereceived from IRP as a part of the Corporate Insolvency Resolution Process (CIRP) IRPhad invited Resolution Plans from the eligible bidders. IRP had received a positiveresponse and after the initial phase there are a few Prospective Resolution Applicants inthe fray. As part of the process these Resolution Applicants have been carrying out thenecessary due diligence. The Resolution Applicants include certain Private Entities in thesector a Public Sector Undertaking and others. At the request of the ResolutionApplicants and in view of the other legal processes involved the timeline for submissionof Resolution plans has been extended and is expected to take place by June 2021. The saleproceeds will enable the company to pay its financial creditors and trade creditors.

Sagar Samrat Conversion Project - Update on Dispute with ONGC and GPC

Mercator Oil & Gas Limited (MOGL) a material subsidiary of theCompany and Mercator Offshore (P) Pte. Limited (collectively 'Mercator Oil & Gas')were engaged in the execution of an EPC contract involving conversion of Sagar Samrat amobile offshore drilling unit into a mobile offshore production unit for ONGC. The saidcontract was awarded to a consortium comprising of Mercator Oil & Gas and Gulf PipingCo. WLL (GPC) a shipyard based out of Abu Dhabi.

On September 25 MOGL received a notice of termination from ONGC forSagar Samrat Conversion Project giving the consortium 14 days' cure period as per thecontract. At the same time ONGC proceeded to encash the bank guarantees. MOGL had thenchallenged the invocation of Bank Guarantees and was granted a stay by Hon'ble SingleMember Bench (SMB) of the Bombay High Court. Appeal in the Arbitration Petition beforedivision bench of Hon'ble Bombay High Court in a 100% subsidiary of the Company wasdismissed vide order in July-2019; By virtue of the above order ONGC invoked bankguarantees worth INR 142 crores in the previous financial year. This has increased thedebt of MOGL by an equivalent amount. Parallely on 15 December 2018 MOGL initiatedarbitration proceedings against ONGC raising claims of US $ 262 Mn [out of which US$173.36 Mn (Rs.1300 crores} has a very strong case in favor of the Company as per a legalopinion) which also includes claims for wrongful invocation of the Bank Guarantees againstONGC on account of the following:

• Certified work but not invoiced

• Works completed and invoiced but unpaid

• Unpaid and/or unapproved variations

• Wrongful deduction of liquidated damages

• New Taxes

• Wrongful invocation of the Bank Guarantees

• Damages at large

• Wrongful termination

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

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

A financial creditor has incurred legal costs aggregating Rs.5.69crores in the year ended March 31 2021 on behalf of MOGL in relation to the ongoingarbitration in the SSCP matter. The same has been expenses out in MOGL towards Legal Costsin the FY 2020-21. MOGL is also in advanced stages of discussions with overseas funds tofund litigation for Sagar Samrat Arbitration matter and encashment of the counter bankguarantees given by GPC for any shortfall of amount sanctioned by the financial creditorand/or further expenses that may be needed for execution of the award.

MATERIAL CHANGES AND COMMITMENTS:

The Company is currently undergoing CIRP vide order dated February 082021. Pursuant to the Order the powers of the Board of Directors stand suspended and arevested with Mr. Girish Siriram Juneja who has been appointed as Resolution Professional(RP) by the NCLT.

Further there were no material changes and commitments affecting thefinancial position of the Company between the end of the financial year of the Company towhich the financial statements relate and the date of this Report.

SHARE CAPITAL:

The paid-up Equity Share Capital as at March 312021 stood at Rs.30.25crore. During the year under review the Company has not issued shares or shares withdifferential voting rights nor has granted any stock options or sweat equity or warrants.

TRANSFER TO RESERVES:

In view of the losses incurred during the year no amount is proposedto be transferred to the Reserves including Debenture Redemption Reserve.

DIVIDEND:

In view of the losses suffered during the year under review nodividend has been recommended for financial year 2020-21.

CHANGE IN THE NATURE OF BUSINESS:

There was no change in the nature of business during the financial yearunder review.

PUBLIC DEPOSITS:

During the financial year under review the Company has not acceptedany deposits within the meaning of Sections 73 and 76 of the Act read with the Companies(Acceptance of Deposits) Rules 2014.

DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Appointments:

During the year under review Mr. Jagmohan Talan (DIN: 08890353) Ms.Ritu Vats (DIN: 08890591) and Mr. Sukhdarshan Singh Bedi (DIN: 08889664) were appointed asAdditional Directors (Non-Executive & Independent) of the Company with effect fromSeptember 23 2020 for a tenure of 5 years and thereafter their appointment as IndependentDirector of the Company was regularized at the 36th Annual General Meeting of the Companyheld on December 29 2020 which was adjourned to be held on January 5 2021.

The Board of Directors of the Company at the time of appointment hadconsidered that Mr. Jagmohan Talan (DIN: 08890353) Ms. Ritu Vats (DIN: 08890591) and Mr.Sukhdarshan Singh Bedi (DIN: 08889664) possesses requisite expertise integrity andexperience (including proficiency) for appointment as Independent Directors of the Companyand that given their professional background and experience their appointments would bebeneficial to the Company.

Resignations:

During the year under review Ms. Ameeta Trehan (DIN: 07087510)Non-Executive Independent Woman Director of the Company has resigned with effect fromSeptember 1 2020 citing personal reasons.

Mr. Chetan Desai (DIN: 03595319) Mr. M. M. Agrawal (DIN: 00681433) andMr. Anil Khanna (DIN: 00199924) NonExecutive Independent Directors of the Companyresigned with effect from September 25 2020 September 29 2020 and October 1 2020respectively citing personal reasons/ill health.

The Board of Directors had placed on record its appreciation for thesupport and contribution made by all the outgoing independent directors during theirtenure with the

Company. It was also noted that there were no other material reasonsfor their resignations other than the ones stated above.

Subsequently to the end of the financial year 2020-21 Ms. Ritu Vats(DIN: 08890591) Mr. Jagmohan Talan (DIN: 08890353) and Mr. Sukhdarshan Singh Bedi (DIN:08889664) Independent Directors of the Company had tendered their resignations videemails dated June 19 2021 June 212021 and June 28 2021 respectively citing personalreasons. Given the fact that the resignation of Directors is governed by the Articles ofAssociation of the Company hence in line with the discussions held with the Committee ofCreditors (CoC) the Resolution Professional requested the Directors to reconsider theirdecision.

Accordingly upon requesting the Directors Ms. Ritu Vats (DIN:08890591) and Mr. Jagmohan Talan (DIN: 08890353) withdrew their respective resignationsand decided to continue as Independent Directors of the Company.

However Mr. Sukhdarshan Singh Bedi (DIN: 08889664) was unwilling tocontinue with his term due to personal commitments as such his resignation was taken onrecord and accepted w.e.f. August 12 2021. It was also noted that there were no othermaterial reasons for his resignation other than the one mentioned herein.

The Board (RP & Directors) placed on record its appreciation forthe support and contribution made by Mr. Sukhdarshan Singh Bedi during his tenure with theCompany.

Variation in terms of existing tenure of Mr. Harish Kumar Mittal (DIN:00007690)

The Board (RP & Directors) in their meeting held on August 12 2021noted that Mr. Harish Kumar Mittal (DIN:00007690) had attained the age of 70 years in 2019and accordingly continuation of his employment as Whole Time Director of the Company tillJuly 312022 requires the approval of the shareholders by passing a special resolution.Thus it has been proposed to the shareholders in the ensuing Annual General Meeting toratify the existing term of Mr. H. K. Mittal by way of special resolution. The requiredStatement under provisions of Section 196(3) of the Act forms part of the Notice for thesaid meeting.

Directors retiring by rotation:

Pursuant to Section 152(6) of the Act read with rules made thereunderand the Articles of Association of the Company Mr. Harish Kumar Mittal (DIN: 00007690)Whole Time Director of the Company retires by rotation at the forthcoming Annual GeneralMeeting and being eligible offers himself for re-appointment. The Board (RP &Directors) recommends the re-appointment of Mr. Harish Kumar Mittal (DIN: 00007690) asDirector of the Company.

