November 26, 2008 is a date that Gautam S Adani, will never forget. He was at the Chambers restaurant of the Taj Mahal Hotel in Mumbai when terrorists struck, spending two fearful hours holed up in the darkness until he and fellow diners were rescued by troops.
Yet, calamity—and, indeed, controversy — have done little to dampen Adani’s indomitable spirit as he relentlessly pursues the pieces of an industrial empire straddling coal mining, coal trading, and power generation to ports and development of special economic zones (SEZs). And as he grows, capturing value across the chain and exploring linkages along the way, he has won over critics and investors alike.
Given his strategy of backward and forward integration, comparisons with Dhirubhai Ambani are recurrent and often apt. Like Dhirubhai, Adani never went to B-school. Like Dhirubhai, Adani has grown at a furious pace and raised over Rs 10,000 crore from the market. And like Dhirubhai, Adani has become a darling of investors by successfully executing large projects.
Adani is already the largest importer of coal (for power utilities) and is using the group’s knowledge of the business to foray into power generation. He plans to invest Rs 55,000 crore to set up 13,200 Mw in generation capacity by March 2016, half of which is under execution. To fuel the plants, Adani is acquiring coal mines and ships that will insulate him from the price vagaries of the commodities and shipping markets.
“We are offering an integrated infrastructure play with coal, power and mining under one company (Adani Enterprises). We are moving from a trading, to an asset-based organisation — which is a big transformation,” says an Adani group official.
Adani, who lost his mother the week he signed a $2.7-billion agreement with Australia’s Linc Energy, was unavailable for comment as he is still in mourning. This deal will help him fuel his power plans, helping him source coal at $45 a tonne against an average international price last year of $76. Without a doubt, Adani’s power plans, if they come good, could catapult him into the big league.
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That’s quite a makeover for a man born into a family of oilseed traders in Ahmedabad, from where Adani moved to Mumbai for higher studies. Staying with a cousin, who was a trader, enabled him to learn the business. In 1980, a crisis at his family-owned small plastic manufacturing unit forced him to return to Ahmedabad, which proved to be a turning point in his life. Faced with an acute scarcity of raw materials, he got a government trading house to import the much-needed input.
By 1985, Adani built a business importing raw materials such as coal, oilseeds and synthetic fibre intermediates and exporting agro and petrochemical products, as well as textiles. From those modest business beginnings, the Adani group has evolved into a Rs 27,000-crore empire built on the edifice of cash-rich commodities trading. His three listed companies — Adani Enterprises, Adani Power, and Mundra Port and Special Economic Zone — have a combined market capitalisation of Rs 101,878 crore, which places the group among India’s top 10 business houses.
The group’s first big foray outside trading was Mundra Port, and it cemented Adani’s reputation for turning adversity to his advantage—with a little help. When a proposed joint venture with Cargill fell through, Adani took advantage of Gujarat’s new policies to set up the Mundra port in 1998. Initially, the state had 26 per cent in the project, but later offloaded it to Adani. “The Mundra port acted as a catalyst for the growth of the Adani empire. Credit must go to Adani's risk-taking abilities,” says a retired state official.
It’s not just infrastructure that Adani has excelled in. In 1999, it joined hands with Wilmar International of Singapore to set up a vegetable oil refining unit. In few years, the Rs 6,000-crore Adani Wilmar’s Fortune has emerged the largest-selling edible oil brand, giving many a fast-moving consumer goods company a run for their money. Adani has also forayed into city gas distribution and has licences for 11 cities.
Adani certainly has a knack for identifying opportunities and then doggedly pursuing them to their logical conclusion. When the SEZ opportunity arose, he began acquiring land around his Mundra port to set up a multi-product SEZ. He floated a new company and merged it with Gujarat Adani Ports to create Mundra Port and Special Economic Zone Ltd (MPSEZ), which went public in 2007 and raised Rs 1,700 crore.
“Gautam Adani has demonstrated an ability to execute big projects, which has given investors comfort. Investors who made money on Mundra came back to invest in power,’’ says a merchant banker.
Yet, the group’s rise has not been without its share of controversy. Adani’s brother Rajesh Adani was arrested earlier this year by the Central Bureau of Investigation in a tax-evasion case. In the past, Gautam Adani himself was in the news for all the wrong reasons: in 1999, for his kidnapping, and in 2002, for his arrest by Delhi police. Before that, he had been under scrutiny for possible complicity with rogue trader Ketan Parekh.
Nevertheless, Adani has emerged largely unscathed from these incidents. Indeed, officials say the stock markets regulator would not have cleared the IPOs for Mundra Port & SEZ and Adani Power if there had been any issues. Group officials say many of these cases were triggered by business rivals. Whatever be the case, few can deny that Adani has grown to become a powerful force to be reckoned with on the country’s industrial landscape.