Adani group to invest $150 billion in pursuit of $1 trillion valuation

Richest Asian Gautam Adani's group will invest over USD 150 billion across businesses ranging from green energy to data centres to airports and healthcare as it chases the dream to join the elite global club of companies with USD 1 trillion valuations.

On October 10, Adani Group Chief Financial Officer Jugeshinder 'Robbie' Singh detailed the growth plans of the group, which started off as a trader in 1988 and expanded rapidly into ports, airports, roads, power, renewable energy, power transmission, gas distribution and FMCG and more recently into data centres, airports, petrochemicals, cement and media, at an investor meet organised by Ventura Securities Ltd in New Delhi.

The group plans to invest USD 50-70 billion in green hydrogen business and another USD 23 billion in green energy over the next 5-10 years, he said. It will invest USD 7 billion in electricity transmission, USD 12 billion in transport utility and USD 5 billion in the road sector.

Its foray into data centre business with cloud services would entail an investment of USD 6.5 billion in partnership with Edge ConneX and another USD 9-10 billion is planned for airports, where it is already the largest private operator. Its foray into the cement sector with the acquisition of ACC and Ambuja cement entailed USD 10 billion investment.

It is foraying into the petrochemical business with plans to set up a 1 million tonnes per annum PVC manufacturing facility at an investment of USD 2 billion and would enter the copper sector with a 0.5 million tonnes a year smelter at an investment of USD 1 billion, he said.

The healthcare sector foray that will include insurance, hospitals and diagnostic and pharma would see an investment of USD 7-10 billion, with some coming from Adani Foundation.

"Whatever you see today, it might look like it has just happened in the last one or two years, but in reality what we have done, both GSA (Gautam Shantilal Adani) and myself discussed this in 2015," Singh said at the investor meeting adding the conglomerate is a result of a well-thought-out business plan that entailed foraying into adjacencies of existing business.

The group's market capitalisation was around USD 16 billion in 2015 and it is USD 260 billion in 2022 - a surge of over 16x in seven years.

"Given what we had as a set of companies, we believed that if we had assets and companies of that type we should really be a USD 1 trillion group. So we went through the steps that we needed to take to get to the point," he said.

There are only a handful of companies that are valued at trillion dollars or more. These include Apple, Saudi Aramco, Microsoft, Google's parent Alphabet and Amazon.

Singh said the Adani Group has set about building its infrastructure and logistics portfolio in a manner that it could emerge as the top five globally and not just India's largest player.

"Look at Adani Ports, Adani transmission, Adani Total Gas, Adani Power, combined when you look at these businesses, these businesses are in total infra and utility portfolio was formed by four core portfolios," he said. "It is the fastest growing portfolio of any comparable size infra portfolio. Our primary industry vertical materials metals and mining again sits next to our core of the infrastructure."

Explaining the logic being the expansions, he said for a trading company it made sense for Adani group to be in the ports business. And since energy is vital for this, the foray into distributed energy and finally into gas to provide an integrated logistics and infrastructure portfolio.

The recent foray into metals and mining is an extension of this as logistics and warehousing is an integral part of the cement business.

Given that power and logistics are the largest components of any metals and materials business, the group has seen it fit to enter copper, aluminum and cement businesses, he said.

Stating that power continues to be core to the Group's future growth plans, he said Adani is making the biggest bet by any Indian group in building the chain for producing hydrogen - the fuel of the future - as well as renewable energy plants.

Most businesses of the Adani Group enjoy the best-in-class margins. The ports business has reported operating margins of 70 per cent, while its closest competitor's margins are at 56 per cent. Adani Total Gas has reported margins of 41 per cent, while Adani Tranmission's operating margin is at 92 per cent. The businesses are profitable and efficient and generate high levels of free cash flows.

On financials, Singh said the group generates earnings before interest, tax, depreciation and amortization (EBITDA) of USD 8 billion. Of this, about USD 3.6 billion is spent on servicing debt (interest and principal). USD 700 million goes towards tax payments and businesses spend USD 1.8 billion towards capex.

While in absolute terms the Group's debt has gone up, so has its EBITDA, he said adding over the last nine years, the Group's EBITDA has grown 23 per cent CAGR, while debt has grown by 12 per cent.

Singh said flagship Adani Enterprises is the group's business incubator. Ports, power, transmission and gas businesses were all incubated by this company and when they reached a certain degree of maturity, they were spun off into separate companies and listed on bourses.

The same will be the approach for several new businesses such as airports being nurtured under AEL. When they become independent and can fund their own capital expenditure plans, they will be separated, he said.

In the next 2-3 years, hydrogen and airports businesses can be demerged when they can be independent.

"Adani Group's transformation is a 25-year story of growth and ambition," he added.