REG - Mercantile Ports&Log - Full Year Results
27/06/2024 07:15
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RNS Number : 0384U Mercantile Ports & Logistics Ltd 27 June 2024
27 June 2024
Mercantile Ports & Logistics Limited
("MPL" or the "Company")
Full Year Results
Mercantile Ports & Logistics Limited (AIM: MPL) which is operating and
continuing to develop a port and logistics facility in Navi Mumbai,
Maharashtra, India, is pleased to announce its preliminary results for the
year ended 31 December 2023.
Chairman's Statement
Overview
Mercantile Ports & Logistics continues to make solid strategic progress,
and we have delivered promising financial performance in the year. The Group
operates and continues to develop a port and logistics facility (the
"Facility") in Navi Mumbai, Maharashtra, India. On completion, the Facility
will be uniquely positioned to capitalise on the growing levels of commerce in
the Maharashtra region, and will include a container freight station, cold
chain facility, reefer container zone and logistics facility dedicated to
handling perishable commodities.
We are pleased to report financial performance for the year ended 31 December
2023 (the "period"). The Company delivered revenues of £ 5.5 million.
Statutory loss before tax was £ 21.26 million, equating to 0.11 pence per
share.
From the below table it is evident that the Group is delivering increased
efficiency within its operations and the Group has now become EBITDA positive.
FY23 FY22
£ 000 £ 000
Gross Margin 3,045 3,423
Admin Expenses -3,266 -3,737
Other Income 590
EBITDA 369 -314
With the signing of new contracts, the directors are confident of the future
prospects of the Group and business at the facility. The Board brings together
vast experience across the port operations and logistics sectors. Leveraging
this experience, we are focused on delivering long term shareholder value via
organic growth, margin expansion and cash generation.
Strategic and Operational review
The Group made strong strategic progress within the year following its first
year of uninterrupted operations for the Facility in 2023. The Group has
signed several new contracts, including a 10-year contract with one of the
largest regional coal traders, which is expected to import volumes of 4.5
million MTs in first three years of operation. Furthermore, the Company signed
a contract with one of the largest cement companies in India for the retail
handling of cement and the development of a dedicated cement terminal at the
Facility for customers.
The Company was proud to support Tata Daewoo in delivering its section of the
Mumbai Trans-Harbour Link (now named as Atal Setu by the Government of India).
Other significant infrastructure projects taking place in the region, such as
the construction of the Navi Mumbai International Airport (located 16 km from
the Facility) will attract project cargo such as cement and steel and the
Directors expect the Company to be a beneficiary. Each project reflects
positive commercial tailwinds in the region as the Board aims to increase the
utilisation of the Facility.
In the coming months the Group will further diversify its commodity mix by
increasing handling of Cargo Containers at the facility. The government
permissions allow the Facility to receive containers directly from JNPA,
enabling customers to avoid lengthy delays in transportation bottlenecks. The
Group successfully undertook trial shipments of containers during the year.
Debt Refinancing
A key focus of the Board for 2023 was to further enhance the terms of its debt
facility and good progress has been made. The Board believes that the Group
will benefit strongly from positioning the Group's debt profile to match the
long-term, back-ended cash flow generation curve that is typical of
infrastructure projects such as the Facility. We are building a Group for the
long-term, and refinancing the Group's debt is vital to achieve our goals.
We continue to work closely with our lenders for re-phasement of the loan
facility from a seven-year repayment period to fourteen years including a
two-year moratorium on principal repayments. We expect to announce further
information on the Company's banking arrangements by mid July 2024. While this
process has taken longer than originally envisaged, this is not inconsistent
with the experiences of other customers of state-owned banks in India. The
Company continues to have an excellent relationship with its banks and remains
confident of securing a facility with much more attractive terms.
Outlook
On behalf of the Board, I would like to thank our investors for their
continued support, including their participation in the Company's successful
equity fundraising last June, as MPL develops into a successful revenue and
profit-making company.
The fundraising enabled us to continue to pursue our strategy and I am pleased
to report that 2024 has seen us make further progress. In particular, we have
onboarded a large Oil & Gas producer as port user. This company has
started using Karanja Port for its supply vessel operations for loading and
unloading supplies to it offshore oil assets.
In addition, we are in discussions with several parties for leasing land for
fabrication works for infrastructure and Oil & Gas sectors.
Finally, I thank all our employees for their continued dedication and
professionalism. Our employees are essential to the continued success of our
Group, and the Board extends its sincere appreciation for their hard work.
Jeremy Warner Allen
Chairman
Mercantile Ports & Logistics Limited
27 June 2024
Operational Review
Indian Economy
The directors are pleased to present their operational review for the year
ended 31(st) December 2023.
The country's remarkable growth rate of 8.4% in the third quarter of the
FY2023-24 (October-December 2023) surpassed all expectations, and growth is
expected to continue. The directors set out below an operational update on the
performance for the period and expectations for the future. With a number of
strategic new customers and ongoing economic growth the Company considers
itself to be well placed to capitalise on this growth.
Expectations for the near-term future remain in line with previous forecasts
with a slight change in the forecast range due to a higher base effect in
FY2023-24 (Source: India Economic Outlook | Deloitte Insights). Deloitte
expects GDP growth to be around 6.6% in the next fiscal year FY2024-25 and
6.75% in the year after FY2025-26, as markets learn to factor in geopolitical
uncertainties in their investment and consumption decisions.
Indian Economy Resilient
Key highlights:
1. Robust growth: India's economy continues to show resilience,
growing at a rate of approximately 8.4% in Q3 of FY24, surpassing expectations
(Source: India Economic Pulse | EY - India). This growth is driven by factors
such as strong tax revenue collections, increased government capital spending,
firm domestic demand (including rural demand), and growth in manufacturing and
construction sectors.
2. Sectoral performance: The manufacturing sector saw significant
growth of 11.6% in Q3 of FY24. Additionally, infrastructure, real estate, and
construction sectors are experiencing momentum, with key segments like steel
and cement witnessing double-digit growth.
3. Domestic demand: Various indicators such as automobile sales,
passenger traffic, robust GST collections, rising electricity demand, and
growth in household credit point towards sustained domestic demand.
4. Macroeconomic stability: Stable repo rates, government bond
yields, exchange rates, and healthy foreign exchange reserves indicate
macroeconomic stability.
5. Challenges and concerns: Despite the overall positive outlook,
there are areas of concern. Declining non-oil merchandise exports, moderated
service exports, and reduced foreign investments highlight challenges in the
external sector. Sluggish private investment, as reflected in stagnant FDI,
VC/PE investments, and credit growth to manufacturing, underscores the need
for acceleration in the private capex cycle.
6. Global economic context: While global growth is projected at
3.1%, which is below historical averages, there are signs of resilience with
moderating inflation and positive service/manufacturing PMIs. (Source: India
Economic Pulse | EY - India)
Overall, while India's economy is performing well amid global challenges,
addressing concerns such as declining exports and sluggish private investment
will be crucial for sustaining growth momentum in the future.
Operations Update
Revenue grew by 8% from £4.9 mn in 2022 to £5.5 mn in 2023. The growth in
revenue was adversely impacted due to (i) the war between Ukraine and Russia
and the latest being the war between Israel and Palestine/Lebanon which has
adversely impacted the shipping business across the world; (ii) following
JSW's acquisition of PNP Maritime Port for captive use, they decided to sell
all the coal lying with them in the hinterland and this compelled importers to
defer coal imports in the region; and (iii) the delay in restructuring the
Group's existing debt facility consuming significant bandwidth of the
management.
Borrowings:
There were no movements in Borrowings during the period. However, the interest
liability due for the period March 2023 to December 2023 is being shown under
Financial Liability.
Cash & cash equivalent at the end of the period 2023 stood at £2.88 mn.
In June 2023, MPL raised gross proceeds from equity investors of £9.0 mn.
MPL initiated a valuation exercise and utilized an independent external agency
to support in preparing the value in use calculations assessing the impact of
impairment of the Port asset in its financial projections over the lease
period. Based on the assessment undertaken, there is an impact of £9.85 mn
impairment charge which is recognised in this financial year. A detailed
explanation is provided in Note 2, Significant Accounting Policies.
From an operations perspective, 2023 was the second full year of uninterrupted
operations for the Port. Karanja Port was able to handle over c1.33 Mn MT of
Cargo.
The facility was able to demonstrate its ability to be a 24x7 facility with
the commencement of night navigation (berthing / de-berthing of vessels at
night).
With seamless operations established in 2022, the focus was more on refining
the logistics operations to achieve higher margin efficiency and ironing out
teething issues.
The volume of coal handled grew approx. 20% from 1.0 mn MT in 2022 to 1.2 mn
MT in 2023. However, this was slightly below expectations due to the below
factors.
The volume of coal handled during 2023, was partly impacted due to:
· High volatility in Coal prices (that impacted trading volumes) during
the months of Jun'23 and Jul'23
· India saw a severe monsoon during Jul'23 to Sep'23
The Port received positive feedback from its customers regarding the overall
efficiency of operations and appreciation for the fact that no demurrage was
incurred by any customer over 2023.
Our customer Sanghi Cement was acquired by a large cement company, marking a
significant milestone in its growth journey. However, this led to suspension
of operations in 2H-2023 through the integration phase of the acquisition.
Post completion of the transaction, this large cement company entered into a
fresh contract for use of Karanja Port facilities with much higher volume
visibility with intention to utilize Cement imported through MPL's facility
for use in the construction of the Navi Mumbai International Airport and one
of the largest real estate redevelopment projects in Mumbai city. The
construction of the International Airport is expected to span a 3-4 year
period. The real estate development call the Dharavi Project is expected
to span a 7-10 year period.
MPL is proud to have onboarded one of India's largest Oil & Gas company as
its port user. This company after a long and thorough due diligence process
commenced operations at the MPL facility by handling of offshore supply
vessels at the port. To this extent, they have publicly announced commencement
of services from Karanja Port via an official post on X.
MPL continues to strengthen its business development and operations team,
including on the container side of the business as it prepares to start
handling containers during the course of 2024, in line with the Group's
strategy to target higher margin container business.
Karanja Port is ideally positioned as an alternative to road evacuation of
containers coming in to the Jawaharlal Nehru Port Authority ("JNPA") region.
Currently, 6.43 Mn TEUs are flowing into JNPA. With the fourth terminal of
JNPA becoming active this year, the number of TEUs flowing into JNPA is
expected to increase to 9.0 - 10.0 mn TEUs in the next 3-4 years.
Karanja Port and JNPA have the same customs jurisdiction, the Jawaharlal Nehru
Customs House (JNCH).
Karanja Port container Terminal aspires to be one of the largest container
handling facilities in the state of Maharashtra and one of the few with a
waterfront.
In addition, there are two important developments (i) Strategic Customer Win
(details below); and (ii) Positioning part of the reclaimed land at Karanja
Port as a storage hub for Perishables (details in Strategic Report).
MPL has been in discussion with their lenders to rephase the debt facility
from 7 years to 14 years of repayment. The process was initiated in the
February 2023 and is expected to be completed by mid-July 2024.
Going Concern
In determining the appropriate basis of preparation of the financial
statements for the period ended 31 December 2023, the Directors are required
to consider whether the Group can continue in operational existence for a
period of at least 12 months from the approval of these financial statements.
The Board has concluded that the Group is a going concern and the Annual
Report and Accounts have been prepared on that basis, having undertaken a
rigorous assessment of the financial forecasts with specific consideration to
the trading position of the Group.
The financial year 2023 has been a year engulfed in War between Ukraine and
Russia and the latest being the war between Israel and Palestine/Lebanon which
has adversely impacted the shipping business across the world and results for
the period.
The Board has assessed the Group's ability to operate as a going concern for
the next 18 months from the date of signing the financial statements to the
31(st) December 2023, based on the financial model which was prepared as part
of approving the 2024 budget. This is considered the appropriate period of
assessment, as it is in line with the board approved budgets and captures the
seasonality of cash flows.
The Group's principal loan repayments and interest accrued since March 2023
until the period end remain unpaid, due to the current restructuring proposal
being at an advanced stage with the head office of the Group's lead banker. A
precondition of the proposed plan would be to repay the overdue monies up to
December 2023 prior implementing the restructuring plan, on the sanctioning of
the restructuring.
However, the operations at the Karanja Port is in the process of ramp up with
the signing of fresh contracts with a large cement company and ongoing
business with the one of India's largest Oil & Gas company for their
operations at our port, and the Directors are optimistic on the Group's
potential at the Port for FY24 onwards and hence have considered the cash
forecasts 24 months from 1 January 2024 up to 31(st) December 2025, together
with certain assumptions for revenue and costs, to satisfy on the
appropriateness of the going concern used in preparing the financial
statements.
Regarding financing, the group had capital of £ 2.88 million cash balance as
at 31 December 2023. While the Indian subsidiary has already submitted the
fresh proposal in February, 2023 for restructuring of the term loan with its
current consortium of lenders, the board is confident of receiving the
sanction by mid-July 2024 with the proposal now in its final phase of
sanction. Payments of principal and interest have not been made since March
2023 while bank negotiations are ongoing.
The directors have prepared a base case scenario, in which sales are forecast
to increase significantly due to the ramp up of operations set out above.
Management have prepared a severe but plausible downside scenario ('severe
downside scenario'), where growth expectations are not achieved, the bank
restructuring is not included and all payments of principal and interest are
made, including contractual payments due by 31st December not yet paid. The
severe downside scenario has a significant adverse impact on sales, gross
margin and cash flows including a 40% reduction in sales for FY24 and FY25
against Managements' base case scenario.
The severe downside scenario modelled indicates that there would be a
shortfall of cash within the going concern period. To cope with an
eventuality of any shortfall during the period, an additional line of
unsecured credit limit from KJS Concrete Private Limited (Hunch Ventures group
company) amounting to £ 15 million has been made available to mitigate
funding risk as well as ensuring continuity in business.
