Gautam Adani - The man who wants to be infrastructure king

It is February, but the mercury has already begun to climb in Mundra, a sleepy port town on Gujarat’s Arabian Sea coast, 70 km from Bhuj, the town with the nearest airport. But 60-year-old Shinzo Nakanishi, Managing Director, Maruti-Suzuki India, the country’s largest passenger car maker, hardly notices the heat. In his pocket is a deal that, almost at a stroke, solves the logistics bottlenecks faced by his export team at Mumbai’s Jawaharlal Nehru Port, from where Maruti-Suzuki ships its cars abroad.

The company will, henceforth, export 50,000 cars of the estimated 200,000 cars it plans to export by 2010 out of India from here. He has also got 30 acres for a car stockyard and a dedicated buffer area for cars to be parked just before they are loaded onto ships. “The Mumbai port is congested,” says a beaming Nakanishi, explaining the rationale behind his move.

Maruti-Suzuki is just one among several Indian and multinational corporate biggies who are buying this logic. Says Gautam Adani, Chairman, Adani Group, which owns Mundra Port, India’s first private sector port, as he shakes hands with Nakanishi and sees him off: “At some stage in future, we expect it (Maruti) to put up a car manufacturing plant in our SEZ.” The obvious advantage: having a plant next to the port will save Maruti a winding 600-km drive from its factories in Haryana.

Package deals

That’s so typical of Adani. The 43-year-old school dropout, who was recently ranked #10 among Indian billionaires by Forbes, with a net worth of Rs 37,200 crore (now down to Rs 33,720 crore due to the stock market meltdown), is thinking big—and ahead—for ways to expand his business empire that now straddles the entire infrastructure spectrum from ports to power to oil & gas to real estate, on which he is investing Rs 50,000 crore over the next five years. This is in addition to his core international trading business, but more on that later.

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Adani is speeding up work on his SEZ, for which he has roped in Singapore’s CPG Corporation as consultant. He has set aside Rs 700 crore in equity for the project. “We are looking at sectors like engineering, ship building and textiles industry in our SEZ,” he says. The port, which has been up and running since October 2001, he believes, will be a magnet for his SEZ.

“We have a readymade solution and offer a package deal both for companies that depend on imported raw materials and also for export-oriented industries,” he says. The Mundra Port handled 19.87 million tonne of cargo in 2006-07 and is expected to end this financial year with 28.07 million tonne. “Our target is to handle 50 million tonne of cargo by 2010-11,” says Rajeeva Sinha, Director, Mundra Port and SEZ. But Adani’s ambitions in the port sector are not restricted to India only. “We may look to expand globally over the next 1-2 years,” he reveals, adding that he is scouting for a port in South East Asia (see Oil’s Well).

In fact, Adani already works according to international parameters. The Mundra Port sets, and consistently meets, international benchmarks. For instance, the turnaround time (the time a vessel spends at the port for unloading cargo) for ships is just 13 hours, which is also the international average. The corresponding figure for public sector ports like Mumbai, Chennai and Kochi is three-and-ahalf days. So, the group is well prepared, both in terms of management practices as well as financially, to venture abroad.

Adani’s business model is quite unique. His group has large business interests in sectors like power, coal mining, oil & gas and exports that can provide his port with captive business, while simultaneously benefiting from having in-house port facilities.

Powering ahead

Having established itself as India’s leading private sector port operator, the Adani Group is betting big on power. It has lined up investments of Rs 45,000 crore over the next 5-7 years to set up 10,000 MW of generating capacity (see The Biggest Bet).

Here, too, he has followed the Mundra Port model—pioneered in India by the late Dhirubhai Ambani—of integrating his value chain backwards to the source of raw materials. The group has acquired coal mines in Rajasthan and Indonesia, which will feed his projects in Gujarat, Maharashtra and Rajasthan. “But our biggest strength in the power sector is the time to completion,” says Ameet Desai, Chief Financial Officer, Adani Group, who is overseeing the power initiatives. “We plan to complete the entire projected generating capacity by 2012-13,” he says. In fact, he expects the 1,320 MW project at Mundra to go on stream in stages next year itself.

Adani’s plans will bring him into direct competition with the Tata Group and Anil Ambani’s Reliance Power, but he is unfazed. “Work on many of our projects is already underway. We will leverage our backward linkages, the port, the group’s execution capabilities and our experience in power trading to forge ahead in this sector,” says Desai. The group is today a leading private sector power trader in India and commands a 13 per cent market share. The group is also evaluating the potential of entering the power trading business in neighbouring countries like Bhutan, Nepal and Bangladesh.

Oil & gas

Adani has big plans in the oil & gas sector—both in gas distribution and in oil exploration. The group was in the news in January this year when it reportedly bid $4 billion (Rs 16,000 crore) for the based oil explorer Burren Energy.