A brief profile of Mr. H. K. Mittal along with requisite details asstipulated under Regulation 36(3) of Listing Regulations and Secretarial Standard onGeneral Meetings (SS-2) issued by the Institute of Company Secretaries of India (ICSI) areprovided in notice forming part of this Annual Report.

Declaration by Independent Directors:

During the year under review the Company has not received declarationfrom the Independent Directors under Section 149(7) of the Act that he / she meets thecriteria of independence laid down in Section 149(6) of the Act and Regulation 16(1 )(b)and Regulation 25 of the Listing Regulations.

Mr. Jagmohan Talan and Mr. Sukhdarshan Singh Bedi IndependentDirectors of the Company have undertaken requisite steps towards the inclusion of theirnames in the databank of Independent Directors maintained with the Indian Institute ofCorporate Affairs (IICA) in terms of Section 150 of the Act read with Rule 6 of theCompanies (Appointment & Qualification of Directors) Rules 2014 as per the Ministryof Corporate Affairs Notification dated October 22 2019. However Ms. Ritu Vats who wasappointed as an Independent Director is in the process of applying to the IICA forinclusion of her name in the databank.

Remuneration to Non-Executive Directors:

During the financial year under review the Non-Executive Directors ofthe Company had no pecuniary relationship or transactions with the Company other thansitting fees and reimbursement of expenses incurred by them for the purpose of attendingmeetings of the Board/Committees of the Company.

Disqualification of Directors:

The Company has failed to pay the instalment due of the debentures onthe due date and has failed to pay the interest due thereon for a continuous period ofmore than a year. Hence all the Directors of the Company are disqualified from beingappointed as Director in terms of Section 164 (2) of the Act.

Board Evaluation Process:

The Board of Directors of the Company comprises of one Whole-timeDirector and the remaining three directors are Non-Executive Independent Directors. Duringthe financial year 2020-21 the meeting of Independent Directors of the Company did nottake place. Generally the said meeting is convened in the last quarter of the financialyear. However since in the last quarter the Company had entered in the process of CIRPand pursuant to the provisions of the Code the powers of Board of Directors had beensuspended. As a result no meeting of Independent Directors was held and as a result noevaluation was carried out.

Key Managerial Personnel:

As on March 312021 Mr. Shalabh Mittal and Mr. Rajendra Kotharicontinued to be the Chief Executive Officer and Chief Financial Officer of the Companyrespectively. During the previous financial year Ms. Sangeetha Pednekar resigned from theposition of Company Secretary and Key Managerial Personnel of the Company w.e.f. theclosure of business hours on July 23 2019. Post her resignation the Company

has not appointed Company Secretary during the year under review.However sincere efforts are being put in to recruit a Company Secretary and ComplianceOfficer since the Company was admitted into CIRP the prospective candidates are showingreluctance in joining the Company.

Subsequent to the end of the financial year Mr. Shalabh Mittaltendered his resignation vide email dated June 21 2021 as Chief Executive Officer and KeyManagerial Personnel of the Company with effect from June 21 2021 citing personalreasons. Accordingly his resignation was taken on record and accepted w.e.f. August 122021 in line with the discussions held with the Committee of Creditors (CoC) members attheir meeting held on 30 July 2021.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

As on March 31 2021 your Company had total 27 subsidiaries/step-downsubsidiaries. The following are the material subsidiaries of the Company:

a) Mercator Petroleum Limited

b) Mercator Oil and Gas Limited

c) PT Karya Putra Borneo

d) PT Indo Perkasa

e) Offshore Holding Company Pte Ltd

Further the Policy for determining material subsidiary companies canbe accessed on the Company's website at www.mercator.co.in.

As per Section 134 of the Act your Company has provided the AuditedConsolidated Financial Statements for the year ended on March 31 2021; together withAuditors' Report thereon forming part of this Annual Report which includes financialinformation of all the subsidiaries. A statement pursuant to the provisions of the Section129 (3) of the Act read with relevant rules made thereunder in the prescribed form AOC-1showing financial highlights of the subsidiary companies is attached to the consolidatedfinancial statements and therefore not repeated here for the sake of brevity.

During the financial year under review no company ceased to besubsidiary associate or joint venture. The Company does not have any joint venturecompanies as on March 31 2021.

MEETINGS OF THE BOARD:

During the year 4 (Four) Board Meetings were held to discuss anddecide on affairs operations of the Company and to supervise and control the activitiesof the Company details of which are given in the Report on Corporate Governance forming apart of this Report.

The intervening gap between two consecutive Board meetings did notexceed the period prescribed in the Act

Listing regulations Secretarial Standards issued by the Institute ofCompany Secretaries of India and pursuant to the relaxations issued by SEBI vide Circularno. SEBI/HO/CFD/CMD1/CIR/P/2020/38 dated March 19 2020 as amended from time to time.

COMMITTEES OF THE BOARD:

The Committees constituted under the Act and Listing Regulations are:

1. Audit Committee

2. Stakeholders' Relationship Committee

3. Nomination & Remuneration Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

The details of the Committees along with their composition terms ofreference number of meetings held and attendance of the members are provided in theCorporate Governance Report forming part of this Annual Report.

PARTICULARS OF EMPLOYEES:

As on March 31 2021 the Company has 2 employees including the ChiefFinancial Officer. The information required under Section 197 of the Act read with Rule5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 in respect of employees of the Company for part of financial year 202021 isappended as Annexure II and Annexure II-A respectively forming part of thisReport.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION:

Pursuant to the provisions of Section 178 of the Act read with theRules made thereunder Regulation 19 of the Listing Regulations and on the recommendationof the Nomination & Remuneration Committee the Company's policy on Directors'appointment and remuneration and other matters provided in Section 178(3) of the Act isappended as Annexure III.

Currently as the Company is under CIRP the approval of CoC isnecessary for the appointment and remuneration of Directors and Key Managerial Personnelof the Company.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS:

At the time of appointment of an independent director the Companyissues a formal letter of appointment outlining his /her role function duties andresponsibilities. During the year under review no programmes were conducted.

AUDITORS:

Pursuant to the requirement of Section 139(1) of the Act at the AnnualGeneral Meeting (AGM) held on September 15 2017 the Members had accorded their approvalfor the appointment of M/s. Singhi and Co. (FRN: 302049E) Chartered Accountants Mumbaias the Statutory Auditors of the Company to examine and audit the accounts of the Companyfor the Financial Years 2017-18 to 2021-22. As required under Regulation 33(1)(d) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Auditorshave also confirmed that they hold a valid certificate issued by the Peer Review Board ofthe Institute of

Chartered Accountants of India.

No fraud was reported by the Statutory Auditors of the Company duringthe year under review pursuant to Section 143(12) of the Act.

