Why and how the market bets on Gautam Adani

Dalal Street is known for laying the red carpet for rising sun. Be it Dhirubhai Ambani's  Reliance Industries in the late 80s or N.R. Narayana Murthy's Infosys in the 90s. The Street seems to be readying for a new horse - Gautam Adani - to bet on. Adani, the college drop out, has built a $8.7-billion empire based in Gujarat in the last two decades.

The 52-year old Adani is undoubtedly the one entrepreneur to watch out for under the Narendra Modi led BJP government.

The Street is already cheering his stocks. In the last four months or so, three listed companies of Adani have increased their market share by a whopping Rs 55,000 crore. The flagship Adani Enterprises,  which is into trading of commodities, has jumped from Rs 238 to Rs 543 since January this year. Adani Port and SEZ  stock has increased from Rs 146 to Rs 223, while Adani Power jumped from Rs 32 to Rs 54 per share.

But Adani also never had it so bad. The last few years have been terribly challenging. Like any other entrepreneur, the  policy paralysis combined with a sustained economic slowdown, has halted his gravy train. The ambitious power venture 'Adani Power' with a capacity of close to 8,000 MW has been amassing losses. At the last count, the losses have mounted to Rs 2,000 crore. The big reason is the unavailability of coal from the state owned Coal India. Adani Power has also been banned by the environment ministry from mining coal in Maharashtra's tiger reserve region. These bottlenecks have already forced Adani to source costly imported coal, leading to losses as the power purchase agreement has been fixed much earlier with the state electricity boards. In fact, the Central government has been asking Coal India to provide long term supplies to power plants, but nothing much has happened so far.

That is where Modi, from 7 Race Course Road, is expected to provide a big relief and fillip to Adani's dream to achieve a capacity of 20,000 MW by 2020. Adani is also the largest mine developer and operator with mining rights in Chhattisgarh  and Orissa. The plans are to start commercial production from 2015 onwards. Today, mining is attracting a lot of criticism in the market, and Adani needs Central government's support here. Adani's crown jewel Adani Ports & SEZ, too, has been mired in  controversies. One and a half years back, the Central government had cancelled its 1,800 hectare special economic zone (SEZ), charging the group for violation of SEZ norms. Adani is still to come out of this set back. Clearly,  Adani is  knocking  at the  doors  of the Central government for better clarity in the policy for land acquisition, mining and oil & gas exploration and pricing etc.

The clarity in policy is now going to come from pro-reform Modi in Prime Minister's chair.

Clearly, the stature of Adani is going to jump manifold with Modi at the helm in the Centre. If the right policy framework is in place,  Adani may well surpass many of the traditional business houses. Adani is already bigger than Anil Ambani's Reliance Power and Tata Power in the energy business in terms of capacity. Take for example, in 2007, when his port business was listed , Adani Port & SEZ got a valuation of close to Rs 40,000 crore. That time he actually displaced some of the top industrialists in the list of top 10 billionaires.

Adani's time, to rule the Street, has come again.