Number 20 holds special significance in the life of Gautam Adani, chairman of the rapidly growing Adani group. All good things at the ₹2.30 lakh crore group begin with number 20. It’s the sum of the birth date of ‘Gautam-bhai’, as everybody addresses him. It’s also the sum of the number plates of each of the eight cars he owns, including the blue BMW 7-Series and Toyota Alphard, his favourites. All family owned and company owned cars sport 20 as the sum of their registration plates. The postal code of Shantigram, an 800 acre township housing the Adani group headquarters on the Sarkhej-Gandhinagar Highway, is 382421. You guessed right, it adds up to 20!

So it was only fitting that 2020 was the year that catapulted Gautam Adani from one among the large business houses in the country to the only one out to challenge the largest — Reliance and Tata — in depth and breadth of operations and value. The valuation of his holdings in seven listed companies shooting from ₹1.4 lakh crore on December 31, 2019 to ₹10.3 lakh crore as on May 24, 2022, overwhelming Mukesh Ambani’s ₹8.7 lakh crore and nudging Tata Group promoter stake worth ₹12.6 lakh crore. In the process, he overtook large entrenched business groups such as Aditya Birla (₹2.2 lakh crore) and Mahindra (₹79,966 crore).

“Adani group is nothing but India's success story in infrastructure,” explains Gautam Adani in a relaxed 90-minute conversation with Fortune India at the Chairman’s Lounge on the 16th floor.

He speaks plain English, in well thought out small sentences, often assimilating complex business equations and jargons into easy one-liners. Lacing them with appropriate similes, euphemisms such as “For me, partnership is not a percentage — it is all respect, trust and transparency” or “Forget individual enterprises, India as a country faces shortage of capital” or “India is 10 years behind China.”

Running up to the inflection year 2020, Adani had already built an enviable empire, tapping India’s grave infrastructure deficiency. Now he has set up one of the boldest green plans globally with a proposed $70 billion push in solar, wind, hydrogen, green gas, green cement, green steel — all to be implemented by 2030.

With its breadth of massive infrastructure operations, the group is already India's largest port operator handling 312 million metric tonnes (MMT) of cargo against No.2 JNPT’s 76.14 MMT tonnes in 2021; India's largest private airports player with seven airports under management and rights for one more under construction; India’s largest private thermal power company with 14,000 MW of thermal and lignite plants, followed by Tata Power’s 8,860 MW thermal capacity; India’s largest solar power company with 5,400 MW installed capacity and 14,600 MW under implementation; India's largest city gas distribution company with operations in 33 geographical area (GA) licences, Gujarat Gas is No.2 with 27 GAs; India’s largest private power transmission and distribution company with 18,795 circuit kilometers; and India's largest edible oil player with an 18.9% market share with brand ‘Fortune’ in a highly unorganised industry.

In recent times, some of this growth came from 35-plus acquisitions worth ₹82,600 crore in last five years. Of that, over ₹33,500 crore was spent in 2021 alone. In 2022, months after incorporating Adani Cement, the group acquired Holcim India’s 70 million tonne (MT) cement capacity for $10.5 billion (about ₹81,360 crore) to emerge as India’s second-largest cement manufacturer, behind Aditya Birla Group’s 117 MT. With 20,000 MW of solar power capacity under development, Adani aims to be the world’s biggest solar power company by 2025.

Such rapid-fire growth and acquisitions have shot up group revenues from ₹70,463 crore five years ago to over ₹2.30 lakh crore today. Of that, an astounding 53.84% was added since 2020. From losses of ₹858 crore five years ago, it clocked profits of ₹18,066 crore in FY22. “Gautam Adani has not only diversified group portfolio but has done it keeping emerging growth sectors in mind and achieved all these within a short period of time,” says Dr. Kavil Ramachandran, professor of entrepreneurship (practice) and senior advisor, Thomas Schmidheiny Centre for Family Enterprise at Indian School of Business (ISB), Hyderabad.

But acquisitions are not cheap. The recent acquisitions worth ₹1.6 lakh crore, have ballooned group debt from ₹1 lakh crore five years ago to around ₹3 lakh crore in FY22 (including the Holcim deal). That makes the 34-year-old Adani group, India’s second-most indebted group after Tata (₹3.5 lakh crore), and ahead of Reliance Industries (₹2.8 lakh crore), as per the latest available listed company information.

In January 2021, senior political leader Subramanian Swamy tweeted without providing evidence, accusing Adani of creating ₹4.5 lakh crore as NPAs to banks. Adani group refuted the allegation saying it has maintained an “impeccable record of not a single NPA in three decades of existence.”