Qualifications in Statutory Auditors' report:

Statutory Auditors' Observations in Audit Report on Consolidated/Standalone Financial Statements and Directors' explanation thereto -

STANDALONE FINANCIAL STATEMENTS

Sr. No. Auditor's Observations Company Reply
1 Regarding preparation of the statement on a going concern basis: The Company's financing arrangements have expired and substantial amounts have been recalled and are due and payable as on March 31 2021. Besides the NCLT has admitted the petition of the Financial Creditors vide its Order dated February 8 2021 and proceedings under the IBC have been initiated on the company. The Company has substantial investments and loans and advances receivable from subsidiary companies and other disputed receivables which are not readily realizable to service the Company's current liabilities and the Company's net worth has also been fully eroded along with inability to meet its current liabilities which substantially exceeds its current assets. The Company had substantially disposed-off its Property Plant and Equipment and currently doesn't have significant operating revenue and operating assets. Further the management has not shared a revival plan for the company to continue as a going concern and hence in the absence of the same we conclude that the going concern assumption has been vitiated. The Financial Results have however been prepared on a going concern basis by the management. The financial results of the Company have been prepared on a going concern basis by the management. The company has incurred a net loss increasing its negative retained earnings as at 31st March 2021 wherein assets are insufficient in comparison to liabilities thereby resulting in erosion of its Net worth. Further the Company had since disposed off the substantial part of the Property Plant and Equipment (PPE). As on March 31 2021 the Company has only two non operating dredgers which have been arrested by operational creditors. The current liabilities substantially exceed the current assets and large sums of money receivable are in dispute which is not readily realizable. As referred to in point #1 a CIR process has been initiated by Hon'ble NCLT Mumbai. It may be further noted that in consonance with the stipulations contained in Section 14 of the Code a moratorium has been declared in the aforesaid order passed by the Hon'ble NCLT inter alia prohibiting the following:
a. the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement decree or other in any court of law tribunal arbitration panel or other authority;
b. transferring encumbering alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;
c. any action to foreclose recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002;
d. the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
The Company's ability to continue as a going concern is dependent upon many factors including continued support from the financial creditors operational creditors and submission of a viable resolution plan by the prospective investor. Under the CIRP a resolution plan needs to be presented to and approved by the COC and thereafter will need to be approved by the NCLT to keep the Company as a going concern. In view of the opinion of the Directors and KMPs resolution and revival of the company is possible in the foreseeable future. Further the RP is required to make every endeavor to protect and preserve the value of the
property of the corporate debtor and manage the operations of the corporate debtor as a going concern.
The management / RP is of the view that they are making best efforts to achieve favorable order in ongoing litigations in order to protect the value of its assets and is making efforts to revive operations. As per rules and regulations of the Corporate Insolvency Resolution Process (CIRP) stipulated under the Insolvency and Bankruptcy Code 2016 RP has invited Resolution Plans from the eligible Prospective Resolution Applicants (PRA). Further the Company believes that the claims receivable for Rs. 1580 crore at the group level could if realized provide a reasonable sufficient opportunity for the repayment of loans from lenders and provide required resources for the development of business opportunities for the revival.
In view of the aforesaid details and pending outcome of the CIRP the financial statements of the Company have been prepared on going concern basis.
2 Regarding the balances restated in the books of accounts pursuant to admission of the claims submitted by the financial creditors of which Rs. 22.43 crore is still under verification/not filed with Resolution Professional (RP). We are unable to comment on the financial impact of the same on the financial results of the Company. As per the Code the RP has to receive collate and admit all the claims submitted by the creditors of the Company. Such claims can be submitted to the RP during the CIRP till the approval of a resolution plan by the COC. The RP is still in the process of collating and verifying such claims as and when they are received and shall subsequently admit such verified claims against the Company as per the Code. Pending admission of the claims received the impact of such claims if any that may arise has not been considered in the preparation of the audited financial statements.
Principal portion of loans from financial creditors in the books of the Corporate Debtor have been restated with the amounts admitted by RP as on Insolvency Commencement Date ("ICD date") (Rs.920.49 crore). Total amount of claims towards principal dues of the financial creditors as on March 31 2021 stand as under:
a. Principal amount of Loans admitted by RP Rs.920.49 crores and;
b. Claims under verification by RP/Not filed Rs.22.43 crores
Total Rs.942.92 crore*
*In addition Contingent Claims arising out of Corporate Guarantee issued by the Company has been admitted by RP for Bank of Baroda (Principal amount of Rs.95.29 crores plus Interest amount of Rs.37.17 crore aggregating to Rs.132.46 crore) and DBS Bank India Ltd. (Principal amount of Rs.21.66 crore and interest of Rs.2.08 crore aggregating to Rs.23.74 crore).
3 Regarding interest or any other charges not being accrued in the books of accounts from the date of commencement of CIR process i.e. 8th February 2021 onwards on account of moratorium under section 14 of Code. Interest or any other charges has not been accrued in the books of accounts from the date of commencement of CIR process i.e. 8th February 2021 onwards on account of moratorium under section 14 of Code.
4 Regarding the Company's investments in its wholly owned foreign subsidiary Mercator International Pte Ltd. (MIL) which was been impaired in full amounting to Rs.415.67 crore (excluding investment in equity shares - Rs. 0.29 crore) during the previous year. The significant investment of MIL is in its coal mines and related infrastructure in Indonesia and the valuation of these assets was conducted on December 31 2020 by an independent valuer and the same has been considered as on March 312021. Further we have been informed by the management that a liquidator has been appointed on MIL effective April 9 2021 and also audited financial statement of MIL are not available with the Company. In view of the non - availability about the information about the fair value of assets and liabilities of MIL and the impact on the valuation had the same been done as on March 312021 we are unable to comment on the value or recoverability of the said investment in subsidiary. The Company had impaired investment amounting to USD 56.55 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 had last carried out valuation of coal business taking cut-off date December 31 2020 for the purpose local reporting requirement and the same has been considered for financial reporting as on March 312021 as well. However due to on-going events such as commencement of liquidation proceedings in Mercator International Pte. Ltd (MIPL) Singapore with effect from April 9 2021and non-availability of audited financial statements of step down coal subsidiaries at Indonesia for the quarter and year ended March 31 2021 any impact on the valuation is not known as on the date. The coal business is housed in companies which are a subsidiary of MIPL and given the fact that a liquidation has been ordered in case of MIPL by the High Court of the Republic of Singapore the coal business will be monetized by the liquidator of MIPL or the receiver appointed by the financial creditor with whom the shares of the subsidiary owning the coal business have been pledged as the case may be. The residual value if any after settling the debts of the financial and other creditors would be available for redemption of the NCRPS of MIPL held by Mercator Limited. Audited Financial Statements of all Indonesian subsidiaries (step down subsidiaries of MIPL) for the quarter and year ended March 31 2021 have not been provided to the Parent Company and hence their financial statements available for the 9 months period ended December 312020 have been considered for the purpose of preparation of Consolidated Financial Statements for the quarter and year ended March 31 2021. Standalone Financial Statements of MIPL (which is under liquidation) have been certified by the management however the same have not been audited. These unaudited Financial Statements have been considered for the purpose of preparation of Consolidated Financial Statements for the quarter and year ended March 312021.
5 Regarding unprovided current tax demands under dispute to the tune of Rs.63.18 crore pending at various judicial forums of the Income Tax department which are treated as contingent liabilities. In the absence of the required supporting documents justifying the stand of the Company we are unable to comment on final outcome of such assessments and the potential financial impact of the same. Non-Current Tax Assets as on March 312021 amount to Rs.54.83 crore includes Rs.69.19 crore which has not been settled due to on-going tax assessment for 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.
