Adani finds mine-development contracts more promising than trading

Adani Group built its fortunes by starting as a commodity trading company. But, Adani Enterprises — the flagship company of the three-decade-old trading group — now sees mine-development contracts as more promising than trading. 

“As we grew, we also looked at how to best utilise our capabilities. Our mine development and operation (MDO) business is growing faster than trading,” said Jugeshinder Singh, chief financial officer, Adani Enterprises. He expected the company’s bulk handling to be higher from the MDO contracts, compared to trading.

In 2006, Adani Enterprises was awarded its first MDO contract. At present, Adani Enterprises is India’s largest MDO operator. The company has one fully operational MDO; two more MDOs have started and another seven are under development. “One of the seven will start operations in the next financial year,” Singh said.

According to the firm’s presentation, washed coal dispatch volume during the June 2019 quarter was at 2.4 million tonnes from its mining and services division. Volume from its integrated coal management  or coal trading was at 18.5 MMT in the same quarter.

For the June quarter, Adani Enterprises reported a segment profit of Rs 347.93 from coal trading  and Rs 239.31 crore from mining. Segment liabilities, however, for the coal trading business was at Rs 10,256.54 and the mining business was at Rs 1,376.06 crore. “Based on the projects at hand, you can safely say that our MDO business would be north of 100 million tonnes,” he said. Its MDO contracts span across Coal India’s mines, blocks won in auctions from private companies and other state utilities.

The company’s coal trading business will get a fillip once production from the Australian Carmichael mine starts likely in one-and-a-half years. "In terms of trading, Carmichael mine will come online in April-June 2021; until then, the coal handling will be in the range of 60-65 million tonnes,” Singh said.

The official said the entire expected output of 11 million tonnes from the Australian mine in the first phase of production will be used at Adani’s power plants in India. The group’s thermal power assets are held under a separate listed entity-Adani Power.

In addition to its core coal business, Adani Enterprises has entered several new businesses in the past two years, including water, transport and airports. The management, however, plans to hive off these businesses as listed entities once they mature. “Everything else (other than coal and Adani-Wilmar) is a business that we will incubate and then shelve it out like Adani Green and Adani Gas, which are listed entity verticals,” Singh said. Adani-Wilmar is a 50-50 joint venture, which owns the edible oil brand Fortune.