The Directors also took account of the principal risks and uncertainties
facing the business referred to above, and a sensitivity analysis on the key
revenue growth assumption with effectiveness of available mitigating actions.
A range of mitigating actions within the control of management has been
assumed, including managing our regular vendors with bare minimum support and
extension of credit during these critical years and also controlled
expenditure on all non-essential services.
The directors have determined that, over the period of the going concern
assessment, there is not expected to be a significant impact resulting from
climate change
The Group continues to closely monitor and manage its liquidity risk. In
assessing the Group's going concern status, the Directors have taken account
of the financial position of the Group, anticipated future utilisation of
available fund, its capital investment plans and forecast of gross operating
margins as the business evolves and ramps up. The Company has had frequent
conversations to date with its longstanding syndicate and advisers.
Based on the above indicators, after taking into account the recent
fundraising and the renegotiation on the debt restructuring, and line of
credit from Hunch Ventures that would cover any shortfall in a severe but
plausible downside scenario, the Directors believe that it remains appropriate
to continue to adopt the going concern in preparing the forecasts.
Consolidated Statement of Comprehensive Income
for the Year ended 31 December 2023
Notes Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
CONTINUING OPERATIONS
Revenue 4 5,462 4,872
Cost of sales 5 (2,417) (1,449)
Gross margin 3,045 3,423
Administrative expenses 6 (3,266) (3,747) *
Other income 590 --
Depreciation 12a (5,581) (6,231) *
Impairment loss 12a (9,853) --
OPERATING LOSS (15,065) (6,555)
Finance income 7(a) 25 38
Finance cost 7(b) (6,225) (5,543)
NET FINANCING COST (6,200) (5,505)
LOSS BEFORE TAX (21,265) (12,060)
Tax income /(expense) for the year 8 -- 2,421
Loss FOR THE YEAR (21,265) (9,639)
Loss for the year attributable to:
Non-controlling interest (43) (18)
Owners of the parent (21,222) (9,621)
LOSS FOR THE YEAR (21,265) (9,639)
Other Comprehensive (Loss)/income:
Items that will not be reclassified subsequently to profit or (loss)
Re-measurement of net defined benefit liability 24 27 1
Items that will be reclassified subsequently to profit or (loss)
Exchange differences on translating foreign operations (5,015) 808
Other comprehensive expense for the year (4,988) 809
(26,253) (8,830)
Total comprehensive expense for the year
Total comprehensive expense for the year attributable to:
Non-controlling interest (43) (18)
Owners of the parent (26,210) (8,812)
(26,253) (8,830)
Earnings per share (consolidated):
Basic & Diluted, for the year attributable to ordinary equity holders 10 (0.105p) (0.232p)
* Depreciation has been re-grouped from Administrative expenses to present
it separately. This is considered to be a change in accounting policy from
prior year, but is deemed to considered to provide more useful information on
entity performance for the period, due to the significance of depreciation to
the statement of comprehensive income and clearer understanding of entity
trading performance.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2023
Notes Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Assets
Property, plant and equipment 11(a) 105,355 127,382
Intangible asset 11(b) 63 14
Non-current tax assets 19 (a) -- 2,108
Total non-current assets 105,418 129,504
Current tax assets 19 (b) 2,114 --
Inventory of traded goods 72 96
Trade and other receivables 12 16,339 14,110
Investments 13 173 --
Cash and cash equivalents 14 2,881 558
Total current assets 21,579 14,764
Total assets 126,997 144,268
Liabilities
Non-current
Employee benefit obligations 18 35 53
Borrowings 19 36,399 39,165
Lease liabilities payable 20 1,457 1,611
Non-current liabilities 37,891 40,829
Current
Employee benefit obligations 17 276 529
Borrowings 18 10,672 2,307
Current tax liabilities 19 (c) 61 17
Lease liabilities payable 20 335 817
Trade and other payable 20 4,131 8,388
Current liabilities 15,475 12,058
Total liabilities 53,366 52,887
Net assets 73,631 91,381
Equity
Stated Capital 16 152,354 143,851
Retained earnings 16 (47,217) (26,022)
Translation Reserve 16 (31,444) (26,429)
Equity attributable to owners of parent 73,693 91,400
Non-controlling Interest (62) (19)
Total equity 73,631 91,381
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Year ended 31 December 2023
Notes Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax (21,265) (12,060)
Non cash flow adjustments 22 21,548 11,748
Operating (loss) before working capital changes 283 (312)
Net changes in working capital 22 (224) 305
Taxes paid (6) (85)
Net cash used in operating activities 53 (92)
CASH FLOW FROM INVESTING ACTIVITIES
Used in purchase of property, plant and equipment (PPE) (1,651) (1,425)
Sale proceeds of PPE 6 --
Finance Income 8 25 38
Net cash used in investing activities (1,620) (1,387)
CASH FLOW FROM FINANCING ACTIVITIES
From issue of additional 5,640 --
shares
Fund raise cost (941) --
Subscription money received (from the previous fund raise) 797 2,452
Repayment of bank borrowing principal (99) (881)
Interest paid on borrowings (749) (4,217)
Principal repayment of lease liabilities (737) (138)
Interest payment on leasing liabilities principal (9) --
Net cash from financing activities 3,902 (2,784)
2,335 (4,262)
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of the year 558 4,783
Exchange difference on cash and cash equivalents (12) 37
Cash and cash equivalents, end of the year 2,881 558
Consolidated Statement of Changes in Equity
for the Year ended 31 December 2023
Stated Translation Retained Other Non- controlling Interest Total
Capital Reserve Earnings Components of equity Equity
£000 £000 £000 £000 £000 £000
Balance at 143,851 (26,429) (26,022) -- (19) 91,381
1 January 2023
Issue of share capital 9,444 -- -- -- -- 9,444
Share Issue cost (941) -- -- -- -- (941)
Transaction with owners 152,354 (26,429) (26,022) -- (19) 99,884
Loss for the year -- -- (21,222) -- (43) (21,265)
Foreign currency translation difference for foreign operations -- (5,015) -- -- -- (5,015)
-- -- -- 27 -- 27
Re-measurement of net defined benefit liability
-- -- 27 (27) -- --
Re-measurement of net defined benefit liability transfer to retained earning
-- (5,015) (21,195) -- (43) (26,253)
Total comprehensive income for the year
Balance at 152,354 (31,444) (47,217) -- (62) 73,631
31 December 2023
Balance at 143,851 (27,237) (16,402) -- (1) 100,211
1 January 2022
Transaction with owners -- -- -- -- -- --
Loss for the year -- -- (9,621) -- (18) (9,639)
Foreign currency translation difference for foreign operations -- 808 -- -- -- 808
-- -- -- 1 -- 1
Re-measurement of net defined benefit liability
-- -- 1 (1) -- --
Re-measurement of net defined benefit liability transfer to retained earning
-- 808 (9,620) -- (18) (8,830)
Total comprehensive income for the year
Balance at 143,851 (26,429) (26,022) -- (19) 91,381
31 December 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Mercantile Ports & Logistics Limited (the "Company") was incorporated in
Guernsey under The Companies (Guernsey) Law, 2008 with registered number 52321
on 24 August 2010. Its registered office and principal place of business is
1st Floor, Tudor House, Le Bordage Rd, Guernsey GY1 1DB. It was listed on the
Alternative Investment Market ('AIM') of the London Stock Exchange on 7
October 2010.
The consolidated financial statements of the Company comprise of the financial
statements of the Company and its subsidiaries (together referred to as the
"Group"). The consolidated financial statements have been prepared for the
year ended 31 December 2023, and presented in UK Sterling (£).
The principal activities of the Group are to develop, own and operate a port
and logistics facilities. As of 31 December 2023, the Group had 45
(Forty-five) (2022: 44 (Forty-four)) employees.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PREPARATION
The consolidated financial statements have been prepared on a historical cost
basis except where otherwise stated. The consolidated financial statements of
the Group have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and interpretations as adopted by the European
Union and also to comply with The Companies (Guernsey) Law, 2008.
Climate Change and its impact on Karanja Port
Introduction
Climate change poses a significant threat to global sea ports, which are
critical nodes in international trade and transportation. The rising sea
levels, increased frequency and intensity of storms, and shifting weather
patterns associated with climate change present multifaceted challenges to
port operations and infrastructure.
The company has anticipated following key impacts of climate change for its
operational activity:
1. Sea Level Rise:
- Inundation of Port Facilities: Rising sea levels may inundate low-lying port
areas, causing structural damage to port infrastructure such as berth, open
and covered storage yard, storm water drain and road.
- Increased Flooding: Higher sea levels exacerbate the risk of flooding,
particularly during high tides and storm surges, leading to operational
disruptions and increased maintenance costs. This may lead to a significant
downtime for revival and smooth operation.
2. Extreme Weather Events:
- Storm Surges: More frequent and severe storms can cause significant damage
to port infrastructure, delay shipping schedules, and increase the risk of
accidents and cargo loss. In 2020, Karanja Port was impacted severely by
cyclone named "Nisarga" which led to financial loss of approximately 0.7
mn (₹7 Crore). Similar natural catastrophic situations can be anticipated in
future with major financial implication.
- High Winds and Heavy Rainfall: These conditions can disrupt loading and
unloading operations, damage cargo, and pose safety risks to port
employees/workers. However, this is covered in the Port insurance.
3. Temperature Changes:
- Thermal Expansion: Higher temperatures cause thermal expansion of sea
water, contributing to sea level rise, leading to additional maintenance cost.
4. Infrastructure Stress:
- Wear and Tear: Increased exposure to saltwater and extreme weather
conditions accelerates the wear and tear on port infrastructure leading to
increase in maintenance cost and significant stress to capital cost.
- Adaptation and Resilience Costs: Ports need to invest in resilient
infrastructure and adaptive measures, such as raising berth levels in future
and improving drainage systems.
Karanja Port has adapted following strategies to mitigate the above
anticipated challenges:
1. Infrastructure Upgrade:
- Elevating Structures: Raising the height of berth, ground level of open
and covered storage yard and other critical infrastructure can help mitigate
the risk of flooding. This will increase the expected lifespan on the project
and ROI.
- Storm Surge Drainage: Constructing storm surge drainage can protect
Karanja port from water logging or flood caused due to rising sea levels and
storm surges.
2. Operational Changes:
- Flexible Scheduling: Emergency management plan for such
extreme climate changes are already in place in Karanja Port for Implementing
flexible scheduling of the operational vessels to compensate the delays caused
by extreme weather and can help the port to maintain operational efficiency.
- Enhanced Monitoring: The operations team is already vigilant and has
adopted advanced weather forecasting and sea level monitoring systems to
provide early warnings and improve preparedness for extreme events.
3. Environmental and Regulatory Measures:
- Adopting and complying to Environmental Regulations: Karanja Port is already
complying with all the relevant environmental regulations and international
guidelines to ensure that ports contribute to global climate mitigation
efforts.
- Sustainable Practices: Karanja Port has adopted sustainable practices, such
as waste management, water stewardship, efficient use of power, optimum vessel
and equipment operations to reduce emissions from port operations to help
mitigate the port's environmental footprint.
4. Collaborative Efforts:
- Stakeholder Engagement: Karanja Port promotes involvement of internal and
external stakeholders for example improvement of local community by preferring
engagement of local contractors and candidates for
employment. Out of the total staff strength, the company has employed 34%
locals at the port currently and implementing the policies in the benefit of
employees.
CONCLUSION
Since Karanja Port is on the frontline of climate change impacts, facing such
significant challenges requires immediate and sustained action. MPL board has
been in serious discussion internally to address this concern through
strategic planning, infrastructure investment, and collaborative efforts.
Karanja Port, can enhance its resilience to climate change and ensure the
continuity of trade and transportation. Addressing these challenges
proactively will be critical in safeguarding the economic and operational
stability of the port. However, the Management has secured the port with a
full coverage by insuring the asset to mitigate from all risk of uncertainties
and eventualities.
Going Concern
In determining the appropriate basis of preparation of the financial
statements for the period ended 31 December 2023, the Directors are required
to consider whether the Group can continue in operational existence for a
period of at least 12 months from the approval of these financial statements.
The Board has concluded that the Group is a going concern and the Annual
Report and Accounts have been prepared on that basis, having undertaken a
rigorous assessment of the financial forecasts with specific consideration to
the trading position of the Group.
The financial year 2023 has been a year engulfed in War between Ukraine/Russia
and the latest being the war between Israel and Palestine/Lebanon which has
adversely impacted the shipping business across the world and results for the
period.
MPL board has assessed the Group's ability to operate as a going concern for
the next 18 months from the date of signing the financial statements to the
31st December 2025, based on the financial model which was prepared as part of
approving the 2024 budget. This is considered the appropriate period of
assessment, as it is in line with the board approved budgets and captures the
seasonality of cash flows. The current principal loan repayments since March
2023 quarter till the balance sheet date as well as the interest for the
period from March 2023 to December 2023 is unpaid, due to the current
restructuring proposal being at an advanced stage with the head office of the
lead banker, the precondition of the proposed sanction would be to prepay the
over dues up to December 2023 prior implementing the restructuring plan, on
sanctioning of the restructuring.
However, the operations at the Karanja Port are in the process of ramp up with
the signing of fresh contracts with a large cement company and announcement of
ongoing business with one of India's largest Oil & Gas company for their
operations at our port, and the Directors are very optimistic about the
business potentials at the Port for the period 2024 onwards and hence have
considered the cash forecasts Twenty Four months from 1 January 2024 up to
31st December 2025, together with certain assumptions for revenue and costs,
to satisfy on the appropriateness of the going concern used in preparing the
financial statements.
Regarding financing, the group had capital of £ 2.88 million cash balance as
at 31 December 2023. While the Indian subsidiary has already submitted the
fresh proposal in February, 2023 for restructuring of the term loan with its
current consortium of lenders, the board is confident of getting the sanction
by end of June 2024 and the proposal is in its final phase of sanction.
Payments of principal and interest have not been made since March 2023 while
bank negotiations are ongoing.
