Gautam Adani | From a merchant to the third richest in the world

The Gujarat-based industrialist, whose interests range from ports and airports to power, media and telecommunications, has a net worth of $140 billion

The Gujarat-based industrialist, whose interests range from ports and airports to power, media and telecommunications, has a net worth of $140 billion

Industrialist Gautam Adani, who founded the Adani Group of Green Energy Ports, ranked in the top three of the Bloomberg Billionaires Index last week, behind Tesla founder Elon Musk and CEO Amazon, Jeff Bezos. Mr Adani, whose net worth is pegged at just over $140 billion as of September 3 according to the index, overtook luxury brand LVMH owner Bernard Arnault to take third place, the top Asian to do it.

Mr Adani’s first brush with business came when he dropped out of university and left his native Gujarat – where his father ran a textile unit – to try his hand at the diamond business in Mumbai. In 1981, barely out of adolescence, he returned home to participate in his brother’s company, which manufactures plastic films. The whiff of an import opportunity hit in 1988 when he found that domestic demand for polyvinyl chloride (PVC) far exceeded local supply. As business volumes soared, a foray into exports was the obvious next step.

The inflection point in the career of Mr. Adani, now 60, came, ironically, not when he joined a global company, but when one of those partners left his joint venture. Cargill and the Adani Group had agreed to set up a salt farm in Mundra, Gujarat, and even got permission to build a jetty to ship the production. But Cargill pulled out of the business – with ostensible reasons for leaving the US agricultural and food products giant ranging from a disagreement between partners over shareholding to protests by activists against salt farms . This was around 1991-92, just after the start of India’s economic liberalization.

The aborted salt farm venture, however, left the Adani Group with around 3,000 acres of land that would be the springboard for its next stage of growth.

At a time when Mr Adani was reportedly looking to move beyond trading and consider entering an asset-based business, and in what would ultimately turn out to be a fortuitous turn of events, Gujarat announced a pioneering port policy in 1995. which opened the doors to private investment in the sector. As the group’s business activities were frequently affected by delays in the clearance of goods at other ports in the country, Mr. Adani decided that it was the right time to establish a port and thus was born the port company of Mundra. Today, Mundra Port is India’s largest private port, providing shippers with the ability to load and unload bulk or containerized cargo.

For someone who claims fate saved him, both from kidnapping for ransom in the early 1990s and from the November 2008 terrorist attack in Mumbai while he was at the Taj Hotel Mahal Palace, Mr. Adani has bet his company’s future not just on providence, but as observers point out, on sniffing out opportunities allied with existing businesses or those offering the benefits of vertical integration.

For example, the SEZ policy of 2000 allowed for the creation of such an area on land adjacent to the Port of Mundra. These two companies were later combined under the umbrella of Adani Ports and SEZ Ltd. Observers say this company is still the cash cow that allows the group to venture into new types of businesses.

energy production

Mr. Adani’s interest in power generation was sparked by the demand for uninterrupted power supply from companies that settled in APSEZ. An example of vertical integration was its entry into power transmission – which was an obvious next step – and coal mining, as dry fuel supply was key to the success of the coal generation business. electricity.

Aside from critics’ claims that Mr Adani’s meteoric rise is a reflection of his closeness to ruling politicians, his forays into entirely new areas have likely been more strategic than daring, observers say. Its decision to acquire ACC and Ambuja Cement from Swiss building materials company Holcim for $10.5 billion to become India’s second-largest cement maker is a case in point. The Adani Group builds highways and implements other infrastructure projects, for which cement is a key raw material. The power generation activity produces fly ash as a by-product, which is an input material in the manufacture of cement.

Adani’s entry into the airports business was equally strategic, says Malay Mahadevia, who heads the company’s airports arm and is said to be a longtime friend of the group’s chairman. Mr Mahadevia is quoted as saying that for a group present in the infrastructure chain – through roads, ports and warehouses – the airport business had been a missing link. Today, the Adani Group operates six airports in the country, in addition to Mumbai Airport.

The founder’s penchant for scale has helped the group achieve goals that initially seemed far-fetched. In 2021, Mr. Adani has pledged to invest $70 billion to become the world’s largest renewable energy company. A year earlier, Adani Green Energy, a relatively new entrant in the field of renewable energy, won the world’s largest solar award from Solar Energy Corporation of India, for setting up 8 GW of solar capacity over 60 months, which involves an investment of ₹45,000 crore (equivalent to about $6 billion at the time).

However, forays into various sectors have not been without controversy. Protests against the group’s acquisition of the Carmichael mines in Australia have sparked local outrage. After buying the mine in outback Queensland in 2010, the group had to wait until 2019 before all state permits were in place. While the protests had made it difficult for the group to lend on the scale originally planned, the patient wait nonetheless hinted at Mr Adani’s belief that coal was the way forward for power generation.

In its annual report for the year ended March 2009, Adani Enterprises Ltd. had this to say: “Notwithstanding various policy initiatives in India to diversify the fuel mix, with the limited oil and natural gas reserve potential, eco-conservation, restrictions on hydropower energy projects and the geopolitical perception nuclear power, we believe it is likely that coal will continue to be India’s main power generator. In July 2022, the thermal power generation capacity accounted for 58% of the country’s total capacity, and at the beginning of this calendar year, the country faced a power generation crisis due to a shortage of coal, requiring coal imports.

The protests witnessed around the Carmichael mines were not the first Mr Adani had to face. Even during the development of the port of Mundra and after the establishment of a thermal power station in the area, reports of ecological damage – ranging from the impact on fisheries to the warming of nearby sea waters to the pollution of plans local waterworks – have drawn the angry attention of environmentalists and local residents.

More recently, a Nordic pension fund dumped its investments in the group following Adani’s past business dealings with a company linked to the Burmese military. And S&P removed APSEZ Ltd. of its Dow Jones Sustainability Indexes after careful consideration.

Yet not everything Mr. Adani touched turned to gold. The IT services sector and the retail sector briefly caught his eye. But the plans had to be quickly scrapped when the required management time turned out to be much higher than that seen in the group’s other businesses.

New Forays

More recently, the telecommunications and media industry have caught Mr. Adani’s attention. Recently, it successfully bid for telecommunications spectrum to provide 5G services to enterprises, including for data centers, and is now engaged in a hostile takeover bid by the news production company founded by Prannoy Roy and Radhika Roy, New Delhi Television Ltd (NDTV).

Last month, a unit of the Fitch Group, CreditSights, observed that the group’s pursuit of an aggressive expansion plan had “put pressure on its credit metrics and cash flow”. He pointed out that the group was increasingly venturing into new and/or unrelated businesses, which were “capital-intensive and raise concerns of too much dispersion in execution oversight.” The agency said it had seen little evidence of equity injections from developers into group companies, which it said were “necessary to reduce leverage in their strained balance sheets”.

The ratings firm added that in the worst-case scenario, “overambitious debt-funded growth plans could end up degenerating into a massive debt trap and eventually lead to distress or default.” one or more group companies.

About Wanda Dufresne

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