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The name Gautam Adani might be elusive for some, but this businessman has recently become the richest man in India, and the fifth richest man in the world. The sudden turn in his fortunes comes from the dizzying rally of Adani Group companies over the past few quarters.
Adani Group is an Indian conglomerate based in the state of Gujarat, having a market capitalization of approximately $260 bn (as of September 19, 2022). It comprises seven publicly listed companies with businesses across sectors of energy, ports & logistics, mining & resources, gas, defence & aerospace and airports. The Group was founded by Gautam Adani, a first-generation entrepreneur, in 1988 as a commodity trading business.
Adani Group business model
The seven listed companies under the group are Adani Enterprises Ltd, Adani Ports & SEZ Ltd, Adani Total Gas Ltd, Adani Green Energy Ltd, Adani Transmission Ltd, Adani Power Ltd and Adani Wilmar. The group’s unit is India’s largest port operator handling 312 million metric tonnes of cargo (as per 2021 data), the largest private airport player with seven airports under management and rights for one more under construction. It also has India’s largest private thermal power company with 14,000 MW of thermal and lignite plants and the largest solar power company with 5,400 MW installed capacity and 14,600 MW under construction.
Adani Group companies have acquired projects such as Lanco’s Udupi thermal power project and Larsen & Turbo (L&T) and Tata’s Dhamra port in Odisha between 2014 and 2017. The conglomerate also expanded into new sectors, including wind energy, solar manufacturing, lending, power distribution, and aerospace and defence. In September 2017, the group announced a collaboration with Swedish defence giant Saab to develop unmanned aerial vehicles and helicopters.
In 2018, Adani won 25 bids out of 126 contracts released by the government to set up and operate piped natural gas networks and gas stations across India. Some 15 contracts were won on their own and 10 were in a joint venture with Indian Oil Corporation. The group acquired Reliance Power’s Mumbai electricity transmission business, GMR’s thermal power project in Chhattisgarh, L&T’s Katupalli port near Chennai, and a power transmission line in Rajasthan owned by KEC International.
Meanwhile, in 2022, the group paid $10.5 bn for Holcim India’s 70 million tonnes of cement capacity to become India’s second-largest cement manufacturer trailing behind Aditya Birla Group.
However, these acquisitions have made the 34-year-old Adani group India’s second-most indebted group ($37.7 bn in FY22) after Tata ($44 bn) and ahead of Reliance Industries ($35.2 bn).
One of the biggest investments of the Adani Group, a coal mining project in Australia, has been facing protests for decades from environmentalists and indigenous communities alike. In 2010, Adani paid $2.7 bn in cash and royalty for a coal tenement in Queensland’s Galilee basin from the Australian energy company Linc Energy (now liquidated).
The Carmichael coal mining project contains 11.05 billion tonnes of high-quality potential coal reserves — enough to meet India’s entire coal needs for 12 years. The company has already spent close to $3.5 bn to $4.5 bn developing the mines, which include a 200-kilometre rail line and a coal-handling terminal.
The project is perceived to be a major threat to the Great Barrier Reef and has been struggling with raising finances. While the Adani Group initially announced an investment of AU$16 bn ($11.17 bn), in 2018 it announced that the entire project would be self-funded for AU$2 bn. Some of the world’s top coal financings banks like BNP Paribas, Credit Agricole, Societe Generale, Barclays, Citigroup, Deutsche Bank and Goldman Sachs Group have declined the group’s funding request.
Adani Group companies’ stock movement
The rapid growth and acquisitions have increased the stock valuations of the companies in the group, with Gautam Adani’s net worth more than doubling in 2021 alone.
“Adani group stocks have had a fantastic run over the past couple of months. All the seven stocks have been consistently performing,” noted Rahul Shah, co-head of research at the Indian platform Equitymaster. “Even the worst performing Adani group stock – Adani Ports – has done better than the BSE Small cap index, the best performing benchmark,” Shah adds.
The shares of the electric utility company Adani Power Ltd increased by 145% since the beginning of 2022 with most gains of approximately 90% occurring in March 2022.
Adani Green Energy has been the top gainer in the group, with shares of the company rising more than 4,000% since September 2019. Adani Total Gas, Adani Enterprises, Adani Transmission and Adani Power have also gained between 485% and 2,550% during the same period. Adani Wilmar, listed in February 2022, has gained over 252% as of September 23.
What’s next for Adani group companies?
The Group has been betting big on the future while investing heavily in the renewables market. Adani Green Energy Ltd. (AGEL) acquired nearly 5 GW of renewable energy assets from SoftBank Energy Holding including 1.4 GW of operational projects (the rest under construction) in May 2021. SB Energy Holding’s green energy portfolio consisted of 84% solar, 9% wind-solar hybrid, and 7% wind projects. All came with 25-year power purchase agreements. This purchase made AGEL one step closer to achieving its goal of owning 25 GW of renewable energy capacity by 2025.
“Adani Green Energy will invest $20 billion in renewable energy development over the next decade and develop 2 gigawatts per year solar panel manufacturing capacity by the fiscal year ending March 2023 to complement the existing 1.5 GW capacity,” Adani said during the TiE Sustainability Summit in October 2021. The group announced a $70 bn investment by 2030 to transition to a green future.
Meanwhile, Adani Ports Ltd has pledged to achieve carbon neutrality by 2025. Adani intends to power the entire Mundra port operations with renewable energy as well to safeguard its main hub. The group is constructing a one-million-tonne-per-annum coal-to-PVC (polyvinyl chloride) project in Mundra with plans to use green hydrogen as fuel.
To fund all these projects, the group is heavily utilizing the green bond market. AGEL raised $750 mn in green bonds in September 2021 and has plans to raise $20 billion more in the future.
