Gautam Adani’s Infra Bet Pays Off

INDIA’S SECOND RICHEST Gautam Adani is a risk-taker who bets money on large core infrastructure projects to unlock value when the companies achieve scale.

Most of those bets have been paying off despite controversies and the subsequent rise, fall and rise in the group’s market value. The infra business, comprising Adani Power, Adani Green Energy, Adani Total Gas, Adani Energy Solutions and Adani Ports & SEZ (APSEZ), clocked an EBITDA of ₹65,725 crore at the end of June 2024, an 83% growth from ₹44,779 crore in June 2023, while emerging infra businesses under Adani Enterprises, including solar and wind equipment making, airports, and roads, contributed an EBITDA of ₹2,991 crore, up 70% during the same period.

The group is already India’s largest thermal power and renewable energy maker, largest port and logistics operator. It is also the second-largest cement maker and handles one-fourth of air passenger traffic and 30% plus air cargo traffic from its seven airports. Gautam Adani’s wealth nearly doubled to ₹10,40,212 crore in the last one year, at a time when the group was going through one of its most challenging times.

The Controversy

A report from U.S-based short seller Hindenburg Research on January 25, 2023 alleging improper use of tax havens and stock manipulation pulled the group’s market capitalisation down 56%, from ₹19.18 lakh crore to ₹10 lakh crore within 10 days. Flagship firm Adani Enterprises (AEL) had to call off a ₹20,000 crore follow-on public offer.

Refuting the report, Adani says it was a two-sided attack — “a vague criticism of our financial standing and, at the same time, an ‘information distortion campaign’, dragging us into a political battlefield.” The group raised an additional ₹40,000 crore to cover debt repayment for the next two years and pre-paid ₹17,500 crore to restore investor confidence.

Market cap of 11 listed companies of the Adani Group rose 74% YoY to ₹15.93 lakh crore in FY24, from ₹9.15 lakh crore in FY23, Fortune India data shows. Business also performed well, despite a marginal fall in revenues from ₹3.33 lakh crore in FY23 to ₹3.09 lakh crore in FY24. Profit after tax grew 62% from ₹25,050 crore to ₹40,676 crore.

“In FY24, we recorded our highest EBITDA (earnings before interest, taxes, depreciation, and amortisation) of ₹82,917 crore, or approximately $10 billion, a surge of 45%,” Gautam Adani said. Net debt to EBITDA fell from 3.3x to 2.2x and cash balance stood at ₹59,791 crore in FY24.

“As we make our way towards becoming a $10 trillion economy by 2032, our spending on infrastructure is expected to grow at a CAGR of 20-25% and reach a cumulative spend of $2.5 trillion,” Adani said at the annual general meeting of Adani Enterprises in June.

Theory Of Adjacency

Recovering from the setback in market crash, Adani said, “we are stronger than ever, and our best is yet to come.” Beginning from the construction of a small port at Mundra in 2001, to creating one of India’s largest diversified business empires, the businesses he entered were of “national importance” and opportunities in “business adjacencies”, says Adani.

Over years, the group added another 12 ports apart from Mundra, besides becoming a comprehensive logistics services provider with 15,000 hectares of industrial land and 15 lakh square feet of warehousing infrastructure. APSEZ’s revenues grew 28% YoY to ₹26,711 crore in FY24, while PAT gained 53% to ₹8,111 crore. The company’s target is to become the world’s largest port operator by 2030. With the first phase commissioning of Vizhinjam port near Thiruvananthapuram as India’s first transhipment hub, Karan Adani-led APSEZ is heading in that direction.

Power-packed, Cement Foray

His beginning as a commodities trader and emergence as one of the largest coal traders prompted Gautam Adani to foray into thermal power generation. The group is currently the country’s largest private thermal power producer with an installed capacity of 15,250MW across nine plants. An early entrant in green power, Adani Renewables has 12,000MW of operational portfolio, including 7,400MW of solar, 1,651MW of wind and 2,140MW of hybrid. The target is to reach 50GW by 2030, the largest renewable capacity in the world by a private developer. The group is constructing the world’s largest single location — 30,000MW — renewable plant at Khavda, Gujarat. The 2,848MW of greenfield capacity addition by Adani Green Energy in FY24 accounts for over 15% of India’s total renewable capacity addition during the fiscal.

Riding on his logistics and commodity trading prowess, Adani also started a business in edible oil and industrial essentials in JV with Wilmar International of Singapore.

Another diversification was into natural gas, with the government looking to increase natural gas’ share in the country’s total energy mix to 15% from just over 3%. Adani teamed up with TotalEnergies of France, and Adani Total Gas (ATGL) has so far set up 559 CNG stations and 1,212 EV charging points. It supplies PNG to 8.58 lakh homes and nearly 8,600 industrial & commercial customers. Adani Gas has also won a mandate to supply in 53 Geographical Areas (GAs), of which 34 are owned by ATGL and the balance 19 by Indian Oil-Adani Gas — a 50:50 joint venture with IOC. Besides, ATGL is also entering the smart meter manufacturing business, e-mobility and biomass production in a big way.

In September 2022, the group forayed into cement and became India’s second-largest cement manufacturer (78.9 MTPA or million tonnes per annum) after UltraTech, by acquiring Holcim’s India business Ambuja Cement with its subsidiaries ACC Ltd. and Sanghi Industries, in a $10.5 billion deal. Adani has announced doubling the capacity in the next three-five years. In June, Ambuja acquired Penna Cement for ₹10,422 crore, taking Adani’s cement capacity to 89 MTPA. The group also entered the media business by acquiring New Delhi Television Ltd (NDTV) in December 2022.

Futuristic Adjacencies

Apart from 11 listed firms, the group is incubating several new businesses under Adani Enterprises — solar equipment and wind turbines, defence and aerospace, data centres, airports, roads, mining and integrated resources management.

Similarly, Adani entered aviation in August 2019 by forming Adani Airports Holdings (AAHL) and took over operations of Ahmedabad, Lucknow and Mangalore airports next year. In 2021, it added Guwahati, Jaipur, and Thiruvananthapuram airports to its kitty. It also acquired GVK’s airport business in Mumbai in 2021. As passenger volumes rose 19% to 88.6 million, AAHL’s revenues grew 35% YoY to ₹8,062 crore in FY24. The greenfield Navi Mumbai airport under construction is targeting operations by March 2025.

Adani Defence and Aerospace, meanwhile, recently commissioned a missile and ammunition park in Kanpur at an investment of ₹3,000 crore. The group is also building data centres in Noida, Hyderabad and Pune under AdaniConnex.

AEL’s incubating business, Kutch Copper Ltd., has commenced operations at its greenfield copper refinery at Mundra. Adani wants to make it the world’s largest single-location copper smelter with a capacity of 1MMTPA.

The group has also won the bid for the Dharavi redevelopment project to convert Asia’s largest slum into a modern township with $3 billion investment.