6 Regarding termination of Sagar Samrat Conversion Project (SSCP) undertaken by a subsidiary Mercator Oil & Gas Ltd. (hereinafter referred as "MOGL" or "subsidiary") by ONGC which is currently under arbitration. The Company has investments in equity amounting to Rs.0.15 crore which has been fully impaired as on March 31 2021 and loans amounting to Rs.92.78 crore (which includes un-serviced interest amounting to Rs.27.29 crore excluding impairment of Rs.35.70 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
crore) and the balance as per the financial results net of impairment amounts to Rs.57.08 crore as at March 31 2021 in MOGL which in the view of the management is recoverable. Further the unaudited financial statements / financial information available with the management /RP is not certified by the management of MOGL as on March 312021. In view of the pending outcome of the arbitration and non - availability of substantive documentation about the expected recovery or the financial statements of the Company as on March 312021 we are unable to comment on the recoverability of such investment and loan amount. 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. Based on the progress of the arbitration proceedings and discussion with the legal counsel the management is hopeful of a positive outcome in the claim of INR 1925 crore filed against ONGC. Accordingly the Company has reversed 50% impairment of interest income (Rs.2.13 crore) and amount advanced to MOGL (Rs.0.69 crore) during the preceding three quarters of FY 2020 21 and made 50% impairment for the last quarter ended March 31 2021 for an amount of Rs. 0.71 crore (Rs.2.84 crore in the year ended March 312021) towards accrued interest on loan given to MOGL and Rs.0.70 crore (Rs. 0.70 crore in the year ended March 31 2021) towards amount advanced to MOGL. Out of the total outstanding loan given to Mercator Oil & Gas Ltd. of Rs.92.78 crore unimpaired amount as on March 312021 is Rs.57.08 crore after considering a provision for impairment of Rs. 35.70 crore. Further one of the operational creditors has filed petition u/s 9 of IBC 2016 wherein the NCLT bench has kept the status as "Reserved for Order". A claim of Rs. 1925 crore (USD 262 Mn) has been made by the subsidiary company on ONGC. In the view of the management and based on legal advice an estimated amount of INR 1274 crore (USD 173.36 Mn) could probably be awarded as payable to the Company. However any impact of the settlement will be known only after completion of the ongoing arbitration proceedings. The financial statements of MOGL have neither been audited nor have been certified by the management and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021.
7 Regarding the Company's investments in its Indian subsidiary Mercator Petroleum Ltd. (hereinafter referred to as "MPL") amounting to Rs. 47.93 crore (excluding impairment of Rs. 16.17 crore during the year) and loan (including Debentures) given amounting to Rs. 114.26 crore (including unserviced interest of Rs. 42.61 crore and excluding impairment of Rs. 6.05 crore) as on March 312021 and the balance as per the financial results including investments and loans amounts to Rs.130 crore which are considered recoverable. MPL had entered into a Farm in Farm Out (FIFO) Agreement for sale of its participating interest in its oil block CB-ONN-205/9 (CB-9) subject to fulfillment of certain conditions however the long stop date has expired and the same is no longer valid. Further the petition filed in NCLT Mumbai Bench by an operational creditor against MPL was admitted vide Order dated August 312020 and an Interim Resolution Professional (IRP) has been appointed. As per the information and explanations provided to us and also basis the financial information available for the period ended March 31 2021 (which are neither certified The Company has receivable towards loan given of Rs.114.26 crore (including debentures issued to it) to Mercator Petroleum Limited (MPL) as on March 312021 against which impairment of Rs.16.02 crore has been created and balance outstanding as on March 312021 is Rs.98.24 crore. During the quarter ended March 31 2021 the Company has provided additional impairment of Rs.1.17 crore (Rs. 4.59 crore in the year ended March 31 2021) towards accrued interest on loan to Mercator Petroleum Limited (MPL) Rs.0.47 crore (Rs. 1.89 crore in the year ended March 31 2021) towards interest accrued on 6% optionally convertible debentures issued by MPL and Rs. Nil (Rs.3.49 crore in the year ended March 312021) towards amount advanced to MPL (other receivables) on evaluating the following criteria -
a. 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.
by the management nor by the IRP of MPL) we are unable to obtain sufficient appropriate evidence about the recoverability of such investment and loan given. b. The application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) filed by an Operational Creditor before the National Company Law Tribunal (NCLT) Mumbai Bench against one of the material subsidiary of the Company Mercator Petroleum Limited (MPL) was admitted vide the order of NCLT dated August 312020 (Order). In terms of Section 17 of the IBC the power of the Board of Directors stands suspended and all such powers stand vested in an Interim Resolution Professional (IRP) appointed vide the said Order who has taken charge under the directions of the Committee of Creditors. Further in terms of stipulations contained in Section 14 of the Code a moratorium has been declared vide the Order prohibiting certain stipulated actions. In terms of the update received from IRP as a part of the Corporate Insolvency Resolution Process (CIRP) IRP had invited Resolution Plans from the eligible bidders. IRP had received a positive response. As part of the process the Resolution Applicants have been carrying out the necessary due diligence.
c. The Board of Directors has approved strategic sale of participating interest in oil block CBONN 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 crore. MPL has executed an amendment to the original Farm in Farm Out agreement dated December 26 2019 for extension of the long stop date to October 31 2020. The Company is hopeful of concluding the sale within the further extended timelines if and whenever agreed with the prospective buyer.
8 Regarding the fact that the Financial Statement of none of the subsidiaries have been audited as at and for the year ended March 31 2021. We are unable to obtain sufficient appropriate evidence about the recoverability of such investments and loans given. The Company has not received Audited or management certified Financial Statements from subsidiaries/Step - down subsidiaries as under:
Indian Subsidiaries -
The financial statements of MPL have neither been audited nor have been certified by the management or IRP and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021.
The financial statements of MOGL have neither been audited nor have been certified by the management and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021.
The financial statements of Oorja Resources India Pvt. Ltd Mercator Offshore Logistics Pvt. Ltd. and Offshore Transport Pvt. Ltd. have neither been audited nor have been certified by the respective management and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021.
Overseas Subsidiaries -
Financials Statements of all Singapore subsidiaries and step down subsidiaries except Mercator International Pte Ltd. (MIPL) and MCS Holdings Pte Ltd. (MCS) have neither been audited nor have been certified by the management and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021. Standalone Financial Statements of MIPL (which is under liquidation) and MCS (under Liquidation) have been certified by the management however the same have not been audited. These unaudited Financial Statements have been considered for the purpose of preparation of Consolidated Financial Statements for the quarter and year ended March 312021.
Audited or management certified Financial Statements of all Indonesian subsidiaries (step down subsidiaries of MIPL) for the quarter and year ended March 31 2021 have not been provided to the Parent Company and hence their financial statements available for the 9 months period ended December 312020 have been considered for the purpose of preparation of Consolidated Financial Statements for the quarter and year ended March 31 2021.
9 Regarding balance confirmations not been received in respect of certain secured / unsecured loans trade receivables trade and other payables and loans and advances as a result of which reconciliation process and consequential adjustments if any has not been carried out. The Company has adjusted / provided significant amounts basis its internal estimates against which necessary supporting documentation has not been made available to us. The Company has been able to obtain only a few confirmations from various debtors loans and advances from banks and others current accounts from banks trade and other payables on account of ongoing lockdown situation resulting from the Covid 19 pandemic. Accordingly adjustments if any arising out of reconciliation with these parties is not readily available. The Company has carried out its internal assessment and accordingly provided/ written off/ back certain receivables/ payables/ loans and advances.
10 The Company has failed to pay the installment due of the debentures on the due date and failed to pay the interest due thereon for a continuous period of more than a year. Hence all the directors are disqualified from being appointed as director in terms of Section 164 (2) of the Act. All of the directors on the Board of Directors of the Company are disqualified as on March 31 2021 from being appointed as a director in terms of Section 164 (2) of the Companies Act 2013.