The directors have prepared a base case scenario, in which sales are forecast
to increase significantly due to the ramp up of operations set out above.
Management have prepared a severe but plausible downside scenario ('severe
downside scenario'), where growth expectations are not achieved, the bank
restructuring is not included and all payments of principal and interest are
made, including contractual payments due by 31st December not yet paid. The
severe downside scenario has a significant adverse impact on sales, gross
margin and cash flows including a 40% reduction in sales for FY24 and FY25
against Managements' base case scenario.
The severe downside scenario modelled indicates that there would be a
shortfall of cash within the going concern period. To cope with an
eventuality of any shortfall during the period, an additional line of
unsecured credit limit from KJS Concrete Private Limited (Hunch Ventures Group
Company) amounting to £ 15 million is availed to mitigate funding risk as
well as ensuring continuity in business.
The Directors also took account of the principal risks and uncertainties
facing the business referred to above, and a sensitivity analysis on the key
revenue growth assumption with effectiveness of available mitigating actions.
A range of mitigating actions within the control of management has been
assumed, including managing our regular vendors with bare minimum support and
extension of credit during these critical years and also controlled
expenditure on all non-essential services.
The directors have determined that, over the period of the going concern
assessment, there is not expected to be a significant impact resulting from
climate change
The Group continues to closely monitor and manage its liquidity risk. In
assessing the Group's going concern status, the Directors have taken account
of the financial position of the Group, anticipated future utilization of
available fund, its capital investment plans and forecast of gross operating
margins as the business evolves and ramps up. The Company has had frequent
conversations to date with its longstanding syndicate and advisors.
Based on the above indicators, after taking into account the recent
fundraising and the renegotiation on the debt restructuring, and line of
credit from Hunch Ventures that would cover any shortfall in a severe but
plausible downside scenario, the Directors believe that it remains appropriate
to continue to adopt the going concern in preparing the forecasts.
b) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the results of the Company
and entities controlled by the Company (its subsidiaries) up to 31 December
2023. Subsidiaries are entities over which the Company has the power to
control the financial and operating policies. The Company obtains and
exercises control through holding more than half of the voting rights. The
financial statements of the subsidiaries are prepared for the same period as
the Company using consistent accounting policies. The fiscal year of Karanja
Terminal & Logistics Private Limited (KTPL) ends on March 31 and its
accounts are adjusted for the same period for consolidation.
Amounts reported in the financial statements of subsidiaries have been
adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
Non-controlling interest
Non-controlling interest, presented as part of equity, represent the portion
of a subsidiary's profit or loss and net assets that is not held by the Group.
The Group attributes total comprehensive income or loss of subsidiaries
between the owners of the parent and the non-controlling interests based on
their respective ownership interest.
c) LIST OF SUBSIDIARIES
Details of the Group's subsidiaries which are consolidated into the Company's
financial statements are as follows:
Subsidiary Immediate Parent Country of Incorporation % Voting Rights % Economic Interest
Karanja Terminal & Logistics (Cyprus) Ltd Mercantile Ports & Logistics Limited Cyprus 100.00 100.00
Karanja Terminal & Logistics Private Limited* Mercantile Ports & Logistics Limited India 8.11 8.11
Karanja Terminal & Logistics Private Limited* Karanja Terminal & Logistics (Cyprus) Ltd. India 91.67 91.67
Karanja Terminal & Logistics (Cyprus) Ltd is wholly owned subsidiary of
Mercantile Ports and Logistics Limited. Karanja Terminal & Logistics
(Cyprus) Ltd holds 91.67% shares, Mercantile Ports & Logistics Limited
holds 8.11% shares in Karanja Terminal & Logistics Private Limited and the
balance 0.22% (50,0000 shares out of 22,968,727) is held by various other
minority shareholders.
* Financial year end for Karanja Terminal & Logistics Private Limited
("KTLPL") is April to March, as same is governed by Companies Act 2013, but
for preparing group financials we have considered January to December period.
d) FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented in UK Sterling (£), which
is the Company's functional currency. The functional currency for all of the
subsidiaries within the Group is as detailed below:
· Karanja Terminal & Logistics (Cyprus) Ltd ("KTLCL") - Euro
· Karanja Terminal & Logistics Private Limited ("KTLPL") - Indian
Rupees
Foreign currency transactions are translated into the functional currency of
the respective Group entity, using the exchange rates prevailing at the date
of the transactions (spot exchange rate). Foreign exchange gains and losses
resulting from the settlement of such transactions and from the retranslation
of monetary items denominated in foreign currency at the year-end exchange
rates are recognised in the Consolidated Statement of Comprehensive Income.
Non-monetary items are not retranslated at year-end and are measured at
historical cost (translated using the exchange rates at the transaction date).
In the Group's financial statements, all assets, liabilities and transactions
of Group entities with a functional currency other than GBP are translated
into GBP upon consolidation.
On consolidation, the assets and liabilities of foreign operations are
translated into GBP at the closing rate at the reporting date. The income and
expenses of foreign operations are translated into GBP at the average exchange
rates over the reporting period. Foreign currency differences are recognised
in other comprehensive income in the translation reserve. When a foreign
operation is disposed of, in part or in full, the relevant amount in the
translation reserves shall be transferred to the profit or loss in the
Consolidated Statement of Comprehensive Income.
e) REVENUE RECOGNITION
Revenue mainly consists of services relating to use of the port by customers
and includes services such as hiring of land, wharf-age, hiring of equipment,
loading/unloading, stevedoring, storage and from value added activities i.e.
trading activities which is incidental to providing port services.
Revenue is measured based on the consideration to which the group expects to
be entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. The group recognises revenue when it transfers
control of a product or service to a customer.
Performance obligations are satisfied on handing over the land and / or
equipment to the customer / lessee, completion of loading/unloading,
stevedoring services, providing storage facilities and shipment of goods on
customers' vehicle.
To determine whether to recognise revenue, the Group follows a 5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognizing revenue as and when performance obligation(s) are
satisfied.
The total transaction price for a contract is allocated amongst the various
performance obligations based on their relative standalone selling prices. The
transaction price for a contract excludes any amounts collected on behalf of
third parties.
Revenue is recognised either at a point in time or over time, when (or as) the
Group satisfies performance obligations by transferring the promised goods or
services to its customers.
Contract asset - The Group's recognises contract asset i.e. right to
consideration in exchange for goods or services that the Group has transferred
to a customer,
Contract liability - The Group's obligation to transfer goods and services to
a customer for which the Group has received consideration (or the amount is
due) from the customer.
The Group recognises contract liabilities for consideration received in
respect of unsatisfied performance obligations and reports these amounts as
other liabilities in the statement of financial position. Similarly, if the
Group satisfies a performance obligation before it receives the consideration,
the Group recognises either a contract asset or a receivable in its statement
of financial position, depending on whether something other than the passage
of time is required before the consideration is due. Invoicing for services is
set out in the contract.
The group does not believe there are elements of financing in the contracts.
There are no warranties or guarantees included in the contract.
The specific recognition criteria described below must also be met before
revenue is recognised.
Port operation and logistics services
Revenue from port operation services including cargo handling, storage, other
ancillary port and logistics services including the end-to-end value-added
services with respect to coal supply and delivery are measured based upon
cargo handled at rates specified under the contract and charged on per metric
tonne basis.
The performance obligation is satisfied using the output method; this method
recognises revenue based on the value of services transferred to the customer,
for example, quantity of cargo loaded and unloaded and/or transported.
Revenue is recognized in the accounting period in which the services are
rendered and completed till reporting date. Amounts are invoiced based on the
estimated arrival date of the vessel provided by the customer, and revenue
recognised when the service is provided.
Management determines if there are separate performance obligations from which
customer are being able to benefit from, for example, barging, stevedoring or
transportation.
Performance obligations are considered on a contract-by-contract basis against
the requirements of IFRS 15. For each service the customer can benefit from
the good or service with "resources that are readily available to the
customer". The nature of the promise to the customer is considered within the
context of the individual customer contract and whether the promise to
transfer a combined item of overall port services, which can vary on a per
customer basis.
Revenue from sale of traded goods
Revenue from sale of traded goods i.e. coal is recognized on transfer of
control to the customers, which is generally on dispatch of goods to the
customer. The delivery is handled by the customer and therefore control is
deemed to have been transferred to the customer at this point and is invoiced
on delivery.
Sales are stated exclusive of Goods and Service Tax ("GST").
Income from long term leases
As a part of its business activity, the Group sub-leases land on a short-term
basis to its customers.
The headlease is not a short-term lease and thus the sublease must be
classified by reference to the right-of-use asset arising from the head lease,
rather than by reference to the economic useful life of the underlying asset.
As a part of its business activity, the Group sub-leases land on a short-term
basis to its customers. It is concluded that the subleases is an operating
lease because none of the indicators for a finance lease in IFRS 16 are
present.
The lease income is recognised from the sublease on a straight-line basis over
the period of lease / sub-lease agreement / date of memorandum of
understanding takes effect over lease period and annual lease rentals are
recognised on an accrual basis.
Amounts are invoiced as the service provided, on either a monthly or ad hoc
usage basis depending on the customer.
Interest income
Interest income is reported on an accrual basis using the effective interest
method.
f) Borrowing cost
Borrowing costs directly attributable to the construction of a qualifying
asset are capitalised during the period of time that is necessary to complete
and prepare the asset for its intended use. Other borrowing costs are expensed
in the period in which they are incurred and reported under finance costs.
g) Share based payments
The Group has entered into a equity-settled share-based arrangement with its
service provider.
All services received in exchange for the grant of any share-based payment are
measured at the fair value of services received. The service provider is
rewarded with share-based payments, the number of shares issued in exchange
for the services received based on the fair values of services.
All share-based payments is recognised as an expense in the Statement of
Comprehensive Income with a corresponding credit to Share Capital up to the
nominal value of the shares issued with any excess being recorded as Share
Premium.
h) EMPLOYEE BENEFITS
i) Defined contribution plan (Provident Fund)
In accordance with Indian Law, eligible employees receive benefit from
Provident Fund, which is a defined contribution plan. Both the employee and
employer make monthly contributions to the plan, which is administrated by the
government authorities, each equal to the specific percentage of employee's
basic salary. The Group has no further obligation under the plan beyond its
monthly contributions. Obligation for contributions to the plan is recognised
as an employee benefit expense in the Consolidated Statement of Comprehensive
Income when incurred.
ii) Defined benefit plan (Gratuity)
In accordance with applicable Indian Law, the Group provides for gratuity, a
defined benefit plan (the Gratuity Plan) covering eligible employees. The
Gratuity Plan provides a lump sum payment to vested employees, at retirement
or termination of employment, and amount based on respective last drawn salary
and the years of employment with the Group. The Group's net obligation in
respect of the Gratuity Plan is calculated by estimating the amount of future
benefits that the employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present
value. Any unrecognised past service cost and the fair value of plan assets
are deducted. The discount rate is a yield at reporting date on risk free
government bonds that have maturity dates approximating the term of the
Group's obligation. The calculation is performed annually by a qualified
actuary using the projected unit credit method. When the calculation results
in a benefit to the Group, the recognised asset is limited to the total of any
unrecognised past service cost and the present value of the economic benefits
available in the form of any future refunds from the plan or reduction in
future contribution to the plan.
The Group recognises all re-measurements of net defined benefit
liability/asset directly in other comprehensive income and presents them
within equity.
iii) Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis
and are expensed as a related service provided. A liability is recognised for
the amount expected to be paid under short term cash bonus or profit-sharing
plans if the Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
i) Leases
As a lessee
The Company mainly has lease arrangements for converting the waterfront into
reclamation of land for construction of Port for terminal and logistics
operations. The land thus reclaimed consist of the open space and also
offices, warehouse spaces and equipment.
The Group assesses whether a contract contains a lease at inception of the
contract. The Group recognises a right-of-use asset and corresponding lease
liability in the statement of financial position for all lease arrangements
where it is the lessee, except for short-term leases with a term of twelve
months or less and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease.
The lease liability is initially measured at the present value of the future
lease payments from the commencement date of the lease. The lease payments are
discounted using the interest rate implicit in the lease or, if not readily
determinable, the asset and company specific incremental borrowing rates.
Lease liabilities are recognised within borrowings on the statement of
financial position. The lease liability is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the
lease payments made. The Group re-measures the lease liability, with a
corresponding adjustment to the related right-of-use assets, whenever:
• The lease term changes or there is a significant event
or change in circumstances resulting in a change in the assessment of exercise
of a purchase option, in which case the lease liability is re-measured by
discounting the revised lease payments using a revised discount rate;
• The lease payments change due to the changes in an index
or rate or a change in expected payment under a guaranteed residual value, in
which case the lease liability is re-measured by discounting the revised lease
payments using an unchanged discount rate;
• A lease contract is modified, and the lease modification
is not accounted for as a separate lease, in which case the lease liability is
re-measured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
modification.
The right-of-use assets are initially recognised on the SOFP at cost, which
comprises the amount of the initial measurement of the corresponding lease
liability, adjusted for any lease payments made at or prior to the
commencement date of the lease, any lease incentive received and any initial
direct costs incurred, and expected costs for obligations to dismantle and
remove right-of use assets when they are no longer used. Right-of-use assets
are recognised within property, plant and equipment on the statement of
financial position. Right-of-use assets are depreciated on a straight-line
basis from the commencement date of the lease over the shorter of the useful
life of the right-of-use asset or the end of the lease term.
The Group enters into lease arrangements as a lessor with respect to some of
its time charter vessels. Leases for which the Group is an intermediate lessor
are classified as finance or operating leases by reference to the right-of-use
asset arising from the head lease. Income from operating leases is recognised
on a straight-line basis over the term of the relevant lease. Amounts due from
lessee under finance leases are recognised as receivables at the amount of the
Group's net investment in the leases. Finance lease income is allocated to
accounting periods so as to reflect a constant periodic rate of return on the
Group's net investment outstanding in respect of these leases.
