After spending two decades building a coal-focused business empire, Indian billionaire Gautam Adani is now looking beyond fossil fuels to cement the future of his group. His ambitious plans have been stepped up by Prime Minister Narendra Modi.
Adani has emerged as India’s king of infrastructure, diversifying from mines, ports and power plants to airports, data centers and defense – sectors that Modi considers key to meeting India’s economic goals. Investors are rewarding the pivot, betting that the tycoon’s strategy of combining his interests with the government’s development program will pay off.
Six units from the group’s list added a total of $ 79 billion to their market value last year at the height of the pandemic, covering the best 12 months in their history. That’s the most after the two largest business empires in the country, Tata Group and Reliance Industries Ltd., led by Mukesh Ambani, blue-chip names including French oil giant Total SE and Warburg Pincus LLC, invested money in Adani’s companies.
In less than two years, Adani has gained control of seven airports and nearly a quarter of Indian air traffic. He unveiled plans to increase renewable energy capacity by almost eight times by 2025, positioning himself to profit while the government discusses ambitious climate targets that will reduce net greenhouse gas emissions by the middle of the century. Last week, he was awarded a contract to jointly build a port terminal in Sri Lanka, India’s neighbor who is courting to check Chinese influence in the region. Adani Enterprises Ltd. signed a contract with EdgeConneX last month to develop and manage data centers across India.
“Adani is politically smart and invests in mostly reasonable, long-term infrastructure projects” mostly related to government priorities, said Tim Buckley, director of energy finance for Australia and South Asia at the Institute for Energy Economics and Financial Analysis or IEEFA. “As long as India maintains strong growth, the group is likely to thrive under his leadership and witness a rise in global investor interest.”
The focus on Indian infrastructure forms the “core” of our “state-building” philosophy and the group has created thousands of jobs and provided unprecedented value to its shareholders, Adani said at the JPMorgan summit in India in September.The group spokesman declined to comment on the story.
After starting the commodity trade in the late 1980s, Adani is now richer than Jack Ma and is the second richest person in India with a net worth of $ 56 billion. He added $ 50 billion to his fortune last year, about $ 5 billion more than Ambani, Asia’s richest man, according to Bloomberg’s billionaire index. Adani’s net worth has risen more than any other billionaire this year.
Adani fell into the spotlight of the international public when he won the 2010 coal project in Australia. He has since been attacked by climate activists, including Greta Thunberg. The campaign of environmentalists “Stop Adani” disrupted the development, increasing the pressure on the lenders to close the credit tap. In an interview with Bloomberg News 2019, Adani said the goals of the project are energy security for India and jobs for the local population.
But at home, Adani was at the center of another controversy that grew louder, especially after Modi became prime minister in 2014. Opponents of the powerful leader say Adani’s success is largely due to his proximity to Modi – an allegation denied by the tycoon – and his inclination. to align its investments with Modi’s policy objectives.
Critics point to reports that the federal government, according to Modi, has relaxed the rules on bidding at airports, helping Adani’s group to qualify, although it has not shown previous experience in managing the airport. The lease, which the conglomerate received in the southern state of Kerala, faced a challenge in court, and a local minister last year called the winning bid an “act of insolent fellowship”.
The Adani group denied those claims and said it had won through a competitive process. In a statement on January 21, the government said Adani was the most favorable bidder among 86 registrations, and the procedure was transparent. The country’s Supreme Court is still hearing the dispute. A representative of the Adani group declined to comment.
Like Modi, Adani hails from the western Indian state of Gujarat. About two decades ago, Adani publicly supported Modi when the crisis threatened to end the careers of rising politicians. Modi was attacked by rivals and businessmen who accused him of failing to prevent bloody sectarian riots in his country in 2002. Adani created a regional industrial lobby and helped launch a two-month global investment summit in Gujarat in 2003 that spurred Modi’s pro-business credentials.
“The connection between Modi and Adani dates back to 2003,” said Nilanjan Mukhopadhyay, a political analyst who wrote the biography “Narendra Modi: Man, Time.” “Adani’s happiness will surely be beaten” without Modi in power. If that happens, he will begin to establish close ties with the new ruling party, Mukhopadhyay said.
Responding to his opponents, Modi said in a speech to parliament last month that the role of the private company in the economy is as important as the public sector, and wealth makers are a necessity. Adani’s representative declined to comment.
The rapid credit market helped Adani’s expansion. Adani Ports & Special Economic Zone Ltd. sold a 10.10-year bond in January for 3.10% of the coupon, compared to 4.375% in June 2019. Adani Green Energy Ltd. signed a $ 1.35 billion credit card last week from 12 banks, including Standard Chartered Plc and Sumitomo Mitsui Banking Corp., one of the largest renewable loans in Asia.
Although Credit Suisse Group AG estimates that the group’s gross debt in the six months to September jumped 29% to $ 24 billion from a year earlier, the spinoff and ring fence units in 2015 provided comfort to creditors.
The biggest threat Adani faces is coal. Financial institutions around the world are all under pressure to avoid funding energy projects that use the dirtiest fossil fuel. Adani Enterprises is the largest Indian importer and also a contract miner for 101 million tons per year. Its more than $ 2 billion investment in Australia faces challenges and delays, and could pose a risk to any unit that jumps into development finance.
Adani’s new ventures face much less wind. He has plans for defense production, appreciating Modi’s calls to help reduce reliance on expensive imports. It is also stepping up production of solar panels and modules, again under Modi’s “Make in India” appeal. Penetration into data centers follows government law that requires local data storage.
Adani’s propensity to attract foreign capital also coincides with the priorities of the Modi administration, which does not have a large enough budget to fund its infrastructure priorities. Warburg invested $ 110 million in the ports and special economic zone of Adana this month, while France’s Total invested a total investment of $ 2.5 billion in Adana Green.
“All in all, the Adani Group is doing all the right things,” said Chakri Lokapriya, Chief Investment Officer at TCG Asset Management Co. in Mumbai, whose fund recently sold its stake in Adani units but wants to buy again. “In the coming years, the Adani Group will own controlling stakes in critical entrances to infrastructure, electricity generation and information technology.”