CONSOLIDATED FINANCIAL STATEMENTS:

Sr. Auditor's Observations No. Company Reply
1 Regarding preparation of the statement on a going concern basis. The financing arrangements for the group have expired and the substantial amounts have been recalled and are due and payable as on March 31 2021. Besides the NCLT has admitted the petition of the Financial Creditors vide its Order dated February 8 2021 and proceedings under the IBC have been initiated on the Holding company. Further certain cases have been filed by operational creditors and financial creditors in National Company Law Tribunal (NCLT) against one of the material subsidiaries of which NCLT has admitted the application vide order dated August 31 2020 and IRP has been appointed. Also we have been informed by the management that a liquidator has been appointed for one material direct subsidiary effective April 9 2021. The Group has been unable to conclude re-negotiations or obtain replacement financing for repayment of its overdue financing arrangements. The Group has accumulated losses and has incurred significant losses during the current period and previous financial year. The Group also has substantial disputed receivables which are not readily realizable to service the Company's current liabilities and the Group's net worth has also been fully eroded along with inability to meet its current liabilities which substantially exceeds its current assets. The management has not shared a revival plan for the Group to continue as a going concern and hence in the absence of the same we conclude that the going concern assumption has been vitiated. The Consolidated Financial Results have however been prepared on a going concern basis by the management. The financial results of the Group have been prepared on a going concern basis by the management. The Group has incurred a net loss increasing its negative retained earnings as at 31st March 2021 wherein assets are insufficient in comparison to liabilities thereby resulting in erosion of its Net-worth. The current liabilities substantially exceed the current assets and large sums of money are in dispute which is not readily realizable. Further the Company has disposed-off the substantial part of the Property Plant and Equipment (PPE). As on March 312021 the Company has only two non-operating dredgers at standalone level which have been arrested by operational creditors. It may be further noted that in consonance with the stipulations contained in Section 14 of the Code a moratorium has been declared in the aforesaid order passed by the Hon'ble NCLT inter alia prohibiting the following:
(i) the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement decree or other in any court of law tribunal arbitration panel or other authority;
(ii) transferring encumbering alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;
(iii)any action to foreclose recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002;
(iv) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
The Company's ability to continue as a going concern is dependent upon many factors including continued support from the financial creditors operational creditors and submission of a viable resolution plan by the prospective investor. Under the CIRP a resolution plan needs to be presented to and approved by the COC and thereafter will need to be approved by the NCLT to keep the Company as a going concern. In view of the opinion of the Directors and KMPs resolution and revival of the company is possible in the foreseeable future. Further the RP is required to make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. The management/RP of the Holding Company is of the view that they are making best efforts to achieve favorable order in ongoing litigations in order to protect the value of its assets and is making efforts to revive operations. As per rules and regulations of the Corporate Insolvency Resolution Process (CIRP) stipulated under the Insolvency and Bankruptcy Code 2016 RP has invited Resolution Plans from the eligible Prospective Resolution Applicants (PRA). Further the Company believes that the claims receivable for Rs. 1580 crore at the group level could if realized provide a reasonable sufficient opportunity for the repayment of loans from lenders and provide required resources for the development of business opportunities for the revival. In view of the aforesaid details and pending outcome of the CIRP the financial statements of the Company have been prepared on going concern basis. Under IAS 10 an entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period date either that it intends to liquidate the entity or to cease trading or that it has no realistic alternative but to do so. All operations have ceased in the case of Indian Subsidiaries of the Company other than Mercator Petroleum Ltd and Mercator Oil and Gas Limited while the coal business continues to generate revenues the Singapore High Court has ordered a Liquidation of MIPL which is the beneficial owner of the coal business through its step down subsidiaries. MCS holdings is also under liquidation. In all such cases the management has not prepared the financial statements on a going concern. However in view of non-availability of liquidation values of assets and liabilities of such subsidiaries the same are not stated at fair values.
2 Regarding the balances restated in the books of accounts of the Holding Company pursuant to admission of the claims submitted by the financial creditors of which Rs.22.43 crore is still under verification/not filed with Resolution Professional (RP). We are unable to comment on the financial impact of the same on the financial results of the Company. As per the Code the RP shall receive collate and admit all the claims submitted by the creditors of the Company. The RP has admitted certain claims of the creditors and is in the process of collating and verifying remaining claims and shall account for the verified claims against the Company as per the provisions of IBC 2016. The impact of the admitted claims has been considered in the preparation of the standalone financial results as on March 312021. Pending admission of the remaining claims received the impact of such claims if any that may arise has not been considered in the preparation of the aforesaid standalone financial results as on March 31 2021. At the standalone level Principal portion of loans from financial creditors in the books of the Corporate Debtor have been restated with the amounts admitted by RP as on ICD dates (Rs.920.49 crores). Total amount of claims towards principal dues of the financial creditors as on March 312021 stand as under:
a. Principal amount of Loans admitted by RP - Rs.920.49 crores
b. Claims under verification by RP/Not filed - Rs.22.43 crores
Total Rs.942.92 crores*
*In addition Contingent Claims arising out of Corporate Guarantee issued by the Company has been admitted by RP for Bank of Baroda (Principal amount of Rs.95.29 crores plus Interest amount of Rs.37.17 crores aggregating to Rs.132.46 crores) and DBS Bank India Ltd. (Principal amount of Rs.21.66 crores and interest of Rs.2.08 crores aggregating to Rs.23.74 crores).
3 Regarding non-compliance of Regulation 33(3)(h) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 wherein at least 80% of each consolidated revenue assets and profits respectively shall be reviewed by the respective auditors. The Financial Statement of none of the subsidiaries have been audited as at and for the year ended March 312021 and hence In terms of Regulation 33(3)(h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 The listed entity shall ensure that for the purposes of quarterly consolidated financial results at least eighty percent of each of the consolidated revenue assets and profits respectively shall have been subject to audit or in case of unaudited results subjected to limited review. The status of consolidation of financial results of all subsidiaries of the Company is as under:
we are unable to express any opinion on the subsidiary financial statements and thereby on the consolidated financial statements /financial information given the materiality of the subsidiaries. Status of financial information considered in preparing Consolidated Financial Statements is as under - (a) In view of initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) as mentioned in clause 5 (v) (c) above the financial statements of Mercator Petroleum Limited one of the material subsidiary of the Company for the quarter and year ended March 31 2021 have neither been certified by the management and IRP nor have been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available for the quarter and year ended March 312021.
1 . Mercator Oil and Gas Limited (MOGL) - Not Available Mar'2021 (b) The financial statements of Mercator Oil and Gas Limited another material subsidiary of the Company have neither been certified by the management and IRP nor have been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available with the Holding Company for the quarter and year ended March 312021.
2. Mercator Petroleum Limited (MPL) - Not Available Mar'2021 (c) The financial statements of Oorja Resources India Pvt. Ltd Mercator Offshore Logistics Pvt. Ltd. and Offshore Transport Pvt. Ltd. have neither been certified by the management and IRP nor have been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available with the Holding Company for the quarter and year ended March 312021.
3. Oorja Resources India Private Limited - Not Available Mar'2021 (d) Financials Statements of all Singapore subsidiaries and step down subsidiaries except Mercator International Pte Ltd. (MIPL) and MCS Holdings Pte Ltd. (MCS) have neither been certified by the management and IRP nor have been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available with the Holding Company for the quarter and year ended March 312021.
4. Mercator Dredging Private Limited. (FPSO) (Formerly Mercator Offshore Logistic Private Limited) - Not Available Mar'2021 (e) MCS Holdings Pte. Ltd. (under Liquidation) is currently undergoing the liquidation process pursuant to an Order of the High Court of the Republic of Singapore dated April 16 2021 and M/s Lim Soh Yen (NRIC No. S7672591H) and Lynn Ong Bee Ling Care (NRIC No. S7932085D) of Auctus Advisory Pte. Ltd. have been appointed as joint and several liquidators of MCS Holdings Pte. Ltd. The Financial Statements of MCS Holdings Pte Ltd. (MCS) have been certified by the management but have not been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available with the Holding Company for the quarter and year ended March 312021.
5. Mercator Oceantransport Limited - Not Available Mar'2021 (f) Mercator International Pte. Ltd. (under Liquidation) a material subsidiary of the Company at Singapore currently under liquidation process pursuant to an Order of the High Court of the Republic of Singapore dated April 9 2021 and M/s Lim Soh Yen (NRIC No. S7672591H) and Lynn Ong Bee Ling Care (NRIC No. S7932085D) of Auctus Advisory Pte. Ltd. have been appointed as joint and several liquidators of Mercator International Pte. Ltd. The Financial Statements of Mercator International Pte Ltd. (MIPL) have been certified by the management but have not been audited and the same have been considered for the purpose of preparation of Consolidated Financial Statements basis the financial information available with the Holding Company for the quarter and year ended March 312021.
6. Mercator International Pte. Limited - Management Certified Mar'2021 (g) Audited or management certified Financial Statements of all Indonesian subsidiaries (step down subsidiaries of MIPL) for the quarter and year ended March 31 2021 have not been provided to the Parent Company and hence their financial statements available for the 9 months period ended December 31 2020 have been considered for the purpose of preparation of Consolidated Financial Statements for the quarter and year ended March 312021.
7. Offshore Holdings Company Pte. Limited - Not Available Mar'2021 As none of the audited Financial Statement of the Subsidiaries were available as on March 31 2021 the Company could not comply with the aforesaid regulations.
8 Oorja Holdings Pte. Limited - Not Available Mar'2021 Due to non-availability of relevant information from the subsidiaries cash flow disclosures have been prepared based on limited facts available and may not depict correct facts for certain reporting done.
9. Mercator Energy Pte Limited - Under Liquidation June'2020 Interest or any other charges has not been accrued in the books of accounts of Holding Company from the date of commencement of CIR process i.e. 8th February 2021 onwards on account of moratorium under section 14 of Code.