As a lessor
As a lessor the Group classifies its leases as either operating or finance
leases. The Group assessed whether it transfers substantially all the risks
and rewards of ownership. Those assets that do not transfer substantially all
the risks and rewards are classified as operating leases. The Group has
currently not entered into any lease that is classified as finance lease.
Lease income from operating leases where the Company is a lessor is recognized
in income on a straight-line basis over the lease term unless a systematic
basis more representative of the pattern in which benefit from the use of the
underlying asset is diminished is suitable
j) INCOME TAX
Tax expense recognised in profit or loss comprises the sum of deferred tax and
current tax not recognised in other comprehensive income or directly in
equity. Current income tax assets and/or liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the current or
prior reporting periods, that are unpaid at the reporting date. Current tax is
payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax laws that
have been substantively enacted by the end of the reporting period.
Deferred tax
The income tax is being accounted under the asset and liability method, which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements. Under this method, we determine deferred tax assets and
liabilities on the basis of the differences between the financial statement
and tax bases of assets and liabilities by using enacted tax rates in effect
for the year in which the differences are expected to reverse. The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in
income in the period that includes the enactment date.
Deferred tax assets are recognized to the extent that management believes that
these assets are more probable than not to be realized. In making such a
determination, it considers all available positive and negative evidence,
including future reversals of existing taxable temporary differences,
projected future taxable income, tax-planning strategies, and results of
recent operations. If it is determined that it would be able to realize the
deferred tax assets in the future in excess of the net recorded amount, the
necessary adjustment would be made to the deferred tax asset valuation
allowance, which would reduce the provision for income tax.
k) FINANCIAL ASSETS
The Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging
instruments, are classified into the following categories:
• amortised cost
• fair value through profit or loss ("FVTPL")
• fair value through other comprehensive income ("FVOCI").
In the periods presented, the corporation does not have any financial assets
categorised as FVTPL or FVOCI.
The classification is determined by both:
• the entity's business model for managing the financial asset
• the contractual cash flow characteristics of the financial
asset.
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold
the financial assets and collect its contractual cash flows
• the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments as
well as listed bonds that were previously classified as held-to-maturity under
IFRS 9.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking information to
recognise expected credit losses - the 'expected credit loss (ECL) model'.
This replaces IFRS 9's 'incurred loss model'. Instruments within the scope of
the new requirements included loans and other debt-type financial assets
measured at amortised cost and FVOCI, trade receivables, contract assets
recognised and measured under IFRS 15 and loan commitments and some financial
guarantee contracts (for the issuer) that are not measured at fair value
through profit or loss.
l) FINANCIAL LIABILITIES
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under
IFRS 9 , the Group's financial liabilities were not impacted by the adoption
of IFRS 9. However, for completeness, the accounting policy is disclosed
below.
The Group's financial liabilities include borrowings, trade and other payables
and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for derivatives and financial liabilities
designated at FVTPL, which are carried subsequently at fair value with gains
or losses recognised in profit or loss (other than derivative financial
instruments that are designated and effective as hedging instruments). In the
periods presented, the corporation does not have any financial liabilities
categorised as FVTPL or FVOCI.
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in profit or loss are included within finance
costs or finance income.
m) PROPERTY, PLANT AND EQUIPMENT
MPL's balance sheet contains significant property, plant and equipment, and
right-of-use assets primarily comprising of assets relating to port, office,
plant and machinery, vehicles and other movable assets. Items of property,
plant and equipment are measured at cost less accumulated depreciation and
impairment losses.
All the expenditures directly attributable in respect of the port and
logistics facility under development are carried at historical cost under
Capital Work in Progress as the Board believes that these expenses will
generate probable future economic benefits. These costs include borrowing
cost, professional fees, construction costs and other direct expenditure.
After capitalisation, management monitors whether the recognition requirements
continue to be met and whether there are any indicators that capitalised costs
may be impaired.
Cost includes expenditures that are directly attributable to the acquisition
of the asset and income directly related to testing the facility is offset
against the corresponding expenditure. The cost of constructed asset includes
the cost of materials, sub-contractors and any other costs directly
attributable to bringing the asset to a working condition for its intended
use. Purchased software that is integral to the functionality of the related
equipment is capitalised as part of that equipment.
Parts of the property, plant and equipment are accounted for as separate items
(major components) on the basis of nature of the assets.
The Indian subsidiary has constructed and developed the port which is now
fully operational. The basic infrastructure is ready, however, depending on
the specification of the customer and cargo dimension, the ground improvement
etc. will be carried out and made worthy for operation and once complete will
be accordingly transferred from Capital Work-in-Progress to Property, Plant
and Equipment when the assets deemed ready to use. Hence, the Group has been
prudently transferring the assets to Property, Plant and Equipment on the
basis of utilisation of space for operations.
Gains or losses arising on the disposal of property, plant and equipment are
determined as the difference between the disposal proceeds and the carrying
amount of the assets are recognised in profit or loss within other income or
other expenses.
Right-of-use assets:
Right-of-use assets, the cost is equivalent to the present value of the future
lease payments relating the leased assets. This note also details nay
additions and disposals during the year, and shows depreciation, which is an
expense in the income statement to reflect the usage of these assets.
Right of use assets are initially measured at cost, which is an amount equal
to the corresponding lease liabilities (present value of future lease
payments) adjusted for any lease payments made at or before the commencement
date, less any lease incentives received. (See note on lease liabilities
accounting policy).
Depreciation is calculated by estimating how many years the asset is expected
to be in use, which is also known as the useful economic life (UEL) of the
asset. The depreciation charge reduces the initial value of the assets over
the time and spread evenly over their UELs. The value after deducting
accumulated depreciation is known as the net book value.
No depreciation is charged during the course of construction on the Port
Assets. Depreciation is calculated for all other assets to write off the cost
or valuation, less residual value, on a straight-line basis over the following
expected UELs:
Useful economic lives
The estimated useful lives for the current year are as -
Assets Estimated Life of assets
Lease hold Land Development Over the period of Concession Agreement by Maharashtra Maritime board (MMB).
Marine Structure, Dredged Channel Over the period of Concession Agreement by Maharashtra Maritime board (MMB).
Non-Carpeted Road other than RCC 3 Years
Office equipment 3-5 Years
Computers 2-3 Years
Computer software 5 Years
Plant & machinery 15 Years
Furniture 5-10 Years
Vehicles 5-8 Years
Depreciation methods, useful lives and residual value are reassessed at each
reporting date.
Right-of-use assets depreciated over the shorter of the lease period and
estimated useful life.
Impairment of Property, Plant and Equipment
Internal and external sources of information are reviewed at the end of the
reporting period to identify indications that the property, plant and
equipment may be impaired. When impairment indicators exist, Management
compares the carrying value of the property, plant and equipment with the fair
value determined as the higher of fair value less cost of disposal or value in
use, also refer note 3.
For impairment assessment purposes, assets are grouped at the lowest levels
for which there are largely independent cash inflows (cash-generating units).
As a result, some assets are tested individually for impairment and some are
tested at cash-generating unit level.
MPL has a sole Cash Generating Unit (CGU) namely, Karanja Port in India since
inception. The Port Assets are reviewed for evidence of a trigger for
potential impairment at least annually or whenever events or circumstances
indicate that the value on the balance sheet may not be recoverable.
Impairment testing is performed on cash generating units (CGUs) which is the
Port itself, this being the lowest level of separately identifiable cash
flows.
An impairment loss is recognised as follows:
Description Amount in
£ million
Enterprise Value 108.72
Carrying Value of the CGU (118.57)
Net Enterprise Value (Impairment) (9.85)
From the above, it is evident that an impairment loss is recognised on the
amount by which the asset's net book value exceeds its recoverable amount, the
latter being the higher of the asset's fair value less cost to dispose and
value in use. Value in use calculation is performed using cash flow
projections, discounted at a post-tax rate, which reflects the asset specific
risks and the time value of money.
Property, plant and equipment is stated at cost, net of accumulated
depreciation and/or impairment losses, if any. Based on the impairment review
performed the property, plant and equipment are impaired to the extent of £
9.85 million.
When an impairment loss subsequently reverses, the carrying amount of the CGU
is increased to the revised estimate of the recoverable amount, but ensuring
the increased carrying amount does not exceed the carrying amount that would
have been determined if no impairment loss had been recognised for the CGU in
prior years. A reversal of an impairment loss is recognised as a credit to the
income statement when recovery of performance is considered reasonably
certain.
n) Trade receivables and payables
Trade receivables are financial assets at amortised costs, initially measured
at the transaction price, which reflects fair value, and subsequently at
amortised cost less impairment. In measuring the impairment, the Group has
applied the simplified approach to expected credit losses as permitted by
IFRS9. Expected credit losses are assessed by considering the Group's
historical credit loss experience, factors specific for each receivable, the
current economic climate and expected changes in forecasts of future events.
Changes if any in expected credit losses are recognised in the Statement of
Comprehensive Income.
Trade payables are financial liabilities at amortised cost, measured
initially at fair value and subsequently at amortised cost using an effective
interest rate method.
o) Advances
Advances paid to the EPC contractor and suppliers for construction of the
facility are categorised as advances and will be offset against future work
performed by the contractor.
p) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and bank deposits that can
easily be liquidated into known amounts of cash and which are subject to an
insignificant risk of changes in value.
q) Stated capital and reserves
Shares have 'no par value'. Stated capital includes any premiums received on
issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from stated capital, net of any related income tax
benefits.
Foreign currency translation differences are included in the translation
reserve. Retained earnings include all current and prior year retained
profits.
r) New standard and interpretation
There are no accounting pronouncements, which have become effective from 1
January 2024 that have a significant impact on the Group's consolidated
financial statements.
Standards, amendments and interpretations to existing standards that are not
yet effective and have not been adopted early by the group
Following new standards or amendments that are not yet effective and have been
issued by the IASB which are not applicable or have material impact on the
Group.
· Amendments to IAS 1 - Presentation of Financial Statements relating to
Non-current Liabilities with Covenants and Classification of Liabilities as
Current or Non-current
· Amendments to IFRS 16 - Leases relating to Lease Liability in a Sale and
Leaseback
· Amendments to IAS 7 - Statement of Cash Flows and IFRS 7- Financial
Instruments: Disclosures relating to Supplier Finance Arrangements
· Amendments to IFRS 7
· IFRS S1 - General Requirements for Disclosure of Sustainability-related
Financial Information
· IFRS S2 - Climate-related Disclosures
CRITICAL ACCOUNTING ESTIMATE
a) Impairment
In line with the accounting policy, management assessed the value in use of
the CGU when testing for impairment. This requires estimation of the present
value of future cash flows expected to arise from the continuing operation of
the CGU. These estimates require assumptions over various factors, in
particular future sales, future margin performance and considering the
consolidated costs. Each of these areas are critical in estimating the present
value of future cash flows. Were there to be significant changes in these
estimations, the amount recognised in respect of impairment during the year
could be materially impacted, or impairment charges recognised in previous
years may be reversed.
While the operations at the Karanja Port is in the process of ramp up with
reputed corporates including one of India's largest Oil & Gas company and
a large cement company for their operations at Karanja Port, the Directors are
very optimistic about the business potential at the Port for the period 2024
onwards. The capacity utilisation of the port in essence drives the
revenue and the EBITDA generated by MPL through its CGU. The optimum
utilisation of the Port capacity is the essence and a driving force which
ramps up the revenue as well as the EBITDA margin of the group. The CGU will
be cash positive the moment capacity utilisation crosses the 35-40% range.
The Management is optimistic of the business growth and the future prospect on
behalf of Karanja Port. The optimism is supported by recent Traffic study done
by KPMG for demand assessment of ports in Mumbai for Karanja Port which
management consider highlights the opportunities available to seize upon.
However, while the Karanja Port is in the process of ramp up of the operations
and the Directors remain optimistic about the business potential at the Port
for the period 2024 onwards, the delays in ramp up of operations post covid-19
and results against expectations, have identified an indicator of impairment
and an impairment review has been performed.
Impairment testing is performed on cash generating units (CGUs) which is the
Port itself, this being the lowest level of separately identifiable cash
flows.
An impairment loss is recognised as follows:
Description Amount in
£ million
Enterprise Value 108.72
Carrying value of CGU (118.57)
Net Enterprise Value (Impairment) (9.85)
Value in use calculation is performed using cash flow projections, discounted
at a pre-tax post IFRS -16 rate, which reflects the asset specific risks and
the time value of money.
The impairment review considers the VIU of the CGU compared to the carrying
value in the first instance, and subsequently for fair value less cost to
dispose if the VIU is lower than the carrying value. The VIU calculation is
based on the remaining life of the Port assets i.e. the balance valid lease
period using the latest forecast data to adjust the specific cash flows. The
recoverable amounts of the impaired CGU are based on the VIU.
The growth rate and operating margins used in the estimate cash flows are
based on the current contracts on hand as well as advanced negotiations with
the current clients on their expansion of activities at Karanja port as
follows:
1) Esquire Contract (Existing Customer):
a. Increase in the estimated imports of coal for 2024 from 1.5 million MT
to 2-2.5 million MT;
b. Import of Silica Sand /Gypsum
c. Import of Steel / TMT bars
2) One of India's largest Oil & Gas company :
a. Increasing the number of OSV vessels to at least 25 vessels per month
per berth;
b. Increase the number of dedicated berth from 1 to 3 by 2026;
c. Discussions underway for use of Karanja Port facilities for Rig repair
and maintenance;
d. Use of Karanja Port facilities by 3(rd) party vendors/
partners/contractors/ associates for Oil & Gas sector operations;
e. Storage and supply of consumables to OSVs;
f. Supply of bunkers and Water supply to OSVs;
g. Other allied services.
3) Existing customer, had paused operations, restarted in 2024
a. They are intending to do full scale operation of berthing cements and
also on the verge of creating Silos at the Port for their uninterrupted supply
to their plant.
4) Rudra Marine (onboarded with plan to executed in 2024)
a. They will set up 3 tanks to facilitate storage for Base Oil, Edible Oil
and Bitumen.