Oil’s well Adani is set to become a big player in the hydrocarbon sector.
Oil & gas	Initiative
Thailand	Two onshore exploration blocks of 4,000 sq. km each awarded to Adani Welspun. Seismic data acquisition planned later this year. This will be followed by drilling
India NELP VI	Two onshore blocks in Gujarat and Assam; 75 sq. km and 95 sq. km, respectively, awarded to Adani Welspun. Both the blocks are in proven petroliferous basins. Seismic data acquisition in progress, will be followed by drilling of several wells
India NELP VII	To participate in the upcoming bids
Other opportunities	Adani Welspun is also looking for other upstream oil & gas opportunities in India and internationally

Though it later denied the bid, its strategy in the sector is clear: bid for new blocks and also go in for M&As if opportunities arise. Shri Mathur, President & CEO, in charge of the group’s oil & gas initiatives, says: “We are open to overseas acquisitions.

Our strategy is to have a balanced portfolio.” According to an Edelweiss Research report, the Adani Group’s oil & gas reserves in Gujarat and Assam are estimated to be in the range of 50 MMBBL (million barrels) of oil and 1,500 MMCM (million centimetres) of gas. In Thailand, it has one onshore block with a total area of 3,900 sq. km. On the gas distribution side, the group has lined up expansion in cities like Faridabad (Haryana), Noida and Lucknow (Uttar Pradesh), and Jaipur and Udaipur (Rajasthan) for both household and industrial use. Enthused by the initial success in distributing gas in Gujarat, Adani is looking to replicate this success in other parts of the country.

Betting on real estate

The Adani Group entered the booming real estate sector relatively late, in 2006, but surprised everybody by bidding Rs 2,250 crore for, and winning, the Bandra Kurla Complex (BKC). Today, the group has a land bank of more than 100 million sq. ft, making it one of the leading real estate developers in the country. But unlike other real estate majors, Adani does not itself develop properties. “It’s better to have a local partner to take care of the local issues and bring entrepreneurial inputs,” says Adani. In BKC, for instance, Adani has roped in Mayfair Housing, a real estate developer, to implement the project in return for an 11 per cent stake.

So, where do these projects leave the group’s core trading business, which contributes almost 50 per cent to its topline of Rs 17,000 crore? “We will leverage the assets we are creating across sectors in the trading business. They will add more value to trading,” says 45-year-old Rajesh Adani, younger brother of Gautam. For instance, the power generation foray will get a ready buyer on account of the group’s power trading strengths and oil & gas exploration will eventually support its gas distribution business. Adds Pranav Adani, Gautam’s nephew: “We want to cover the whole value chain to build a more sustainable trading model.” Under Pranav’s leadership, the Adani Group is aggressively developing, for the first time in India, integrated storage and logistics infrastructure for fresh fruits, vegetables and grains. Adani Agrifresh, with a total storage capacity of 18,000 tonne in Himachal Pradesh, handled 4,800 tonne of apples in 2006-07 and plans to procure 25,000 tonne of apples in 2007-08. The company plans to roll out additional capacities in Jammu, Maharashtra, Karnataka and Gujarat.

The challenges

The two issues that can trip up Adani’s ambitions are management bandwidth and money. All his projects— in power, oil & gas, coal mining, SEZs and real estate—are implementation-intensive and immensely expensive.

But Adani, who himself dropped out of school when he was in Class 10, has quietly built a strong management team of experienced people. He is known for his hands-on style. In fact, he believes in complete delegation once the business targets are fixed. “He is very good at rolling out quick business numbers,” says Malay Mahadevia, Director (Projects), Adani Group.

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Then, the group proposes to launch the Institute of Infrastructure Management, an infrastructurefocussed university, and Adani Knowledge Centre, for training its own personnel, which can supply him—and India Inc.—with a steady stream of qualified management personnel. For this, he has roped in Bakul Dholakia, former Director, Indian Institute of Management Ahmedabad, as an advisor. “We are also exploring the possibility of tying up with a reputed foreign university for a campus inside the SEZ,” says an Adani insider on condition of anonymity. The other issue—of finding money to finance the group’s ambitious plans—is not really a problem, say Adani executives.

They point to the combined market capitalisation of Adani Enterprises and Mundra Port of Rs 46,000 crore. The promoters own 75 per cent and 81 per cent, respectively, in the two companies, leaving massive headroom for raising funds in future. Then, the group’s power projects are expected to start generating revenues by next year. “We may look to list the power projects first,” says Devang Desai, CFO, Adani Enterprises, adding that the group’s philosophy is to tap the markets only after companies begin to create some value. Then, over the last couple of years, private equity players have been showing a lot of interest in his group. Last October, global private equity and venture capital major 3i invested Rs 900 crore for an 8 per cent stake in Adani Power, valuing it at more than Rs 11,000 crore. But the recent market turmoil may spoil his plan to raise cheap equity from the market, especially for the power and real estate businesses. The group is also believed to be studying the possibility of a global listing.

Can Adani pull off all his mega projects and move up the value chain to the next level? It’s difficult to say at this stage, but a successful implementation of all its plans will catapult the group into the top echelons of India Inc. Watch this space.