10. Mercator Offshore Assets Holding Pte Limited - Under Liquidation June'2020 The Group has last carried out valuation of underlying investment in coal mining and logistic company situated in Indonesia for determining of fair valuation of these financial assets as per local regulations as on December 312020. The Group had recognized reduction in fair value of such financial instrument amounting to Rs.24.56 Crore (USD 3.34 Mn) in the quarter ended March 31 2021. Such reduction was on account of account of sharp fall in coal prices reduction in absolute realization of coal handling fees for one of major customer cost of production and change in assumption of terminal value based on extension of mining license. The fair value as on March 31 2021 can be substantially different in view of the valuation factors.
11. Mercator Offshore (P) Pte Limited - Under Liquidation June'2020 At standalone level Non-Current Tax Assets as on March 312021 amount to Rs.54.83 crore includes Rs.69.19 crore which has not been settled due to on-going tax assessment for 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.
12. Panther Resources Pte Limited - Not Available Mar'2021 MOGL was engaged in EPC project awarded by ONGC for conversion of their Mobile Offshore Drilling Unit (MODU) 'Sagar
13. Oorja (Batua) Pte. Limited - Not Available Mar'2021 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. 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 previous year. Based on the progress of the arbitration proceedings and discussion with the legal counsel the management is hopeful of a positive outcome in the claim of INR 1925 crores filed against ONGC. Accordingly the Company has reversed 50% impairment of interest income (Rs.2.13 crores) and amount advanced to MOGL (Rs.0.69 crores) during the preceding three quarters of FY 2020-21 (other receivables) and made 50% impairment for the last quarter ended March 312021 for an amount of Rs. 0.71 crore (Rs.2.84 crore in the year ended March 312021) towards accrued interest on loan given to MOGL and Rs.0.70 crores (Rs.0.70 crore in the year ended March 31 2021) towards amount advanced to MOGL. Further one of the operational creditors has filed petition u/s 9 of IBC 2016 wherein the NCLT bench has kept the status as "Reserved for Order.
14. Oorja 1 Pte. Limited - Not Available Mar'2021 A claim of Rs. 1925 crores (USD 262 Mn) has been made by the subsidiary company on ONGC. In the view of the management and based on legal advice an estimated amount of INR 1274 crores (USD 173.36 Mn) could probably be awarded as payable to the Company. However any impact of the settlement will be known only after completion of the ongoing arbitration proceedings. MOGL has an ongoing dispute with its consortium partner M/s Gulf Piping Co Ltd (GPC) and based on an order of the Abu Dhabi Court a final liability of USD 5.7Mn (Rs.43.05 crore) along with interest at 5% interest p.a. is payable to them. MOGL has filed scheme of arrangement in NCLT for deferring payment of all creditors and has considered the same as a contingent liability.
15. Oorja Mozambique Lda - No Financials Mar'2020 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.
16 MCS Holdings Pte. Ltd. - Management Certified Mar'2021 The subsidiary is confident of defending the amounts claimed by Directorate General of Hydrocarbon (DGH). In event of rejection of subsidiary's contention estimated financial impact would be approx. Rs.35.80 Crore.
17. PT Karya Putra Borneo - Not Available Dec'2020 The Board of Directors 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 crore. The Group has accordingly considered the amount of Rs.252 Crore under capital work in progress as an Asset Held for Sale. MPL has executed an amendment to the original Farm in Farm Out agreement dated December 26 2019 for extension of the long stop date to October 31 2020. The Company is hopeful of concluding the sale within the further extended timelines if and whenever agreed with the prospective buyer. The application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) filed by an Operational Creditor before the National Company Law Tribunal (NCLT) Mumbai Bench against one of the material subsidiary of the Company Mercator Petroleum Limited (MPL) was admitted vide the order of NCLT dated August 312020 (Order). In terms of Section 17 of the IBC the power of the Board of Directors stands suspended and all such powers stand vested in an Interim Resolution Professional (IRP) appointed vide the said Order who has taken charge under the directions of the Committee of Creditors. Further in terms of stipulations contained in Section 14 of the Code a moratorium has been declared vide the Order prohibiting certain stipulated actions. In terms of the update received from IRP as a part of the Corporate Insolvency Resolution Process (CIRP) IRP had invited Resolution Plans from the eligible bidders. IRP had received a positive response. As part of the process these Resolution Applicants have been carrying out the necessary due diligence.
18. PT Indo Perkasa - Not Available Dec'2020 During the quarter ended March 31 2021 the Company has provided additional impairment of Rs.1.17 crore (Rs.4.59 crore in the year ended March 312021) towards accrued interest on loan to Mercator Petroleum Limited (MPL) Rs.0.47 crore (Rs.1.89 crore in the year ended March 312021) towards interest accrued on 6% optionally convertible debentures issued by MPL and Rs.Nil (Rs.3.49 crore in the year ended March 31 2021) towards other receivables on evaluating the developments.
19. Oorja Indo Petangis Four - Not Available Dec'2020 All of the directors on the Board of Directors of the Company are disqualified as on March 31 2021 from being appointed as a director in terms of Section 164 (2) of the Companies Act 2013.
20. Oorja Indo Petangis Three - Not Available Dec'2020 Due to impediments created due to Covid lockdown the Holding Company and some of its subsidiaries have been able to obtain selective confirmations from various debtors loans and advances from banks and others current accounts from banks trade and other payables. Accordingly adjustments if any arising out of reconciliation with these parties is not readily available. The Company has carried out its internal assessment and provided/ written off/ back these receivables/ payables/ loans and advances.
21. Bima Gema Permata PT - Not Available Dec'2020 In case of MPL Independent Director Chief Financial Officer and Company secretary had resigned during the year ended March 31 2020. The management has not filled the said vacancy until date of reporting.
22. Oorja Indo KGS - Not Available Dec'2020 In case of MOGL Independent Director had resigned during the year ended March 312020. The management has filled the said vacancy. Mr. Jagmohan Talan and Mrs. Ritu Vats were appointed as Additional Directors (Non-Executive & Independent) of the Company with effect from September 26 2020. Further Mr. H K Mittal resigned as a Director with effect from September 26 2020 citing personal reasons.
23. Broadtec Mozambique Minas Lda - Not Available Mar'2020
24. Marvel Value International Limited (BVI) - Dissolved effective August'2020
Further due to non - availability of the relevant financial information from the subsidiaries certain reporting done in the statement of cash flow may not reflect the correct position.
4 Regarding interest or any other charges not being accrued in the books of accounts of the Holding Company from the date of commencement of CIR process i.e. 8th February 2021 onwards on account of moratorium under section 14 of Code.
5 Regarding the Group's investment carried at Fair Value through Profit and Loss Account pertaining to its coal mining and related infrastructure assets in Indonesia on which reduction in fair value of Rs. 24.56 crore was recognized during the year ended March 31 2021 basis an independent valuation report conducted on December 31 2020. We are unable to comment on the impact on the fair valuation of these financial assets and consequently the financial results had the valuation been done as on March 31 2021 or the impact of the liquidation of the intermediate subsidiary.
6 Regarding unprovided current tax demands under dispute pertaining to Holding Company to the tune of Rs.63.18 crore pending at various judicial forums of the Income Tax department. In the absence of the required supporting documents justifying the stand of the Holding Company we are unable to comment on final outcome of such assessments and the potential financial impact of the same.
7 Regarding termination of Sagar Samrat Conversion Project (SSCP) undertaken by a
subsidiary Mercator Oil & Gas Ltd. (hereinafter referred as "MOGL" or "subsidiary") by ONGC which is currently under arbitration. The amount standing under Other Financial Assets is Rs. 204.60 crore. The amount of recoverability and ultimate impairment would depend on the outcome of the arbitration proceedings which is uncertain as on the date of financial results.
8 Regarding one of the consortium partners in SSCP ('GPC') has filed a claim against the MOGL in Abu Dhabi First Instance Court wherein the Court after review sought for work undertaken and change of assessment base ordered MOGL to pay USD 5.7 million (equivalent Rs.41.90 crore) and interest @ 5% p.a. from date of case filed until actual payment. However MOGL had not accepted the claim and recognized Rs.22.97 crore as contingent liability on the subject matter. Further one of the operational creditors has filed petition u/s 9 of IBC 2016 wherein the NCLT bench has kept the status as "Reserved for Order". The financial statements as on March 312021 has been incorporated basis the information available with the management of the Holding Company however the same is not certified by the management of the MOGL. In the view of the above we are unable to comment on the potential financial impact of the same on the Consolidated Financial Results.
9 Regarding notice received by a subsidiary company Mercator Petroleum Limited (hereinafter referred to as "MPL") from the Ministry of Petroleum and Natural Gas (MOPNG) for termination of Production Sharing Contract (PSC) for one of its non-operative oil Block and has demanded costs and other dues to be determined as per terms and conditions of PSC. In case MPL's stand is not accepted by MOPNG the estimated financial impact on the group would be to the tune of Rs.35.80 crore. Further the impact of insolvency proceedings as MPL is under insolvency the impact of the same has not been considered.
10 Regarding the fact that MPL had entered into a Farm-in Farm-out ('FIFO') agreement and deed of assignment with one of the prospective buyers for sale of participating interest ('PI') in oil block CB-9. As per the FIFO agreement the estimated sale price for PI in CB-9 was approximately Rs. 252 crore however the long stop date has expired and the transaction has not been concluded as yet. MPL on the basis of the aforesaid agreement had revalued its non-current asset and provided impairment loss aggregating to Rs. 12.75 crore in the previous financial year. As per Ind AS 105 an entity should value its non-current asset held for sale at the lower of carrying amount or fair value. Further the petition filed in NCLT Mumbai Bench by an operational creditor against MPL has been admitted vide Order dated Aug 31 2020 and an Interim Resolution Professional (IRP) has been appointed. As per the explanations provided to us and basis the financial results / financial information provided by the management / RP of the Holding Company MPL has not been able to provide any valuation report with respect to fair value of oil block CB-9 on which reliance can be placed. The financial statements as on March 31 2021 has been incorporated basis the information available with the management of the Holding Company however the same is not certified by the management or IRP of the MPL.
11 The Holding Company has failed to pay the installment due of the debentures on the due date and failed to pay the interest due thereon for a continuous period of more than a year. Hence all the directors of the Holding Company are disqualified from being appointed as director in terms of Section 164 (2) of the Act.
12 Regarding balance confirmations not been received in respect of various secured / unsecured loans trade receivables trade and other payables and loans and advances for several entities of the group as a result of which reconciliation process and consequential adjustments if any has not been carried out in these entities. The Group has adjusted / provided significant amounts basis its internal estimates against which necessary supporting documentation has not been made available for verification.
13 Regarding non - compliance of Section 134 and 149 of the Companies Act 2013 in case of certain material subsidiaries.