5) Lucky Marine: (onboarded with plan to executed in 2024)
a. Container operations are expected to commence operation and ramp up
during 2024.
b. Contract signed
6) Project Cargo (new customer)
a. The Indian subsidiary is also in advanced negotiations with Afcons
infrastructure for the similar space which was earlier assigned to Tata Daewoo
JV, for constructing the new bridge from Uran to Revas Bridge for a period of
24- 30 months.
The key assumptions used in the VIU calculation are;
- A post-tax discount rate of 13.5% (2022: 13.4%) was calculated using
the weighted average cost of capital (WACC). An assessment was made of the
risks associated with the cashflows based on the forecast assumptions and a
risk adjustment included in the WACC.
- Port utilisation estimated to peak at 75% by 2030 (driven by bulk and
container cargo). It is important to note that this is a conservative
assumption. Generally, Ports operate at much higher capacity utilisation
levels even beyond 100 percent. In the current case, we have remained
conservative and assumed peak capacity utilisation around 75%.
- The forecast assumes that port utilization will be 26% in 2024, 31% in
2025, 41% in 2026 and 50% in 2027. The expected sales growth as a result of
increase in port utilisation with a CAGR ranging between from 50% to 60% to
2028 with steady growth of 0-1% per annum thereafter.
Based on the impairment review carried out, the group recognised a net
impairment of £9.85 million for the year.
In the VIU calculations, no specific impact has been included in respect of
climate change as it is not expected to be materially different to the
forecast assumptions during the forecast period. Certain movable assets are
expected to be replaced at the end of their UEL by those that have a lower
impact on the environment. Cash outflows that are directly associated with
CGUs have been included in the discounted cash flow modelling.
Sensitivities in the impairment modelling
The impairment model is prepared on very conservative assumptions. Generally,
Ports operate at 100-110% of the installed capacity as peak capacity
utilisation. In addition, ramp up in capacity utilisation is steep preponing
cash flows at higher or peak capacity utilisation.
In case of MPL, not only the ramp up in capacity utilisation is assumed to be
gradual, but also the peak capacity utilisation is taken at 77% instead of
110% in the impairment model. To add to the conservative assumptions, the
tariff revenue on handling per MT of cargo is also assumed to be constant
while G&A expenses are assumed to see a steady incline year on year.
However, the below sensitivity analysis reflects a reasonably plausible
alternative scenario for impairment evaluation.
Sensitivity Adjustment Net Impairment Impact £ in mn
Decrease in port utilisation by 2% Additional Charge -£8.25
Increase in port utilisation by 2% Additional Release £8.25
EBITDA decreased by 2% Additional Charge -£1.88
EBITDA increased by 2% Additional Release £1.88
G&A increased by 5% Additional Charge -£2.22
G&A decreased by 5% Additional Release £2.22
WACC increased by 50 bps Additional Charge -£5.37
WACC decreased by 50 bps Additional Release £5.79
The management exercised a sensitivity analysis on the financial model for the
immediate future to ascertain the impact of increase/ decrease under various
heads in the model:
i. Port Capacity utilization:
Increase: Catalyst drivers for Revenues are majorly the Bulk Cargo and
Container Cargo. Any increase in traffic at the Port will enhance the Port
utilization, which will contribute to the improvement of business performance
and thus release the charge on the impaired asset.
Decrease: Decrease in the Port Utilization capacity due to climate conditions,
deferment of operations may adversely impact and thus increase the charge of
impairment on the asset.
ii. General & Administration Expense:
Increase: Major Cost contributing to G&A are the Cost of Personnel,
Insurance, Professional Fees and Travel. The increase is cost depends on the
economic situation and changes considering the inflation, beyond the assumed
rate. This would further impair the asset proportionately.
Decrease: Any reduction due to better negotiations on the Insurance,
Professional fees, Travel rates, would reduce the impact of impairment on the
asset.
iii. EBITDA:
Increase: Revenue generated from land rentals, which is 100% margin business,
will directly reduce & release the charge on the impairment of the asset
and improve the EBITDA margin.
Decrease: Increase in cost of operations such as equipment hire, stevedoring
etc cost, if hiked, then would adversely impact the EBITDA margin and would
contribute and increase the impairment of asset.
iv. Weighted Average Cost of Capital (WACC):
Increase: Increase in the WACC by 50 basis point will also contribute to
additional charge on the impaired asset. This may occur if the Reserve Bank
increases the REPO rate which will have direct impact on the rate of interest
on the term debt.
Decrease: a decrease in the WACC by 50 basis point will release and reduce the
charge on the impaired asset. This again depends solely on the market
condition and Reserve bank policy.
b) Recognition of income tax assets in respect of tax
MPL group's Indian subsidiary had filed a writ petition in Hon'ble High court
for seeking relief against the order passed by the Income Tax Appellate
Tribunal (ITAT) for the two assessment years 2011-12 and 2012-13, which was
decided in favour of the group's Indian subsidiary. Therefore, the major
portion of the tax pertains to the amounts paid under protest for the
Assessment Year (AY) 2011-2012 (£0.45 Mn) and AY 2012-13 (£1.47 Mn). These
amounts were deposited as a precondition for filing appeals with the
Income-tax authorities for these years.
The Principal Commissioner of Income Tax (Appeals) vide its order dated 20th
March, 2023, issued an order in favour of the Group's subsidiary for the
assessment years 2011-12 and 2012-13. As such, as a result of a tax previous
paid in respect of 2011-12 and 2012-13 is expected to be returned to the
Indian subsidiary and as such an asset has been recognised of £2.1m.
The Indian subsidiary has received the refund order u/s. 264 read with section
260 of the Income Tax Act for the assessment year 2011-12 as well as 2023-23
vide the order dated 20th June, 2023 totalling to £2.97 Million (₹.31.52
crores).
Since the Income tax department has preferred an appeal in Supreme Court and
in light of the uncertainty of the final outcome, there remains a risk over
the amount recognised. However, the chances of appeal are considered remote
and as such, on the basis of highly probable an asset was recognised in
respect of the amount receivable.
As per these orders, the matter was sent back to the files of Principal
Commissioner of Income Tax (Appeals) for re-adjudication following the ITAT
orders for assessment years 2013-14 to 2015-16. The status of open litigations
for AY 2013-14 to AY 2015-16 remain unchanged during FY 2022-23 i.e., the
matter is yet to be adjudicated and the outcome of appeal before Hon'ble
Bombay High Court is pending.
3. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The Board of
Directors of are identified as the Chief operating decision maker. The Group
has only one operating and geographic segment, being the project on hand in
India and hence no separate segmental report presented.
4. REVENUE FROM OPERATION
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Sale of goods 1,456 561
Cargo handling income 1,683 1,968
Lease income 1,188 1,728
Other operating income 1,135 615
5,462 4,872
Revenue from Sale of goods is "Point in time" and other revenue heads are
"Over the time". Other operating income relates to income from dredging, coal
handling and distribution income and wharfage.
Certain portions of the port have been designated for leasing portions. The
lease has been classified as operating lease because it does not transfer
substantially all the risks and rewards incident to ownership and it does not
fulfil other conditions mentioned in IFRS 16 applicable to be classified as
finance lease.
The major customer for sale of goods is Radha Krishna Trading Company,
followed by Mahakali Fuel Pvt. Ltd. The major customer for Cargo Handling
Income is Esquire Shipping & Trading Pvt Ltd. The major customer for Lease
income is Daewoo-TPL JV and for Other Operating Income the major customer is
Daewoo-TPL JV, followed by Esquire Shipping & Trading Pvt Ltd.
The total future minimum lease rentals receivable at the SOFP date is as
under:
Payments falling due As on As on
31 Dec 23 31 Dec 23
INR in million £ million
2024 9.60 0.09
2025 9.60 0.09
2026 9.60 0.09
2027 9.60 0.09
Fifth year and above 38.40 0.37
Total 76.80 0.73
5. COST OF SALES
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Wharf-age expense 479 411
Other operating expense 1,919 1,134
Changes in inventory 19 (96)
2,417 1,449
6. ADMINISTRATIVE EXPENSES
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
556 635
Employee costs
Directors' remuneration and fees 281 476
Operating lease rentals -- 9
Foreign exchange loss (3) 68
Other administration costs 2,432 2,559
3,266 3,747
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Interest on bank deposits 25 38
7. (a) FINANCE INCOME
Management has tested the OTR for debt modification under IFRS 9. The revised
cash out flow discounted at original EIR 13.45% resulted in net gain of £5.41
million and was effected accordingly in 2021. The recognized gain is spread
over the remaining term of the modified debt using the effective interest
method, and therefore has been considered in the 2023 financials.
7. (b) FINANCE EXPENSES
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Interest on term loan 4,398 4,726
Interest others 1,827 817
6,225 5,543
With regard to interest on term loan of £ 4.40 million, the actual interest
paid during the period is £ 1.54 million. The unpaid portion is primarily due
to the proposal submitted for restructuring of loan in February 2023 for
considering re-phasement of debt facility from 7 years to 14 years of
repayment with cut-off date as 1 April 2023, under consideration. The interest
on term loan also proposes a moratorium period of 2 years viz. April 2023 to
March 2025 (interest considered in the financial statements for the period
January 2023 to December 2023).
8. INCOME TAX
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Loss Before Tax (21,265) (12,060)
Applicable tax rate in India* 26.00% 26.00%
Expected tax credit (5,529) (3,136)
Reconciling items 378 320
Non-deductible losses of MPL and Cyprus entities
Un-recognised deferred tax asset on tax losses 5,151 2,025
Non-deductible expenses -- 791
Reversal of outstanding tax liability and interest thereon pertaining to -- 2,421
earlier years
-- 2,421
* Considering that the Group's operations are presently based in India, the
effective tax rate of the Group of 26% (prior year 26%) has been computed
based on the current tax rates prevailing in India. In India, income earned
from all sources (including interest income) are taxable at the prevailing tax
rate unless exempted. However, administrative expenses are treated as
non-deductible expenses until commencement of operations.
MPL group's Indian subsidiary had filed a writ petition in Hon'ble High court
for seeking relief against the order passed by the Income Tax Appellate
Tribunal (ITAT) for the two assessment years 2011-12 and 2012-13, which was
decided in favour of the group's Indian subsidiary. Therefore, the major
portion of the tax pertains to the amounts paid under protest for the
Assessment Year (AY) 2011-2012 (£0.45 Mn) and AY 2012-13 (£1.47 Mn). These
amounts were deposited as a precondition for filing appeals with the
Income-tax authorities for these years.
The Principal Commissioner of Income Tax (Appeals) vide its order dated 20th
March, 2023, issued an order in favour of the Group's subsidiary for the
assessment years 2011-12 and 2012-13. As such, as a result of a tax previous
paid in respect of 2011-12 and 2012-13 is expected to be returned to the
Indian subsidiary and as such an asset has been recognised of £2.1m. Since
the Income tax department has preferred an appeal in Supreme Court and in
light of the uncertainty of the final outcome, there remains a risk over the
amount recognised and as such there was judgement taken that the amount was
expected to be recovered.
As per these orders, the matter was sent back to the files of Principal
Commissioner of Income Tax (Appeals) for re-adjudication following the ITAT
orders for assessment years 2013-14 to 2015-16. The status of open litigations
for AY 2013-14 to AY 2015-16 remain unchanged during FY 2022-23 i.e., the
matter is yet to be adjudicated and the outcome of appeal before Hon'ble
Bombay High Court is pending. As such a contingent liability continues to be
recognised in respect of amounts potentially due.
The Indian Subsidiary has received the refund order u/s. 264 read with section
260 of the Income Tax Act for the assessment year 2011-12 as well as 2023-23
vide the order dated 20 June 2023 totalling to £2.97 Million (₹.31.52
crores).
Since the Income tax department has preferred an appeal in Supreme Court and
in light of the uncertainty of the final outcome, the Group has disclosed the
same under the head of contingent liability in note no 25.
The Company is incorporated in Guernsey under The Companies (Guernsey) Law
2008, as amended. The Guernsey tax rate for companies is 0%. The rate of
withholding tax on dividend payments to non-residents by companies within the
0% corporate income tax regime is also 0%. Accordingly, the Company will have
no liability to Guernsey income tax on its income and there will be no
requirement to deduct withholding tax from payments of dividends to
non-resident shareholders.
In Cyprus, the tax rate for companies is 12.5% with effect from 1 January
2014. There is no tax expense in Cyprus.
As at 31st December 2023 due to uncertainty that Indian entity will generate
sufficient future taxable income to offset business losses incurred to realise
deferred tax assets, the management has not recognised the Deferred Tax Asset
amounting to (£ 5.43mn) (Gross tax losses: £ 20.9mn) (2022- (£ 6.4
mn). (Gross tax losses: £ 24.6mn).
Year ended Year ended
2023 2022
Deferred tax liabilities (1,886) (362)
Offset against deferred tax assets 1,886 362
Deferred tax liabilities -- --
As a result of amendments to IAS 12 'Deferred Tax related to Assets and
Liabilities arising from a Single Transaction' deferred tax has been
recognised in respect of IFRS 16 leases. In applying the standard at the
beginning of the earliest comparative period presented, a deferred tax asset
has been recognised to the extent that it is probable that taxable profit
(javascript:;) will be available against which the deductible temporary
difference (javascript:;) can be utilised resulting in an amendment to the
amounts recognised at 31(st) December 2022.
9. AUDITORS' REMUNERATION
The following are the details of fees paid to the auditors, Grant Thornton UK
LLP and Indian auditors, in various capacities for the year:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Audit Fees
Audit fees payable to Grant Thornton UK LLP for the Group accounts audit * 184 162
Audit fees payable to auditors of subsidiary companies 7 9
Non-audit service:
Interim Financial Statement Review 5 10
Fees payable to grant Thornton UK LLP in respect of advisory work on the -- 110
equity placing
196 291
* This includes the additional fees charged during the year in respect of the
prior year audit aggregating to £ 30,000 (2022: £ 12,500).
