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The Adani Metamorphosis

Monday, February 27, 2012

Founded in 1988 with a capital of just Rs 5,00,000 this small company has metamorphosed into a giant conglomerate with current revenues nearing Rs 30,000 crores. And now it is set to take another major leap forward. So what makes this company tick and what is the media shy, but brilliant Gautam Adani of the Adani group chasing? It’s ‘the love for his business’, believes Mayura Shanbaug, that is the driving force and may be the primary reason  why the groups revenues could sky rocket by the year 2020. Her report…

Gautam Adani, the man from which the group has derived its name is another classic example of a success story that inspires millions with similar aspirations. The journey of taking the Adani group from a trading business founded with Rs 5,00,000 to the conglomerate with current revenue of almost $6 billion has been full of twists and turns. Of success and controversies that involved repeated run-ins with the authorities as his Business Interests spread from Power, to Infrastructure, Trading to Real Estate, Energy Logistics to SEZs, and Oil and Gas Exploration.  

Often compared to the legendry Dhirubhai Ambani for his acumen, this 50 year old, college dropout from Gujarat is a self made multi billionaire. He keeps bureaucrats and politicians in good humour and may appear soft, but plays hardball.

Now on the threshold of the third phase of its growth, the Adani group has begun by changing its brand identity, and perhaps indicating that the group is poised for further transformation. When asked about his next five year plan, Gautam Adani says it’s too near a future. “If all goes as planned, by 2020, we would produce 20,000 MW of power, handle 200 million tonnes of cargo at our port in Mundra and mine 200 million tonnes of coal and other ores,” he said.

Changing To Change
As the group spreads its wings beyond Indian shores by commencing mine exploration at Galilee Basin coal mine, Abbot Point port in Australia and in Indonesia, the man from Ahmedabad felt the need to change its image. “The new corporate identity captures the Adani Group’s journey from its humble beginnings in Ahmedabad to its current global presence with mining assets in Australia and Indonesia.” Adani explains the philosophy of the change in corporate identity, by saying “It marks the culmination of some important milestones in the Adani journey.”

And now as it goes forward, the group has decided to focus on three clusters - Resources, Logistics and Energy. “These three will be our key growth drivers for a successful and sustainable future,” he said. 

The group has already invested $3 billion in Australia on infrastructure so far and will be spending another $6 billion on its global expansion plans in the next three to four years. The funds will be generated through mixed options of equity debt and internal accruals.

Giant Leaps on Home Ground, too…
Before taking the plunge on to newer frontiers, Adani has set their house in order. There are important milestones that the Group has achieved back home, too. The group is the number one coal importer in India. “The energy need of India is going to be huge. Obtaining the natural resources necessary to meet the huge demand is a big challenge for the government…We have recently met the Prime Minister with our demand,” But, “We are well placed to help overcome those challenges,” he said.  

According to Adani, until 2015, it will continue to expand its coal mining business after which it would venture into iron ore mining. Its Extractive capacity is scheduled to increase from the current 3 Million Metric Tonnes (MMT) per annum of coal to 200 MMT per annum by 2020.

Already the group is biding for British Gas' domestic gas assets in Gujarat and it has several projects at the exploration stage in India and abroad. This will give impetus to their ‘Citi Gas’ distribution business. 

The Mundra Port, which the group owns and operates, has now become the number one private port in India. 95% of India’s international trade comes through this port. ”We are planning five other ports in India and Australia and aim to increase our annual cargo handling capacity from 52 MMT to 200 MMT by 2020” he said. 
According to estimates, the private sector will account for 40% of electricity generation in the country in the coming years. With eight plants and plans to scale up its capacity from current 4000 MW to 20,000 MW in the next decade, Adani could also become the number one private thermal power producer in India. 

The Other Focus Areas

Alongside the group’s core integrated infrastructure operations, Adani also has interests in the agribusiness through a joint venture (JV) with Wilmar of Singapore. The JV owns a highly successful range of cooking and baking products, including Fortune edible oil.

To stick to core activities, the group has decided to exit real estate and this business would be gradually divested to promoters' families.

"The holding company at Adani would continue to divest in non-core businesses. The Adani family would pursue these businesses at an arm's length," he added.
The company's land bank in Ahmedabad, National Capital Region (NCR) and Mumbai is valued at over $1 billion, of which the Mumbai property alone is estimated at over $400 million.

Keeping Controversies At Bay
Although Adani has always remained shy of the media glare, this favorite child of destiny has had his share of controversies. The mysterious drama surrounding his kidnapping a decade ago to his wining and dining with the top brasses of the political Mecca have found its way in the news. His ongoing battle with the environmentalists for upsetting the ecological balance of the area where his businesses operate or having the group implicated by the Karnataka Lokayukta for being the part owner of the port from where the illegal shipment of iron ore was sent and also getting investigated by Enforcement directorate for foreign exchange rules violation, the group has had it all.

So will the new corporate brand identity create a perception change? The answer to that question is a clear cut “No”. “Doing business in India with such complicated rules and regulations is not an easy task…You get caught in one or the other regulatory tangle,” said Adani in explanation to the charges. But the spirit is to keep moving on.  
Controversy or no controversy, for a teenager who came to Mumbai to get a job of a diamond sorter, Adani has certainly come a very long way…

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