Sanjay Sethi, managing partner & CEO, Nestor Capital Consulting LLP says Adani has cash-generating businesses to fund equity expansion and maintains prudent financial discipline by refinancing previous rupee debts with low-cost bonds, bringing in external investments. And is adept at tapping primary and secondary markets.

Business is more than just money power. After expanding rapidly in 22 different businesses — seven of them added in the last two years —does the group have the capacity to absorb the massive transition or management and operational bandwidth to make it a success? Why did Adani enter seemingly unrelated businesses that are far removed from core competence?

Adani's 'Adjacency' Theory

Gautam Adani starts off slowly, patiently explaining his ‘adjacency’ theory behind the group’s entry into each of the businesses. As a listed trading company in 1994, investors often asked him why flagship Adani Enterprises had no assets. “People said Adani does not purchase any assets that can sustain. In people's eye it was a finance company, a trading company. It is just individual expertise and not corporate. That was the real issue and we started thinking how to adjust,” explains Adani.

By then, Adani Enterprises was already India’s largest coal importer, using 20 ports to unload imported coal. Fortunately, India began opening public-private partnerships and Adani entered the port business at Mundra. “It was a natural extension for us to support our prime activity. That's how our infrastructure journey started with a port,” says Adani. Power generation came next: “When you have a port and a large tract of land next to your port, and being the largest importers of coal, it was a natural extension to get into thermal power.”

Adani was also India’s biggest edible oil importer. While the port was being set up, Singapore’s Wilmar—from whom Adani imported edible oils—approached with a vision to set up port-based agri refineries, keeping in mind the potential of India’s huge market. “Everyone thinks of India as a huge market. When anyone sees 1.4 billion population, it is a huge opportunity. You have to only work to tap that underlying market. No one can deny the potential,” says Adani.

Almost 4-5 years after entering power generation, it was natural to get into transmission and then distribution, explains Adani. When the government began focusing on renewables, Adani entered solar power. About 10-15 years ago, when the Centre’s piped gas policy was yet to evolve, the Gujarat Government pioneered piped gas distribution to create a large piped gas network in the state. Adani entered city gas distribution in Ahmedabad. In 2014, then Gujarat chief minister Narendra Modi became Prime Minister and he planned to replicate Gujarat's gas distribution success across India. “We participated in all bids and won many. That is why we have a huge energy portfolio,” explains Adani.

“After our port and energy related ambitions were fulfilled, we looked at other areas. Delhi and Mumbai airports were privatised after 2005. Airports at Hyderabad and Bangalore also were developed by state governments. For the first time the government came up with privatisation of six more airports. We thought of this as an extension from ports to airports. These are adjacencies and we entered at the appropriate time. We did not enter telecom because there is no connection,” says Adani.

Now in cement, steel and aluminium, Adani not just sees the same ‘adjacencies’ but also enormous opportunity as India embarks on a great infrastructure push through massive Centre-funded public expenditure to keep the country's growth engine kicking amidst a prolonged slowdown. “The drivers for this (Holcim) decision have been based on two primary factors—the demand-supply gap, and synergies with our existing businesses. When we combine the cement demand pattern with existing businesses adjacencies that include Adani group's ports and logistics, energy, and real estate businesses, we are well positioned to build an integrated and differentiated business model that will be competitive and hard to match,” says Adani right after acquiring Holcim’s cement business in a swift deal. The group banks on India’s low cement consumption: Just 240 kg per capita against the global average of 525 kg. In China, per capita cement consumption is over 1,600 kg.

The group's foray into defence is based on four priorities — collaborate with global partners, focus on platforms and technologies of critical importance to meet emerging security and defence needs, set up an ecosystem of capabilities through investment in MSMEs and facilities and capabilities — says Adani. Adani Defence and Aerospace established India’s first Unmanned Aerial Vehicles (UAV) manufacturing facility at a 20 acre Adani Aerospace Park in Hyderabad in collaboration with Elbit Systems of Israel. In 2018, the group signed an agreement with Swedish fighter craft maker Saab to make Gripen series fighter aircrafts in India.

Never Back Off Mantra

Industry observers notice incredulous tenacity in Adani’s actions. He neither relents, nor backs down, say close family circles and executives. Once convinced about a project, he sets near impossible deadlines and pushes teams to achieve targets well before deadline, meeting and monitoring them every month. Re-consideration is never on the agenda under any circumstances.

Some bold audacious bets with a lot of luck went behind the group’s astronomical growth. Rivals do point to this coinciding with the rise and rise of Prime Minister Narendra Modi right from when he was chief minister of Gujarat, Adani’s home state, to being the Prime Minister of India. Adani doesn’t shy away from appreciating PM Modi on policy initiatives and his vision for energy security and defence. He narrates how he could launch city gas distribution in Ahmedabad, thanks to then chief minister Modi’s vision.