10. EARNINGS PER SHARE
Both basic and diluted earnings per share for the year ended 31 December 2023
have been calculated using the loss attributable to equity holders of the
Group of £18.40 million (prior year loss of £9.621 million).
Year ended Year ended
31 Dec 23 31 Dec 22
Loss attributable to equity holders of the parent £ (21,221,801) £ (9,621,000)
Weighted average number of shares used in basic and diluted earnings per share 201,581,972 41,499,699
EARNINGS PER SHARE
Basic and Diluted earnings per share (0.105p) (0. 232p)
The group has successfully completed fund raise by private placement of
301,479,660 and 13,333,333 new Ordinary Shares on 28 June 2023 and 31 July
2023 respectively at a price of 0.03 pence per share.
11 (a). PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their carrying
amounts are as follows:
Computers Office Equipment Furniture Vehicles Plant & Machinery Port Asset Right of use Capital Work in Progress Total
Asset
£000 £000 £000 £000 £000 £000 £000 £000 £000
Gross carrying amount
Balance 1 Jan 2023 49 570 472 626 63 110,533 2,035 24,894 139,242
Net Exchange Difference (3) (34) (91) (38) (4) (6,463) (123) (1,497) (8,253)
Additions 1 46 53 5 -- 101 -- 724 930
Transfers from CWIP ^ -- -- -- -- -- -- -- (64) (64)
Disposals -- (3) -- (24) -- -- (253) -- (280)
Balance 31 Dec 2023 47 579 434 569 59 104,171 1,659 24,057 131,575
Depreciation
Balance 1 Jan 2023 (41) (227) (114) (412) (8) (10,468) (589) -- (11,859)
Net Exchange Difference 3 17 19 26 -- 616 110 -- 791
Charge for the year (3) (111) (27) (47) (4) (5,197) (177) -- (5,566)
Disposals -- 1 -- 13 -- -- 253 -- 267
Impairment -- -- -- -- -- (9,853) -- -- (9,853)
Balance 31 Dec 2023 (41) (320) (122) (420) (12) (24,902) (403) -- (26,220)
Carrying amount 31 Dec 2023 6 259 312 149 47 79,269 1,256 24,057 105,355
The Group has leased various assets including land and buildings. As at 31
December 2023, the net book value of recognised right-of use assets relating
to land and buildings was £ 1.26 million (2022: £ 1.45 million). The
depreciation charge for the period relating to those assets was £ 0.18
million (2022: £ 0.26 million).
Amounts recognised in the statement of income are detailed below:
Particular £000 £000
31 Dec 2023 31 Dec 2022
Depreciation on right-of-use assets 177 258
Interest expense on lease liabilities 173 181
Expense relating to short-term leases -- 9
350 448
Computers Office Equipment Furniture Vehicles Plant & Machinery Port Asset Right of use Capital Work in Progress Total
Asset
£000 £000 £000 £000 £000 £000 £000 £000 £000
Gross carrying amount
Balance 1 Jan 2022 42 535 345 586 47 109,523 1,721 24,149 136,948
Net Exchange Difference -- 4 2 3 -- 777 10 140 936
Additions 7 31 125 36 16 233 304 605 1,357
Transfers from CWIP ^ -- -- -- -- -- -- -- -- --
Disposals -- -- -- -- -- -- -- -- --
Balance 31 Dec 2022 49 570 472 625 63 110,533 2,035 24,894 139,241
Depreciation
Balance 1 Jan 2022 (36) (115) (91) (362) (4) (4,668) (328) -- (5,604)
Net Exchange Difference -- (1) -- (2) -- (26) (3) -- (32)
Charge for the year (5) (111) (23) (48) (4) (5,774) (258) -- (6,223)
Disposals -- -- -- -- -- -- -- -- --
Balance 31 Dec 2022 (41) (227) (114) (412) (8) (10,468) (589) -- (11,859)
Carrying amount 31 Dec 2022 8 343 358 213 55 100,065 1,446 24,894 127,382
The Group has leased various assets including land and buildings. As at 31
December 2022, the net book value of recognised right-of use assets relating
to land and buildings was £ 1.45 million (2021: £ 1.39 million). The
depreciation charge for the period relating to those assets was £ 0.26
million (2021: £ 0.09 million).
Movable Assets taken against loan provided as security
· The following asset are provided as security for lease liability
payable as described in Note 20:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Vehicles 150 214
150 214
The vehicles, which are free from encumbrances, will also form as a
subservient charge of hypothecation towards securitisation of debt.
All other immovable and movable property with a carrying value of £
105,268,233 (2022: £127,172,000) is under hypothecation in favour of the
"Term lenders".
The Port facility being developed in India has been hypothecated by the Indian
subsidiary as security for the bank borrowings (revised outstanding as at
31(st) December 2023 as against the borrowing limit sanctioned in 2021 as per
OTR is INR 460 crore £43.36 million (2022: INR 462 crore (£46.32 million))
for part financing the build out of the facility.
The Indian subsidiary has estimated the total project cost of INR 1,404 crore
(£138.10 million) towards construction of the port facility. Out of the
aforesaid project cost, the contract signed with the major contractor is INR
1,049 crores (£105.21 million). As of 31 December 2023, the contractual
amount (net of advances) of INR 48.03 crores (£4.82 million) work is
unexecuted. There were no other material contractual commitments.
11 (b). Intangible Asset
Intangible Asset -
Asset
Software
Software
£000
aGross carrying amount
Balance 1 Jan 2023 33
Exchange Difference (1)
Additions --
Transfers from CWIP ^ 64
Disposals --
Balance 31 Dec 2023 96
Depreciation
Balance 1 Jan 2023 (19)
Exchange Difference 1
Charge for the year (15)
Disposals --
Balance 31 Dec 2023 (33)
Carrying amount 31 Dec 2023 63
Intangible Asset -
Asset
Software
Software
£000
Gross carrying amount
Balance 1 Jan 2022 14
Exchange Difference --
Additions 19
Disposals --
Balance 31 Dec 2022 33
Depreciation
Balance 1 Jan 2022 (10)
Exchange Difference --
Charge for the year (9)
Disposals --
Balance 31 Dec 2022 (19)
Carrying amount 31 Dec 2022 14
12. TRADE AND OTHER RECEIVABLES
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Deposits 1,043 1,442
Advances
- Related Party 4,113 1,160
- Others 9,297 10,483
Accrued Interest of fixed deposits 3 3
Accrued Income -- 126
Debtors
- Related Party -- 107
- Prepayment 95 102
- Trade Debtors 1,788 687
16,339 14,110
Advances include payment to EPC contractor of £ 6.16 million (2022: £ 7.29
million) towards mobilisation advances and quarry development. These advances
will either be recovered as a deduction from the invoices being raised by the
contractor over the contract period or refunded.
'Advances to Related Party' include receivables towards share application
money of £ 4.11 million (Dec 2022: £ 1.16 million).
'Break down of Trade Debtors:
£ 1.32 million (2022: £ 0.64 million) receivable from the single major
customer, which includes £ 0.02 million (2022: £ 0.00 million) which is past
due for 30 days' management estimate that amount is fully realisable hence no
provision for expected credit loss is made for the same amount.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivable.
To measure expected credit losses on a collective basis, trade and other
receivables are grouped based on similar credit risk and aging. The assets
have similar risk characteristics to the trade receivables for similar types
of contracts.
The expected loss rates are based on the Group's historical credit losses
experienced. The historical loss rates are then adjusted to reflect current
and forward-looking information, any known legal and specific economic
factors, including the credit worthiness and ability of the customer to settle
the receivables.
The Group renegotiations or modifications of contractual cash flows of a
financial asset, which results in de-recognition, the revised instruments are
treated as a new or else the group recalculates the gross carrying amount of
the financial asset.
13. INVESTMENTS
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Deposits* 173 --
173 --
*Deposits are placed under lien against Bank Guarantees issued by bank on
behalf of the group to various Government Authorities and the Debt Service
Reserve (DSR) as per the loan agreement with lenders.
14. CASH AND CASH EQUIVALENTS
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Cash at bank and in hand 2,881 389
Deposits* -- 169
2,881 558
Cash at bank earns interest at floating rates based on bank deposit rates. The
fair value of cash and short-term deposits is £ 3.05 million (2022: £0.56
million).
Included in cash and cash equivalents is £0.71 million (2022: £0.00 million)
that is within a bank account in the name of Hunch Ventures (Karanja), as a
result of the 2018 and 2021 share sale. The Company is the beneficiary of
the account. During the year, we have been able to draw money out of this
account to cover working capital throughout the year.
*Deposits are placed under lien against Bank Guarantees issued by bank on
behalf of the group to various Government Authorities and the Debt Service
Reserve (DSR) as per the loan agreement with lenders.
15. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Risk Management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and interest rate risk), credit risk and liquidity
risk. The Board of Directors carries out risk management.
(a)Market Risk
(i)Translation risk
Foreign currency risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in market foreign
exchange rates. The Company's functional and presentation currency is the UK
Sterling (£). The functional currency of its subsidiary Karanja Terminal
& Logistics Private Limited (KTLPL) is INR and functional currency of
Karanja Terminal & Logistics (Cyprus) Ltd.
The exchange difference arising due to variances on translating a foreign
operation into the presentation currency results in a translation risk. These
exchange differences are recognised in other comprehensive income. As a
result, the profit, assets and liabilities of this entity must be converted to
GBP in order to bring the results into the consolidated financial statements.
The exchange differences resulting from converting the profit and loss account
at average rate and the assets and liabilities at closing rate are transferred
to the translation reserve.
While consolidating the Indian subsidiary accounts the group has taken closing
rate of GBP 1: INR 106.1053 for SOFP items and for profit and loss item GBP 1:
INR 102.7267.
This balance is cumulatively a £31.44m loss to equity (2022: £26.43m loss).
This is primarily due to a movement from approximately 1:70 to 1:100 between
2010 to 2013 and the translation reserve reaching a loss of £21.6m at 31
December 2013 and further increase in translation reserve from £21.6m to
£31.44m due to appreciation of GBP against INR during the period 2018 to
2023. The closing rate at 31 December 2023 was GBP1: INR 106.1053, hence as
compared to the translation loss reported between 2018-19, the same is
insignificant in 2023. With the majority of funding now in India this risk is
further mitigated. During 2023, the average and year-end spot rate used for
INR to GBP were 102.7267 and 106.1053 respectively (2022: 97.0625 and
99.7436).
Translation risk sensitivity
The foreign currency risk management are referring to is the translation of
the Indian subsidiary from INR to GBP, which impacts on the translation
reserve through OCI. As such this is not considered relevant to the disclosure
requirements of IFRS 7.
The amounts included in KTPL are all denominated in INR (including the loan)
which is disclosed as the functional currency and the amounts in MPL parent in
GBP which is disclosed. As such there isn't considered to be any material
foreign currency risk.
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Group's exposure to the risk of changes in market interest rates relates
primarily to the Group's long-term debt obligations with floating interest
rates.
The base rate set by the bank may be changed periodically as per the
discretion of the bank in line with Reserve Bank of India (RBI) guidelines.
Based on the current economic outlook and RBI Guidance, management expects the
Indian economy to enter a lower interest rate regime as moderating inflation
will enable RBI and the banks to lower the base rate in the near future.
Interest rate sensitivity
At 31 December 2023, the Group is exposed to changes in market interest rates
through bank borrowings at variable interest rates. The exposure to interest
rates for the Group's money market funds is considered immaterial.
The following table illustrates the sensitivity of profit to a reasonably
possible change in interest rates of +/- 1% (2022: +/- 1%). These changes are
considered to be reasonably possible based on observation of current market
conditions. The calculations are based on a change in the average market
interest rate for each period, and the financial instruments held at each
reporting date that are sensitive to changes in interest rates. All other
variables are held constant.
Year Profit for the Year Equity, net of tax
£000 £000
+1% -1% +1% -1%
31 December 2023 (574) 574 (425) 425
(b) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation
to the Group. The Group's maximum exposure (£ 9.16 million (2022: £ 2.81
million)) to credit risk is limited to the carrying amount of financial assets
recognised at the reporting date.
The Group determines credit risk by checking a company's creditworthiness and
financial strength both before commencing trade and during the business
relationship at initial recognition and subsequently. Customer credit risk is
managed by the Company's established policy, procedures and control relating
to customer credit risk management. Credit quality of a customer is assessed
based on an extensive evaluation and individual credit limits are defined in
accordance with this assessment.
The Group's policy is to deal only with creditworthy counterparties. The Group
has no significant concentrations of credit risk.
The Group considers default to be when there is a breach of any of the terms
of agreement.
The Group writes off a financial asset when there is no realistic prospect of
recovery and all attempts to recover the balance have been exhausted. An
indication that all credit control activities have been exhausted and where
the asset due is greater than 365 days old or where there are insolvency
issues relating to the trade and other receivables.
The Group does not concentrate any of its deposits in one bank. This is seen
as being prudent and credit risk is managed by the management having conducted
its own due diligence. The balances held with banks are on a short-term basis.
Management reviews quarterly bank counter-party risk on an on-going basis.
(c) Liquidity risk
Liquidity risk is the risk that the Group might be unable to meet its
financial obligations. Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability of funding through
an adequate amount of committed credit facilities.
The Indian subsidiary which is currently availing the term loan facility has
again approached the current consortium of lenders for a re-phasement of
current Term Loan, Funded Interest Term Loan (FITL) and Guaranteed Emergency
Credit Line (GECL) for 14 years including 2 years moratorium on the
consolidated term debt due to the cascading impact on the business of the
Indian subsidiary due to the relapse of Covid 19 pandemic.
The Group is in an advanced stage of negotiation with the current consortium
of lenders and is confident of obtaining a favourable response from the
lenders shortly.
The Group's objective is to maintain cash and demand deposits to meet its
liquidity requirements for 30-day periods at a minimum. This objective was met
for the reporting periods. Funding for build out of the port facility is
secured by sufficient equity, sanctioned credit facilities from lenders and
the ability to raise additional funds due to headroom in the capital
structure.
