Mercator Lines [Get Quote], India's second largest private shipping company, which is ramping up its non-shipping businesses to beat the downfall in freight rates, expects to close the current financial year with 8 per cent revenue coming from the dredging business.

The company had reported less than 1 per cent of the revenue of Rs 781 crore (Rs 7.81 billion) in 2007-08 from the dredging business. For the nine months ending December 31, 2008, it reported revenue of Rs 853 crore (Rs 8.53 billion), a 61.1 per cent growth over the corresponding period of the previous year as it largely deployed its ships on long-term contracts.

As these contracts come up for renewal the company risks losing revenue, which is prompting it to ramp up other businesses.

"We are expecting our non shipping business revenue to be greater than shipping revenue by March 2011," said H K Mittal, chairman and managing director of the Mumbai based shipping company with the largest fleet in the dry bulk segment.

On Monday the Baltic Dry Index, the benchmark for the freight rate of dry bulk carriers was at 2058, about 83 per cent lower than the all time high of 11793 last year in May. Drilling, oil production, coal mining are the other business from where the company plans to ramp up the revenue to achieve the target. On Monday the company made an announcement of purchasing a jack up rig costing Rs 1,000 crore (Rs 10 billion).

The company has deployed the rig on a bare boat charter agreement with Great Ship at a day rate of $92,700 for the next three years. Great Ship, the offshore business subsidiary of India's largest private sector shipping company Great Eastern Shipping has in turn deployed the rig with public sector oil producer Oil and Natural Gas Corporation.

This would result in Rs174 crore (Rs 1.74 billion) of annual revenue for Mercator from the rig at the current value of Rupee against the US currency. The company was also awarded with two oil blocks in 2008 in Gujarat under the seventh round of National Exploration License Policy, the work on these blocks are yet to be started. "We are diversifying to overcome cyclical impact of the shipping business," said Mittal.

Mercator expects its other non shipping revenue to come from the coal mines that it has acquired in Indonesia and Mozambique. The two coal block it has Indonesia is already expected to contribute about 3 to 4 per cent of revenue in the current financial which would complete by the end of March.