SECRETARIAL AUDIT REPORT:

Pursuant to the provisions of Section 204 of the Act read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 your Companyhad appointed M/s. Shalinder Kaur & Associates Company Secretaries as SecretarialAuditor of the Company for the financial year 2020-21 at the meeting of the Board (RP& Directors) held on June 23 2021 and thereafter ratified by the Committee ofCreditors. The Company has obtained the Secretarial Audit Report for the financial yearended on March 31 2021 from M/s. Shalinder Kaur & Associates Company Secretarieswhich is appended as Annexure IV and forms part of this report.

With respect to the responses on behalf of the Company on all theobservations made by the Secretarial Auditor (as appended under Annexure IV of thisReport) this is to place on record that the sincere efforts and necessary steps are beingtaken by the Company to rectify the non- compliances as observed during the period underreview. Further as the members are aware that there was a nationwide lockdown as directedby the Central and the State Governments due to prevailing COVID-19 Pandemic covering themajority of period under review as a result of which the Company faced various hardshipsin complying with certain statutory requirements as prescribed under the laws applicableto the Company.

In regard to the compliances with respect to the Listing Regulationsit is hereinafter worthy to mention that in terms of sub-regulation 2A and 2B ofRegulation 15 of Listing Regulations as amended from time to time the provisions asspecified in Regulations 17 to 21 shall not be applicable to the listed entity which isundergoing CIRP under the Code. Accordingly the provisions specified in Regulations 17 to21 are not applicable to the Company with effect from quarter ended March 312021.

ANNUAL SECRETARIAL COMPLIANCE REPORT:

Pursuant to circular No. CIR/ CFD/ CMD1/ 27/ 2019 dated

February 8 2019 issued by Securities and Exchange Board of India(SEBI) the Company has obtained Annual Secretarial Compliance Report from M/s ManishGhia & Associates Company Secretaries on compliance of all applicable SEBIRegulations and circulars/guidelines issued thereunder and the same has been submitted tothe Stock Exchanges.

MAINTENANCE OF COST RECORDS:

Pursuant to the provisions of Section 148(1) of the Act the governmenthas not prescribed maintenance of the cost records in respect of services dealt with bythe Company. Hence the prescribed section for maintenance of cost records is notapplicable to the company during the year under review.

INTERNAL AUDIT

Pursuant to the provisions of Section 138 of the Act the Company wasrequired to appoint an internal auditor. The Company has appointed M/s. J D Jhaveri &Associates Chartered Accountants as the Internal Auditor of the Company.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO:

Your Company operates offshore and onshore activities in environmentfriendly manner. The major activities carried by the Company are offshore and your Companywork towards minimizing the impact of its operations on the environment including marinelife. Several steps are taken for conservation of energy some of which are listed below:

(A) Conservation of Energy:

(i) The steps taken or impact on conservation of energy:

• Having regular track on weather updates M/E RPM and settings ofthe Auto Pilot System of Vessels are adjusted accordingly which in turn helps to save thefuel oil.

Besides the crews are properly trained to steer in bad weather usingminimum Rudder movements.

• Cleaning of Hull and Polishing the propeller in afloat conditionof some of the vessels was done

• To reduce the Hull Roughness and thereby fuel consumption.

• Using the latest Performance Monitoring Technology helps inmaintaining engines and generators of Vessels in good conditions; which leads higheroperation efficiently and reduce consumption of energy considerably.

• Weekly inspection of entire vessels and providing training toCrew and Officers about preservation of resources by Master brings the consumption ofenergy down.

• Machineries are run efficiently by following the laid downprocedures and following the PMS (Planned Maintenance Schedule) so that fuel consumptionare kept under control.

• Machineries which are not required are immediately shut downthis reduces the load on generators which leads to fuel saving.

• Cargo Planning load and discharge is done in such a way so as touse relevant cargo gear to the optimum levels. Ballasting and De-ballasting is carried outby using gravity which shortens time frame to use pumping arrangements this in turn helpsus to reduce fuel consumption.

(ii) The steps taken by the company for utilizing alternate sources ofenergy: Since your Company operates mostly from offshore; options for utilizing ofalternate sources of energy options are minimal but your Company takes every necessarystep to use alternate energy source as and when available.