The Group manages its liquidity needs by monitoring scheduled contractual
payments for build out of the port facility as well as forecast cash inflows
and outflows due in day-to-day business. Liquidity needs are monitored and
reviewed by the management on a regular basis. Net cash requirements are
compared to available borrowing facilities in order to determine headroom or
any shortfalls. This analysis shows that available borrowing facilities are
expected to be sufficient over the lookout period.
Comparative working of the Group's non-derivative financial liabilities have
contractual maturities (and interest payments) as summarized below:
As at 31 December 2023:
Payment falling due Principal payments Interest payments
INR in Crore £000 INR in Crore £000
Within 1 year 70 6,584 76 7,186
1 to 5 years 316 29,794 99 9,370
After 5 years 37 3,512 4 338
Total 423 39,890 179 16,894
The above table represents the current loan which is active and does not
include the impact of the re-structuring proposal under consideration.
The present composite rate of interest ranges from 7.95% to 10.55% and closing
exchange rate has been considered for the above analysis.
In addition, the Group's liquidity management policy involves considering the
level of liquid assets necessary to meet the funding requirement; monitoring
SOFP liquidity ratio against internal requirements and maintaining debt
financing plans. The current debt equity ratio with the lenders is 0.64:1.
As a part of monitoring SOFP liquidity ratio, management monitors the
debt-to-equity ratio and has specified optimal level for debt-to-equity ratio
of 1:1.
As at 31 December 2022:
Payment falling due Principal payments Interest payments
INR in Crore £000 INR in Crore £000
Within 1 year 23 2,307 43 4,339
1 to 5 years 316 31,681 132 13,212
After 5 years 75 7,484 2 182
Total 414 41,472 177 17,733
The present composite rate of interest ranges from 7.95% to 10.55% and closing
exchange rate has been considered for the above analysis.
In addition, the Group's liquidity management policy involves considering the
level of liquid assets necessary to meet the funding requirement; monitoring
SOFP liquidity ratio against internal requirements and maintaining debt
financing plans. The current debt equity ratio with the lenders is 0.64 : 1.
As a part of monitoring SOFP liquidity ratio, management monitors the
debt-to-equity ratio and has specified optimal level for debt-to-equity ratio
of 1:1.
Financial Instruments
Fair Values
The different levels per the IFRS 13: Fair Value Measurement fair value
hierarchy have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices);
Level 3: Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs)
Set out below is a comparison by category of carrying amounts and fair values
of the entire Group's financial instruments that are carried in the financial
statements.
Note Year ended Restated Year ended
31 Dec 23 31 Dec 22
£000 £000
Financial Assets at Amortised Cost
2
Trade and other receivables 13 6,102 2,252
Investments 14 173 --
Cash and cash equivalents 15 2,881 558
9,156 2,810
Financial Liability at Amortised Cost
Borrowings 19 47,071 41,472
Trade and other payables 20 4,131 8,388
Lease liabilities 20 1,792 2,428
52,994 52,288
The carrying amount of financial assets and financial liabilities have been
disclosed in accordance with IFRS 7. However, the prior year did not included
lease liabilities, and note that employee liabilities were incorrectly
included. As such the prior year comparative has been restated.
All the financial assets and financial liabilities are considered to be level
1, except for borrowings which are level 2.
The fair value of the Group's financial assets and financial liabilities
significantly approximate their carrying amount as at the reporting date.
The carrying amount of financial assets and financial liabilities are measured
at amortised cost in the financial statements are a reasonable approximation
of their fair values since the Group does not anticipate that the carrying
amounts would be significantly different from the values that would eventually
be received or settled.
Maturity profile of financial liabilities
The table below presents the maturity profile of the Group's financial
liabilities using the contractual undiscounted cash flows.
Within 1 year 1-2 years 2-5 years More than 5 years Total
£ 000 £ 000 £ 000 £ 000
As at 31 December 2023
2
Borrowings 10,672 5,419 27,886 3,094 47,071
Interest on borrowings 7,186 3,419 5,951 338 16,894
Trade and other payables 4,131 -- -- -- 4,131
Lease liabilities (including 507 232 527 5,060 6,326
vehicle loan)
As at 31 December 2022
2
Borrowings 2,307 10,543 28,622 -- 41,472
Interest on borrowings 4,393 4,113 8,746 1,623 18,875
Trade and other payables 8,388 -- -- -- 8,388
Lease liabilities (including 1,006 245 637 5,593 7,481
vehicle loan)
16. EQUITY
16.1 Issued Capital
The share capital of MPL consists only of fully paid ordinary shares of no-par
value. The total number of issued and fully paid-up shares of the Company as
on each reporting date is summarised as follows:
Particulars Year ended Year ended
31 December 23 31 December 22
No of shares £000 No of shares £000
Shares issues and fully paid:
Beginning of the year 41,499,699 143,851 41,499,699 143,851
Addition in the year# 314,812,993 9,444 -- --
Share issue cost -- (941) -- --
Closing number of shares 356,312,692 152,354 41,499,699 143,851
The stated capital amounts to £152.35 million (2022: £143.85 million) after
reduction of share issue costs. Holders of the ordinary shares are entitled to
receive dividends and other distributions and to attend and vote at any
general meeting. During the year the Company has allotted 314.81 million
(2022: Nil) equity shares to various institutional and private investors, by
way of a rights issue.
The Company has recognized the services received in a share-based payment
transaction when the services are received in accordance with IFRS 2 -
Share-based payment.
# Shares issued during the year includes 13,359,166 for value shares £
400,775 issued to Cavendish Financial PLC (erstwhile known as Cenkos
Securities PLC) as the consideration for the fair value of services rendered
pertaining to private placement of shares.
The transaction costs are incremental costs directly attributable to the
equity transaction that otherwise would have
been avoided and have therefore been accounted for as a deduction from equity.
16.2 Other Components of Equity
Retained Earnings
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Opening Balance (26,022) (16,402)
Addition during the year (21,222) (9,621)
Re-measurement of net defined benefit liability 27 1
Closing balance (47,217) (26,022)
Accumulated losses of £ 47.54 million (2022: £ 26.02 million) include all
current year retained profits.
Translation Reserve
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Opening Balance (26,429) (27,237)
Addition during the year (5,015) 808
Closing balance (31,444) (26,429)
The translation reserve of £ 31.22 million (2022: £ 26.43 million) is on
account of exchange differences relating to the translation of the net assets
of the Group's foreign operations which relate to subsidiaries, from their
functional currency into the Group's presentational currency being Sterling.
17. EMPLOYEE BENEFIT OBLIGATIONS
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Non- Current
Pensions - defined benefit plans 35 53
35 53
Current
Wages, salaries 267 523
Pensions - defined benefit plans 9 6
276 529
18. BORROWINGS
Borrowings consist of the following:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Non-Current
Bank loan (refer note 26) 33,305 39,165
Loan from others * 3,094 --
36,399 39,165
Current
Bank loan (refer note 26) 6,584 2,307
Interest payable 4,088 --
10,672 2,307
Borrowing
The term loan facility currently is as per existing sanction which was issued
on 10 June 2021 against which the quarterly principal repayments for the
entire 2023 is overdue, and the interest on these facilities is overdue from
March 2023 till December 2023. The interest rate on term loan is 9.55%, on
FITL is 10.55% and GECL is 8%.
The Indian subsidiary which is currently availing the term loan facility has
approached the current consortium of lenders for a re-phasement of current
term loan under Resolution framework for re-structuring of the current debt
for a period of 14 years instead of 7 years (including moratorium of 2 years)
and Funded Interest Term Loan (FITL) of 2 years, repayable in 5 years from the
second quarter of 2025 onwards.
The proposal is at the Head office level of the Lead banker and is expected to
be sanctioned shortly, which will enable the group to manage its cash flow and
focus more on operational stability and growth.
* Loan from others: This amount pertains to unsecured loan from Grevek
Investments & Finance Pvt. Ltd.
19 (a). NON-CURRENT tax ASSETS
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Income tax * -- 2,108
Non-current tax assets -- 2,108
19 (b). CURRENT tax ASSETS
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Income tax * 2,114 --
Current tax assets 2,114 --
* The income tax pertains to self -assessment tax as well as withholding
taxes paid for the assessment years 2011-12 to 2024-25.
The Indian subsidiary has received the refund order for the Assessment years
2011-12 as well as 2012-13 and is expected to be transferred to the bank
account within one year.
(Refer Note 25 for disclosure of Contingent liabilities in respect of these
matters)
19 (c). current tax liabilities
Current tax liabilities consist of the following:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Duties & taxes 61 17
Current tax liabilities 61 17
The carrying amounts and the movements in the Provision for Income Tax
account are as follows:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Carrying amount 1 January -- 2,342
Interest provision on outstanding tax liability -- --
Less: Reversal of tax liability and interest provision -- (2,354)
Exchange difference -- 12
Carrying amount 31 December -- --
Income tax paid (net of provision) -- --
-- --
The Group recognises liabilities for anticipated tax issues based on
assessment of whether additional taxes will be due, and whether it is probable
that the relevant authority will accept each tax treatment, or group of tax
treatments, that it used or plans to use in its income tax filing.
Where the outcome of assessment by the Income Tax department on these matters
is different from the amounts that were initially recorded, such differences
will impact the income tax provisions in the period in which such
determination is made. The Group discharges the tax liability based on income
tax assessment.
Based on the judgements passed by Income Tax Tribunal in favour of the Indian
Subsidiary for the assessment years 2013-14 to 2015-16, the Commissioner of
Income Tax - CIT-(A) has relied upon the ITAT judgement and issued order in
favour of the Indian subsidiary for the assessment years 2011-12 and 2012-13
as well.
20. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Non-Current
Lease liability (refer note 26) 1,457 1,611
Current
Lease Liability - (refer note 26) 335 817
Sundry creditors 4,131 8,400
Interest (prepaid) -- (12)
4,131 8,388
Future minimum lease payments at 31 December 2023 were as follows -
Minimum lease payments due
Within 1 - 2 2 - 3 3 - 4 4 - 5 After 5 Total
1 year Year Year Year Year Year
Lease payments 507 232 190 176 161 5,060 6,326
Finance charges (172) (165) (161) (158) (157) (3,721) (4,534)
Net present values 335 67 29 18 4 1,339 1,792
Future minimum lease payments at 31 December 2022 were as follows -
Minimum lease payments due
Within 1 - 2 2 - 3 3 - 4 4 - 5 After 5 Total
1 year Year Year Year Year Year
Lease payments 1,006 245 247 202 188 5,593 7,481
Finance charges (189) (183) (175) (171) (167) (4,127) (5,012)
Net present values 817 62 72 31 21 1,466 2,469
21. RELATED PARTY TRANSACTIONS
The consolidated financial statements include the financial statements of the
Company and the subsidiaries listed in the following table:
Name Country of Incorporation Field Activity Ownership Interest Type of
share Held
HELD BY The Company (MPL): Cyprus
Karanja Terminal & Logistics (Cyprus) Ltd. India Holding Company 100% Ordinary
Karanja Terminal & Logistics Private Ltd. Operating company -Terminal Project 8.11% Ordinary
HELD BY Karanja Terminal & Logistics (Cyprus) Ltd:
Karanja Terminal & Logistics Private Ltd. India Operating company -Terminal Project 91.67% Ordinary
The Group has the following related parties with whom it has entered into
transactions with during the year.
a) Shareholders having significant influence
The following shareholders of the Group have had a significant influence
during the year under review:
• SKIL Global Ports & Logistics Limited, which is 100% owned by
Mr. Nikhil Gandhi, holds 0.28% of issued share capital as at 31 December 2023
(as at 31 December 2022 - 2.37%) of Mercantile Ports & Logistics Limited.
• Lord Howard Flight holds 0.18% of issued share capital as on 31
December 2023 (as on 31 December 2022 - 0.56%) of Mercantile Ports &
Logistics Limited at the year end.
• Jay Mehta holds 0.99% of issued share capital as on 31 December 2023
(as on 31 December 2022 - 0.50%) of Mercantile Ports & Logistics Limited
at the year end.
• John Fitzgerald holds 0.18% of issued share capital as on 31
December 2023 (as on 31 December 2022 - 0.14%) of Mercantile Ports &
Logistics Limited at the year end.
• Jeremy Warner Allen holds 1.08% of issued share capital as on 31
December 2023 (as on 31 December 2022 - 1.25 %) of Mercantile Ports &
Logistics Limited at the year end.
• Karanpal Singh via Hunch Ventures and Investments Private Limited
holds 38.40% of issued share capital as on 31 December 2023 (as on 31 December
2022 - 28.48%) of Mercantile Ports & Logistics Limited at the year end.
b) Key Managerial Personnel of the parent
Non-executive Directors
- Lord Howard Flight - Resigned w.e.f. 24 November 2023
- Mr. John Fitzgerald
- Jeremy Warner Allen
- Karanpal Singh
- Amit Dutta
- Dmitri Tsvetkov
- Nikhil Gandhi
Executive Directors
- Mr. Jay Mehta (Managing Director)
c) Key Managerial Personnel of the subsidiaries
Directors of KTLPL (India)
- Mr. Jay Mehta
- Mr. Rakesh Bajaj
Directors of Karanja Terminal & Logistics (Cyprus) Ltd - KTLCL (Cyprus)
- Ms. Andria Andreou
- Ms. Chrystalla Stavrou
Others
- Mr. Pavan Bakshi
d) Other related party disclosure
Entities that are controlled, jointly controlled or significantly influenced
by, or for which significant voting power in such entity resides with,
directly or indirectly, any individual or close family member of such
individual referred above.