In 2006, Adani’s ambition to set up a large coast-based power plant at Mundra was shattered when his bid didn’t make it to the ultra mega power project (UMPP) awarded to Tata Power and later three more to Anil Ambani’s Reliance Power. But having made up his mind, Adani went ahead to set up the 4,620 MW Mundra Thermal Power Station right next to Tata Power’s 4,000 MW UMPP at Mundra. It is the world’s 11th-largest single location coal-based thermal power plant.

Or take the case of the widespread opposition to Adani’s coal mining project in Australia. A project with high-quality potential coal reserves of 11.05 billion tonnes — enough to meet India’s entire coal needs for 12 years. The group has already spent nearly $3.5-4.5 billion in developing the mines, including a 200km rail line and a coal-handling terminal while protests erupted against the project among environmentalists and local communities.

We asked if Adani moderated his expectations from the project. “There is no question of moderating plans,” Adani shoots back. “If you enter into a pipe, you have to get out at the other end. You cannot get stuck inside a pipe. Many people got stuck in between and died. You have to get out. Now we are through. We have got out of it (coal production has started). Already three ships have come to India,” says Adani emphatically. Adani's voice thickens, then becomes heavy to near agitated while narrating how he was haunted for a decade by what he calls “so called environmentalists and philanthropists with agenda” against his Australian coal adventure. “It requires wherewithal and perseverance to fight up to the last mile,” he proclaims.

Execution Is Key

Adani’s tenacity rubs off on the group’s execution skills, which conceptualised large greenfield projects — from ports to power plants, transmission lines and solar projects — and implemented them under tight schedules. “Perseverance and wherewithal to execute are strengths and DNA of the group,” says Adani.

His teams say Adani cherishes infrastructure execution challenges for the nation. At Mundra port, you can't miss Muhammad Iqbal’s patriotic song “Saare Jahan Se Achchaa...Hindustan Hamaraa”. It reverberates in each of the lifts of all group facilities at Mundra. When Adani took up the port in 1995, it was a ruined coastal port town with a barren coast, mostly marshy surface waters and land devoid of vegetation or habitat.

Construction began in 1995 and within three years the group operationalised the first two berths to anchor the first ship on October 7, 1998. Today the Mundra port and SEZ is spread over 35,000 hectares with over a lakh people directly and indirectly working there. Meanwhile, Mumbai's Nhava Sheva Port was commissioned in 1989, after decades of planning and construction.

Projects are centrally managed by a Project Management and Assurance Group (PMAG) and 125 Energy Network Operation Centres (ENOC), which provide real-time data monitoring on electricity generation, locations of plant faults, and rectification. Drones are used to monitor solar farms and wind turbines. Adani Green Energy Ltd (AGEL) has also set up a 2 lakh-plus vendor ecosystem across the country for components. Insiders say the mission is led by Sagar Adani, nephew of Gautam Adani and director, AGEL, along with Vneet S Jaain, MD and CEO, AGEL, who was earlier heading the thermal power business.

The group had no power plant experience before committing to the 4,620 MW Mundra Thermal Power Station. Yet all its four 330 MW and five 660 MW units were commissioned between May 2009 and March 2012, almost two years before schedule. It is among the fastest built mega power plants in the world in 60 months. Tata Power’s 4,000 MW UMPP at Mundra took nearly 100 months.

In the 648 MW Kamuthi solar power project in Tamil Nadu in 2015, then the world's largest single-location solar project across 2,500 acres, 8,500 people worked 24x7 to complete the project in a record eight months. Adani is now replicating that in a much bigger 1,500 MW capacity solar park spread over 9,981 acres at Fatehgarh, Jaisalmer and a 500MW capacity solar park in Bhadla, Jodhpur.

Like a family patriarch, Adani showers praise on his team on ground for their operations and execution skills. "I'm biased towards our team's execution skills," says Adani.

The $70 Billion Green Push

Gautam Adani’s home 'Shantivan' on the prime Shantipath behind Karnavati Club on Ahmedabad's SG Road, is powered by a 53 KV rooftop solar power plant with 153 panels.

Green is where Adani’s heart is now. He sees India’s energy landscape transitioning in just 10-20 years, opening up numerous opportunities in the country. It could also position India and the Adani group for a shot at world markets, just like China did. “Climate change is one of the biggest challenges. It also opens up huge business opportunities. The opportunity here is energy transition—from fossil fuels to renewables and hydrogen. That is what the whole game is about. What the world has seen in the last 100 years of energy forms is set to change in the next 30-40 years. The entire academia research is working towards how to make more affordable green energy,” says Adani as he explains his vision — and mission.

