THE MAN, THE MYTH, THE LEGEND 😎

Recently, Mr. Gautam Adani made an appearance on the Rajat Sharma show. In that he made a few statements which highlighted the courageous attitude with which he has run the business and has placed it among the Fortune 500 companies. It is not easy to clone what he has done. Among all the available sectors to start a business, he entered those which had the highest amount of risk and capital involved. Mr. Adani started his journey with the port business. It was then that he realized what India imports and exports and that's how he came to know about his next investment. 

Over the last 35 years, the Adani group has entered into Infrastructure, Cement, Ports, Airports, Coal, Electricity generation and transmission, Mining, FMCG, Telecom, Power distribution, green energy and Gas distribution. I don't think I need to tell you all how capital intensive all of these sectors are. I mean, just to give you an idea, if you were to start a cement business from scratch, the minimum capital required to buy the appropriate land, set up a plant, manufacturing and distribution network, lease limestone mines, build a transport chain, marketing the brand, deciding on raw material suppliers, etc. The combined capital required would definitely cross Rs 25,000 Cr. It is not as easy as it looks. 

Mr. Adani has been a strategic thinker. The group is an elephant. But for Adani, it's like a flexible and highly mobile leopard. Let's look at some of his moves so that we all know how he thinks? 

1. Last year, Mr. Adani purchased 2 branded cement companies. He acquired Ambuja and ACC cement. After acquiring Ambuja and ACC, Adani has become the 2nd largest player in the Indian cement industry with a combined production capacity of 67.4 MTPA. He purchased these cement companies for 2 reasons. First was when he started his port business, he came to know that India had a lot of dependency on imported cement. Second was that Adani holds a significant position in the Indian infrastructure space. He very well knows the consequences of being dependent on other players for key raw materials. Hence, to integrate his supply chain, Adani thought of backward integration, which led to the acquisition of Ambuja and ACC. Acquisition cost of Ambuja and ACC was $10 billion (Rs 80, 000 Cr). 

2. Adani owns 6 airports in India, including the affluent Mumbai International Airport. Out of 1.4 billion people that reside in India, only 188 million have access to this luxurious and time-efficient service. Only 4% of the Indian population has the money to afford this service. Over the last 20 years, India's per capita income has grown by an average 6%. This figure is rising. Adani knows very well that the rising disposable income of Indians would definitely increase the air traffic. Hence, instead of owning loss making airline business, he decided to own the entire airport itself. That was one of his masterstrokes. Owning and running an airport is more profitable than running an airline company.

3. Adani's contribution towards making India a green energy exporting nation is huge. Talking about Adani green energy, Adani green energy has strong backing from the French giant, Total Energies. They have a 20% stake in Adani green energies limited and has become one of the largest renewable players in the country with more than 20GW of capacity, spread across different states. Currently, 6.7 GW is operational with cash flow secured through the power purchase agreements and 13.7 GW as under construction. This shows why the company has a PE of 644. 
 
Under thermal capacity, Adani is largest private player with 12450 MW of capacity. Adani transmission lines has a network of 18795 circuit Kms. Currently, 15003 CMS is operational. This tells us why the company has a PE of 824. 

4. Adani ports is India's largest private port operator with 312 MMT of port cargo, with a 30% market share. Apart from ports, it also has a 4000-hectare SEZ in Mundra, a free trade warehouse zone and a large bank of 12000-hectares. Adani has synergized his entire operation. He has coal mines required to run his thermal power stations as well as cement capacity. He has a cement company to satisfy his infrastructure needs. He has power agreements so as to supply a constant supply of electricity to all of his plants and, lastly, he has ports so as to transport the cement produced. One of the largest costs of running a cement company is transportation. 

5. Adani group companies have a great runway ahead. In the metal space, AEL is setting up an aluminum and copper refinery with a billion-dollars worth of investment. In the FMCG space, AWL has emerged as the biggest player with sales surpassing that of HUL. Sales stood at Rs 54214 Cr. AWL is a 50:50 JV between Adani and Singapore's Wilmar. 

All of these companies have high capital requirements, are very risky, policy dependent, plus their insurance premiums would definitely run into the billions. For Example, the airport business has 70% EBITDA (earnings before interest, taxes, depreciation and amortization), green energy has 92% EBITDA margin, and followed by the transmission business with 92%. 

The common thread in Adani's business is growth opportunities, de-risking the business model, managing regulatory issues, timely execution, resource mobilization at competitive rates and matching cash flow payments. Unlike Mallya and Dhoot of Videocon, Adani's businesses are fully integrated. Coal mining - ports - thermal power is a form of de-risking. You don't always have to find money sources to de-risk these capital-intensive businesses. Sometimes, you just need brain.

Today, Adani not only has Indian financial institutions backing him but has also got the Sovereign funds from Canada, the UAE and many other countries backing him. Recently, when the "literate" people started pointing out figures on Adani's debt, he raised Rs 20,000 Cr in just 1 week from these sovereign institutions. If that's not power, then what is? Sovereign funds manage pensions and government money. He has global alliances supporting his back.

 And all of this has been accomplished in the last 35 years. Time does expand so as to fill the work. It's hard to believe that he has achieved all of this in just one birth. He is a first-generation entrepreneur. Though it seems difficult to digest, it does not change the fact. Today, he stands 3rd in the world's richest people, according to Forbes. He is the only Asian as well as the only Indian to ever reach that spot. He is fearless, he is courageous, he is smart and more importantly, he is a futurist. Though the world has raised a lot of allegations about him, some even calling him an Oligarch of the serving PM, I think what he has done requires more than political connections and favorable policy design. 

I think the ones who raise a finger at him are the ones that envy him and his success. I deeply respect him for what he has built because I know for sure that it wasn't just an overnight success. I would end this blog by quoting Mr. Adani himself.

"What we do in the short-term, looks like a marathon, but what we achieve in the long-term, will look like a sprint." 

FRIDAY 
13-01-2023