- SKIL Infrastructure Limited
- Grevek Investment & Finance Private Limited
- Athos Hq Group Bus. Ser. Cy Ltd
- John Fitzgerald Limited
- KJS Concrete Private Limited
- Himangini Singh
- Fiona Gupta
e) Transaction with related parties
The following transactions took place between the Group and related parties
during the year ended 31 December 2023
Nature of transaction Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Athos Hq Group Bus. Ser. Cy Ltd Administrative fees 10 13
10 13
The following table provides the total amount outstanding with related parties
as at year ended 31 December 2023:
Transactions with Key Managerial Personnel of the subsidiaries
See Key Managerial Personnel Compensation details as provided below -
Advisory services fee
None
Compensation to Key Managerial Personnel of the parent
Fees paid to persons or entities considered Key Managerial Personnel of the
Group include:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Non-Executive Directors fees
- Lord 36 40
Flight
- John Fitzgerald 45 45
- Jeremy Warner Allen 40 40
- Peter Mills -- 3
- Amit Dutta 35 33
-
- Dmitri Tsvetkov 45* 42
-
201 203
Executive Directors Fees
- Jay Mehta 88 93
- Nikhil Gandhi -- 188
88 281
Others
- Pavan Bakshi # 175 175
Total compensation paid to Key Managerial Personnel 464 659
* Includes £ 10,000 (2022: Nil) paid as sitting fees to Dmitri Tsvekov for
attending Audit Committee meetings.
# Pavan Bakshi has been instrumental in playing a key management role by
providing pivotal support to the board and hence he is added as a Key
Management Personnel.
Compensation to Key Managerial Personnel of the subsidiaries
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Directors' fees
KTLCL - Cyprus 3 3
3 3
Transactions with shareholders / entity having significant influence
Nature of transaction Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Provision created for doubtful advances for advance given to SKIL Provision for doubtful advances 107 --
Infrastructure Ltd.
Shares issued to Hunch Ventures and Investment Limited Share subscription 3,750 --
Shares issued to Jay Mehta Share subscription 100 --
Sundry Creditors
As at 31 December 2023, the Group had £3.09 million (2023: £3.29 million) as
sundry creditors with related parties.
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Grevek Investment & Finance Private Ltd. 3,094 3,292
3,094 3,292
Receivable from the shareholders having significant influence
Nature of transaction Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
SKIL Global Ports & Logistics Limited
Debtors Advances 107 107
Less: Provision for doubtful advances (107) --
Hunch Ventures and Investment Limited*
Advances recoverable in cash or in kind Advances 4,113 1,110
4,113 1,217
* At the time of the placing and subscription in August 2021, the Company
intended for the proceeds of the fundraising to be held in the Company's bank
account in Guernsey. The subscription monies from Hunch Ventures required
Reserve Bank of India ("RBI") approval in order to be remitted to Guernsey.
However, at the time of the Company's General Meeting on 9th September 2021,
the Company confirmed that it had directed Hunch Ventures to transfer the
subscription monies to one of the Company's Indian bank accounts and that was
done.
Subsequently, the Board resolved that it did wish the funds to be transferred
to Guernsey and, as a result, requested that Hunch Ventures pursue the "RBI
approval" route once more. In pursuing this, Hunch Venture's bank required the
subscription monies to be transferred to Hunch Venture's account so that
application could be made for the funds to be moved to Guernsey.
The Company is able to rely on the support documentation to the RBI process,
put in place at the time of Hunch Ventures' original investment in 2018. It
should be noted that the Company continues to have access to the Subscription
monies and, since the period end, has accessed these funds.
Given the time being taken to receive RBI approval, the Company and Hunch
Ventures have received advice on an alternative structure to achieve the
Company's desired treasury requirements, without the requirement to receive
RBI approval.
Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
22. CASH FLOW ADJUSTMENTS AND CHANGES IN WORKING CAPITAL
The following non-cash flow adjustments and adjustments for changes in working
capital have been made to profit before tax to arrive at operating cash flow:
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Non-cash flow adjustments
Depreciation 5,581 6,231
Impairment loss 9,853 --
Finance Income (25) (38)
Finance cost 6,225 5,543
Re-measurement of net defined benefit liability (27) (1)
Provision for Gratuity 17 13
Loss on disposal of PPE 7 --
Balances written back (190) --
Provision for doubtful advances 107 --
21,548 11,748
Increase/(Decrease) in trade and other payables 49 247
Decrease/(Increase) in trade and other receivables *(124) 154
Current investments (deposits with bank) (173) --
Increase in inventory 24 (96)
(224) 305
* Excludes £ 3.8 million receivable towards share application money.
23. CAPITAL MANAGEMENT POLICIES AND PROCEDURE
The Group's capital management objectives are:
• To ensure the Group's ability to continue as a going
concern
• To provide an adequate return to shareholders
Capital
The Company's capital includes share premium (reduced by share issue costs),
retained earnings and translation reserve which are reflected on the face of
the Statement of Financial Position and in Note 16.
24. EMPLOYEE BENEFIT OBLIGATIONS
a. Defined Contribution Plan:
The following amount recognized as an expense in statement of profit
and loss on account of provident fund and other funds. There are no other
obligations other than the contribution payable to the respective authorities.
Year ended Year ended
31 Dec 23 31 Dec 22
£000 £000
Contribution to Provident Fund 22 12
Contribution to ESIC 2 2
24 14
b. Defined Benefit Plan:
The Company has an unfunded defined benefit gratuity plan. The
gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act,
employee who has completed five years of service is entitled to specific
benefit. The level of benefits provided depends on the member's tenure of
service and salary at retirement age. Every employee who has completed five
years or more of service gets a gratuity on departure at 15 days' salary (last
drawn salary) for each completed year of service as per the provision of the
Payment of Gratuity Act, 1972 with total ceiling on gratuity of INR 20 Mn.
with effect from 20 Feb 2020.
The significant actuarial assumptions for the determination of the
defined benefit obligation are the discount rate, the salary growth rate and
the average life expectancy. These assumptions were developed by management
with the assistance of independent actuaries. Discount factors are determined
close to each period-end by reference to market yields of high-quality
corporate bonds that are denominated in the currency in which the benefits
will be paid and that have terms to maturity approximating to the terms of the
related pension obligation. Other assumptions are based on current actuarial
benchmarks and management's historical experience. The assumptions used for
the valuation of the defined benefit obligation are as follows:
Key Assumptions
Particulars 31 Dec 23 31 Dec 22
Discount rate 7.40% p .a. 7.46% p.a.
Salary growth rate 6.00% p.a. 6.00% p.a.
2.00% p.a at younger ages reducing to 7.00% p.a% at older ages 2.00% p.a at younger ages reducing to 7.00% p.a% at older ages
Withdrawal rate
The following tables summaries the components of net benefit expense
recognised in the Consolidated Statement of Comprehensive Income and the
funded status and amounts recognised in the Consolidated Statement of
Financial Position for the gratuity plan:
As at As at
31 Dec 23
31 Dec 22
Particulars
£000
£000
Statement of Comprehensive Income
Net employee benefit expense recognised in the employee cost
Current service cost 12 11
Interest cost on defined benefit obligation 4 3
Total expense charged to loss for the period 16 14
Amount recorded in Other Comprehensive Income (OCI)
Opening amount recognised in OCI
Re-measurement during the period due to:
Actuarial (gain) arising from change in financial assumptions -- (4)
Actuarial (gain) / loss arising on account of experience changes (27) 3
Amount recognised in OCI (27) (1)
Closing amount recognised in OCI (27) (1)
Reconciliation of net liability / asset
Opening defined benefit liability 56 46
Expense charged to profit or loss account 15 14
Amount recognised in Other Comprehensive (Income) (27) (1)
Closing net defined benefit liability 44 59
Movement in benefit obligation and Consolidated Statement of Financial
Position
A reconciliation of the benefit obligation during the inter-valuation period:
Particulars As at As at
31 Dec 23
31 Dec 22
£000
£000
Opening defined benefit obligation 59 46
Current service cost 10 11
Interest on defined benefit obligation 4 3
Re-measurement during the period due to:
Actuarial (gain) arising on account of experience changes -- (4)
Actuarial loss / (gain) arising from change in financial assumptions (27) 3
Benefits paid (2) --
Closing defined benefit obligation liability recognised in Consolidated 44 59
Statement of Financial Position
Particulars As at As at
31 Dec 23
31 Dec 22
£000
£000
Net liability is bifurcated as follows:
Current 9 6
Non-current 35 53
Net liability 44 59
The present value of the DBO was measured using the Projected Unit Credit
(PUC) method.
The weighted average duration of the defined benefit obligation at 31 December
2023 is 10.67 years (2022: 7.7 years).
25. CONTINGENT LIABILITIES
Particulars As at As at
31 Dec 23
31 Dec 22
£000
£000
Bank guarantee issued to Maharashtra Pollution Control Board towards issuing 30 30
the consent to operate the Port
The Commissioner Of Customs - Jawaharlal Nehru Custom House towards the 100 100
collateral for acting as a custodian of the Cargo handled at the Port
There is an ongoing arbitration proceeding initiated by the Indian subsidiary 7,695 7,695
with the dredging sub-contractor for claiming damages for non-performance
under dredging contract to the tune of ₹214 crores (£21.5 Mn) and a counter
claim made by the sub-contractor for ₹76.75 crores (£7.69 Mn).
The matter is under arbitration act in the jurisdiction of Mumbai. Based on
the legal opinion obtained, management is confident that the outcome will be
in favour of the Company.
The counter claim made by the sub-contractor on the Company is considered as a
contingent liability.
As of the Balance sheet date the cross examination of the witnesses of the
Claimant is underway.
The Income tax liability to the tune of ₹48.12 crores (£4.54 Mn) (exclusive 4,535 6,822
of any interest or penalties) for the Assessment years 2013-14, 2014-15 and
2015-16.
MPL group's Indian subsidiary had filed a writ petition in Hon'ble High court
for seeking relief against the order passed by the Income Tax Appellate
Tribunal (ITAT) for the two assessment years 2011-12 and 2012-13, which was
decided in favour of the group's Indian subsidiary.
The Indian subsidiary has received the refund order u/s. 264 read with section
260 of the Income Tax Act for the assessment year 2011-12 as well as 2012-2013
and as such the amount in respect of these two years is no longer considered a
contingent liability.
As per these orders, the matter was sent back to the files of Principal
Commissioner of Income Tax (Appeals) for re-adjudication following the ITAT
orders for assessment years 2013-14 to 2015-16. The status of open litigations
for AY 2013-14 to AY 2015-16 remain unchanged during FY 2023-24 i.e., the
matter is yet to be adjudicated and the outcome of appeal before Hon'ble
Bombay High Court is pending.
Cash outflows, if any, is determinable on receipt of judgments pending at
respective authorities.
26. CAPITAL COMMITMENTS
Particulars As at As at
31 Dec 23
31 Dec 22
£000
£000
Estimated value of contracts in capital account in relation to property, plant 4,815 4,815
and equipment remaining to be executed and not provided
for (net of advances)
27. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the Group's liabilities arising from financing activities can
be classified as follows:
Particulars Long-term borrowing Current maturity of long-term borrowing Leased Total
£000 £000 liabilities
£000 £000
1 January 2023 39,165 2,295 2,428 43,888
Cash-flows:
- Repayment -- (99) (737) (836)
- Repayment of principal -- (749) (9) (758)
Non-cash:
- Exchange difference (2,382) (267) (129) (2,778)
- Accrued during the period -- 4,981 239 5,220
- Interest on term loan EIR adjustment 1,033 -- -- 1,033
- Reclassification (1,417) * 4,511 -- 3,094
31 December 2023 36,399 10,672 1,792 48,863
* The amount is net of re-classification of Loan from Others £ 3.09 million
from Trade Payables in the previous year to non-current borrowings in the
current year. The £3.1m was advanced as financial assistance during the port
construction due to the delay in disbursement from lenders. As a result of the
cash constraint on account of Covid-19 an agreement was signed 31(st) May 2023
that the advances will not be called until the company becomes adequately
cashflow surplus or 3 years, whichever is earlier.
Particulars Long-term borrowing Current maturity of long-term borrowing Interest on long term borrowing Leased Total
£000 £000 £000 liabilities
£000 £000
1 January 2022 39,932 1,037 (3) 2,357 43,323
Cash-flows:
- Repayment -- (881) -- (138) (1,019)
- Accrued during period -- -- 5,372 171 5,543
- Paid during the year -- -- (4,217) -- (4,217)
Non-cash:
- Exchange difference 239 -- (19) 38 258
- Interest on term loan converted to FITL 517 -- (517) -- --
- Interest on term loan EIR adjustment
628 -- (628) -- --
- Reclassification* (2,151) 2,151 -- -- --
31 December 2022 39,165 2,307 (12) 2,428 43,888
28. EVENTS OCCURRING AFTER REPORTING PERIOD
a. New projects / contracts:
The Indian subsidiary has commenced a business relationship with a large Oil
and Gas Company. The MPL facility is currently handling Offshore vessels for
this customer and is looking to widen its scope of activities in the offshore
sector to include heavy fabrication works and other logistics. Business with
the offshore sector is expected to become a significant contributor to revenue
growth going forward.
The Indian subsidiary has also successfully signed the contract with a large
cement company for the cement cargo for an initial period of 1 year, which
will be extended on an annual basis.
b. Status of the re-structuring proposal:
Update of the proposal with the existing lenders for restructuring of the
current debt on the following terms:
i. Rephasement of existing term repayment from 7 years to 12-14 years;
ii. Deferment of principal term loan repayment for a
period of 24 months;
iii. Interest moratorium for a period of 24 months.
c. New unsecured credit limit
Unsecured credit limit from KJS Concrete Private Limited (Hunch Ventures group
company) amounting to £ 15 million.
29. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31 December 2023 were
approved and authorised for issue by the Board of Directors on 26 June 2024.
For further information, please visit www.mercpl.com or contact:
MPL c/o SEC Newgate
+44 (0) 20 3757 6880
Cavendish Capital Markets Limited Stephen Keys
(Nomad and Broker) +44 (0) 207 220 0500
SEC Newgate Elisabeth Cowell/ Bob Huxford
(Financial Communications) +44 (0) 20 3757 6880
mpl@newgatecomms.com
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