(iii) The capital investment on energy conservation equipment's: YourCompany has not made any material capital investment on energy conservation equipmentduring the year. All vessels are equipped with Exhaust Gas Economizers so that the hotexhaust gases which are going up the funnel are used to provide heat source this piece ofequipment undergoes regular repairs and maintenance.

(B) Technology Absorption:

Your Company has neither entered into technical collaboration with anyentity relating to technology absorption nor imported any technology during the year.

(C) Foreign Exchange Earnings and Outgo:

Your Company has earned foreign exchange of Rs.0.03 crores (previousyear Rs. 69.12 crore) and spent Nil (previous year Rs.14.13 crore) in foreign exchange onaccount of import of stores & spares capital goods repairs / renovations of vesselsbunker other vessel expenses travelling and interests etc.

(D) Expenditure Incurred on Research & Development:

During the year the Company has not incurred any expenditure onresearch and development.

ANNUAL RETURN:

As per the requirements of Section 92(3) of the Act and Rules framedthereunder the Annual Return in the prescribed format is available on the website of theCompany at www.mercator.co.in.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

In compliance with regulations under the Act CSR Committee has beenconstituted and CSR policy has been adopted by the Company. Since the Company has beenincurring losses accordingly during the year under review the liability of the Companytowards CSR was NIL. Therefore in accordance with the applicable provisions of Section135 of the Act read with rules thereunder the reporting on CSR shall not be required. Thedetails of the Committee are set out in the Report on Corporate Governance forming part ofthis Report.

PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN ANDSECURITIES PROVIDED:

Particulars of loans given investments made guarantees given andsecurities provided along with the purpose for which the loan or guarantee or security isproposed to be utilized by the recipient are provided in the standalone financialstatements.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

All related party transactions that were entered into during thefinancial year; were on an arm's length basis and in the ordinary course of business. Therequirement of giving particulars of contracts/arrangement made with related parties inForm AOC-2 are not applicable for the year under review. There were no materiallysignificant related party transactions made by the Company with Promoters Directors orKey Managerial Personnel which may have a potential conflict with the interest of theCompany at large. All Related Party Transactions are placed before the Audit Committee forapproval. Prior omnibus approval of the Audit Committee is obtained on yearly basis forthe transactions which are of a foreseen and repetitive nature. The transactions enteredinto pursuant to the omnibus approval so granted are audited and a statement givingdetails of all such related party transactions is placed before the Audit Committee andthe Board of Directors for their approval on quarterly basis. The Company has framed aRelated Party Transactions policy to ensure proper identification approval process andreporting of transactions. The policy on Related Party Transactions as approved by theBoard is available on the Company's website at www.mercator.co.in

RISK MANAGEMENT POLICY:

The Company has a Risk Management Committee. The details of Committeeand its terms of reference are set out in the Corporate Governance Report forming part ofthis Report. The Company has framed policy to identify evaluate business risks andopportunities and to mitigate the risk. The policy defines the risk management approach atvarious levels including documentation and reporting. The policy helps in identifyingrisks trend exposure and potential impact analysis at a Company level as also separatelyfor business segments.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has in place adequate internal financial controls. TheAudit Committee of Directors periodically reviews the internal control systems with thetop management and the Statutory and Internal Auditors. The Audit Committee also looksafter adequacy of internal audit function significant findings of the internal audit andsubsequent follow-up action on the same from time to time.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has a Vigil Mechanism and Whistle Blower Policy forDirectors and employees to deal with instance of fraud and mismanagement. The policyfacilitates reporting of genuine concern or grievances unethical behavior actual orsuspected fraud or violation of the Code of Conduct of the Company or its ethics Policy.They provide adequate safeguards to Directors/employees who avail of the mechanism. Thesame is overseen by the Audit Committee. During the year under review no personnel of theCompany approached the Audit Committee on any issue falling under the Policy. The saidPolicy is posted on the website of the Company at www.mercator.co.in

INFORMATION UNDER THE SEXUAL HARASSMENT OF WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013:

The Company has zero tolerance for sexual harassment at workplace andtherefore has adopted a "Policy on Prevention Prohibition and Redressal of SexualHarassment at workplace" in line with the provisions of the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 "POSH Act"and the Rules made thereunder. An Internal Compliant Committee (ICC) had been set up incompliance with the provision of the said Act. However since in the last quarter theCompany had entered in the process of CIRP and since there are no employees other than theChief Financial Officer of the Company hence the provisions of the POSH Act becomeineffective. During the year under review no complaint was registered under the saidprovision.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 134(3)(c) of the Act theDirectors hereby confirm that:

i. In preparation of the annual accounts for the financial year endedMarch 31 2021 the applicable accounting standards had been followed along with properexplanation relating to material departures if any;

ii. They have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 312021 andof loss of the Company for the year ended on that date;

iii. They have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provision of the Companies Act 2013to safeguard the assets of the Company and to prevent and detect fraud and otherirregularities;

iv. They have prepared the annual accounts for the financial year endedMarch 312021 on a going concern basis;

v. They have laid down internal financial controls to be followed bythe company and that such internal financial controls are adequate and were operatingeffectively; and

vi. They have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS ORCOURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

Except as disclosed in this Report no significant and material orderwas passed by any regulator or court or tribunal which impacts the going concern statusof the Company or will have any bearing on Company's operations in future.

TRANSFER OF SHARES TO INVEST OR EDUCATION AND PROTECTION FUND:

Pursuant to Sections 124 and 125 of the Act read with the InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016 ("IEPF Rules") dividends if not claimed for a consecutive period of 7years from the date of transfer to Unpaid Dividend Account of the Company are liable tobe transferred to the Investor Education and Protection Fund ("IEPF"). Furthershares in respect of such dividends which have not been claimed for a period of 7consecutive years are also liable to be transferred to the Demat account of the IEPFAuthority.

During the year under review the Company has not transferred anyshares to the IEPF Authority in respect of which dividend had not been paid or claimed bythe members for seven consecutive years or more.

The Company has intiated steps to communicate to the concernedshareholders whose equity shares are liable to be transferred to the IEPF to enable themto take appropriate action for claiming the unclaimed dividends and equity shares if anyby due date November 29 2021 failing which the Company would transfer the aforesaidequity shares to the IEPF as per the procedure set out in the Rules. The details of suchequity shareholders and equity shares due for transfer are uploaded on the website of theCompany (www.mercator.co.in).

DISCLOSURE IN RESPECT OF STATUS OF APPLICATION OR PROCEEDING PENDINGUNDER THE INSOLVENCY AND BANKRUPTCY CODE:

The Company is undergoing the CIRP which has been initiated vide anorder no. CP(IB) 4404/2019 dated February 08 2021 ("Order") of the Hon'bleNational Company Law Tribunal Mumbai Bench in terms of the provisions of the Insolvencyand Bankruptcy Code 2016 ("Code") pursuant to an application filed by ICICIBank Financial Creditor of the Company bearing Company Petition No. (IB) 4404/MB/2019 inthe matter of ICICI Bank Ltd v/s Mercator Ltd & Anr. under Section 7 of the Code.Pursuant to the Order Mr. Girish Siriram Juneja was appointed as the Interim ResolutionProfessional (IRP) and subsequently confirmed as the Resolution Professional (RP) by theCommittee of Creditors (CoC).

Currently the Resolution Plans for the revival of the Company are yetto be submitted by the Prospective Resolution Applicants (PRAs) in accordance with theprovisions of the Code and regulations framed thereunder.

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIMEOF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS ORFINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF:

During the year under review no such valuation was done at the time ofone time settlement and while taking loan from bank or financial institution.

SECRETARIAL STANDARDS

During the year under review the Company has complied with theapplicable Secretarial Standards issued by the Institute of Company Secretaries of India.

ACKNOWLEDGEMENTS:

The Directors express their sincere thanks to all customers suppliersservice providers regulators Governmental agencies and other statutory authorities fortheir continued whole hearted support to the Company during the year. We also acknowledgethe support lent and confidence bestowed upon us by our bankers and stakeholders.

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