Adani Group: India’s Energy, Mining and Everything Else Company

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In Part I: Can Adani Heat Up, Sohrab Darabshaw described the political climate that has allowed the Adani Group, one of India’s biggest industrial concerns, to become so prominent in the nation. Here is more on the history of a major force in energy and several other sectors of India’s economy.

Within a span of about 25 years, the Adani Group has spread itself across important sectors of the Indian economy such as energy, agribusiness, and logistics.

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Here are some of its achievements:

  • It’s India’s largest private thermal power producer
  • Its Mundra port in Gujarat is the number one private port in India
  • It’s India’s number one coal importer
  • It owns one of India’s leading edible oil brands – Fortune, along with other cooking and baking products
  • It’s one of the biggest players in coal and agricultural commodities trading

The company’s commodities businesses, coupled with a new political era about to dawn in India, make an interesting story.

The story of Adani can be clearly marked in two phases – before 1988 and past it, when the Group was set up. A young Gautam Adani, not wanting to join his father’s textile business, tried his luck with diamond trading, and mad his first million at the age of 20. Thereafter, he returns to Ahmedabad, Gujarat’s capital city, and starts importing PVC for his brother’s plastic company.

Then, the Group is founded in 1988, more as a multiple commodities trading firm than anything else. In the early ’90s, after setting up its own private port, the Adani Group starts getting into the limelight, and of course, also starts diversifying. The rest, as they say, is history.

Future Expansion

Now, Adani Enterprises is poised to take off on an aggressive expansion plan. It has made massive investments in infrastructure in the provinces of Gujarat, Rajasthan, Maharashtra, Chhattisgarh, Odisha and Haryana. There’s talk of buying a port jointly owned by Tata Steel and engineering firm Larsen & Toubro for about US $800 million.

A recent report by CNBC-TV18 quoted Gautam Adani as saying his companies would achieve 20,000 mega watts (MW) of power capacity by 2020. “We want to consolidate our power portfolio and grow capacity in the next 1-1.5 years to 9,000 MW and by 2020, we’ll have 20,000 MW,” he told the interviewer.

Gautam Adani also revealed that the Group’s port business at present had 100 million tons of volume but they planned to increase it by another 100 million tons in next 4 years.

Allegations of Political Backscratching

Prior to embarking on this expansion plan, the Adani Group went through a consolidation phase during which its mining presence in Australia and Indonesia would be streamlined to the extent that in the next decade or so, the international operations make up around 40-50 percent of the group’s total revenues.

All of which did not go unnoticed by detractors, business as well as political. The main allegation against Adani has been that it ramped up so rapidly because of the “closeness” to Narendra Modi, the man very likely to be India’s next Prime Minister. During the just-concluded parliamentary election campaign, there were allegations of land being given away “dirt cheap” by Modi to Adani Group for the port development.

Even Modi rival Rahul Gandhi alleged in his political speeches that Modi’s election campaign was being funded by the Adani Group. This was not only constantly denied by Modi but also by Gautam who came out and told the media here that all such allegations were “rubbish.”

Friendly New Government

With exit polls showing the Modi-led political front coming to power next in India, Adani Enterprises and the Group’s other companies’ shares at the BSE Sensex have been soaring in the last few days. On May 12, shares of these companies rallied an average 7-11 per cent, after exit polls indicated Modi would form the next government.

Not only the company’s intrinsic value but that of Gautam Adani, too, has gone up in the last few weeks.  According to the Bloomberg Billionaires Index, the personal fortune of the 51-year-old Gautam tripled to $6 billion as of May 2, from $1.9 billion on September 13.

If Modi and his political party, the Bharatiya Janata Party do form the next government in India, it will be interesting to see how it impacts the fortunes of the Adani Group, and the direction its business takes.

Sohrab Darabshaw contributes an Indian perspective on industrial metals markets to MetalMiner.

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