The group is aware that going forward it will become difficult to find funds for polluting and non-ESG compliant businesses since globally banks, funds, corporations and governments are committing to sustainability goals. “Global fossil fuel majors are rapidly repositioning themselves as green energy companies — investing in solar and wind power generation as well as planning large green hydrogen capacities. Adani group already has a sizeable presence in green power generation and is now doubling down on expanding its footprint both organically as well as through acquisitions,” observes Nestor’s Sanjay Sethi. “More than 80% of our capex is on green investments. We still have to invest 20% capex to sustain energy transition, which is not going to happen overnight. It is a journey of a minimum 30 years,” says Adani.

The group announced an investment of $70 billion by 2030 to transition towards a green future. It is spending over $20 billion to set up 45,000 MW of solar and wind energy generation capacity. To protect itself from the vagaries of imported components, it will be backed by fully backward integrated manufacturing of an entire ecosystem of solar and wind power equipment. A $4 billion investment is currently under implementation to build a poly-silica plant, solar wafers & ingots plant, copper smelters and ancillary aluminium and glass factories at Mundra. All of this is expected to take off in the next 2-3 years. It is also entering into wind turbine and auxiliary machine manufacturing. Adani-Total will be investing ₹20,000 crore ($2.57 billion) in city gas distribution in 33 GAs.

If green EBITDA constituted only 4% of Adani group's utility business in 2015, it has grown to 43% by 2021. The group aims for renewable utilities to contribute 70% of utility EBITDA by 2025. A majority of the investment in recent times was in green infra assets such as SB Energy’s solar and wind farms in India, Essel’s advanced transmission lines and the Mumbai International Airport.

At the core of that strategy is fully backward-integrated manufacturing to support the green push — from solar cells and panels to wind turbines, all within the country for self-reliance. “Without self-reliance or ‘atmanirbharta’, we can't serve 1.4 billion people. You have to be atmanirbhar. This is a huge opportunity for India to become atmanirbhar and move from ‘atmanirbharta’ (self-reliance), to ‘bharatnirbharta’ (reliance on India). Now the world is dependent on what China makes. India can play this role for the world,” says Adani.

One of the big triggers was Covid-led supply chain disruption. Adani says Covid-19 was an eye opener for the Indian solar industry and government. More than 80% of solar equipment needed for planned projects in India is imported mainly from China, Vietnam or Malaysia. Imports of solar equipment since April 2021 have been consistently over 800 MW per month. Cumulatively, domestic manufacturers make only 4GW of solar cell and 16GW of modules, according to the All India Solar Industries Association (AISIA). There is no capacity for basic raw materials like ingots and wafers and polysilicon, which makes domestic manufacturers uncompetitive. During Covid-19, China raised prices by 50-60% to nearly 30 cents per panel from 18 cents, hitting Indian project equations.

To mitigate this, Adani is developing a big green solar manufacturing ecosystem in Mundra, investing $4 billion. That is also going to act as a platform for the group's green hydrogen ambitions. “It is happening on ground and we are not going to depend on any external suppliers,” says Adani.

This future investment play is projected to be backed by green funds. The group’s renewable energy arm Adani Green was the first energy utility from India to raise $2 billion Global Medium-Term Notes (GMTN) or Sustainability Linked Bonds (SLB). Unlike in the past where the group took loans from local banks to fund cash-guzzling infra projects, as of March of FY21, at least 50% of total debt was secured from bonds, mostly low-cost green bonds. Just six years ago, in March of FY16, 55% of his debt at group level was taken from public sector banks and 31% from private banks. Now PSU banks fund only 21% and private banks' share of the debt has come down to 11%. For equity, the group is unlocking value in mature green businesses by bringing in external investors and multinationals with technological expertise.

Adani Green Energy brought in global energy major Total Energy as a strategic partner, investing ₹3,707 crore for a 50% stake in three SPVs and later diluted 20% stake in AGEL to Total for a $2.5 billion investment commitment and a board seat. In gas, Adani and Total have equal stake of 37.4% each. Recently, the International Holding Company (IHC), the Abu Dhabi-based conglomerate, also committed to invest $2 billion (₹15,400 crore) in three of Adani’s green energy driven companies — ₹3,850 crore each in Adani Green Energy and Adani Transmission and ₹7,700 crore in Adani Enterprises.

AGEL sources say it has tied up 'diversified growth capital' with a revolving facility of $1.35 billion to fully fund its entire project pipeline. In September last year, it raised $750 million from green bonds for funding equity capex for underlying renewable projects under construction.

Next on the agenda is green hydrogen where Adani will be competing with Mukesh Ambani’s Reliance Industries in the race to be the largest green H2 producer and exporter in the world. He is banking on the group's core competencies in ports, logistics and manufacturing. Adani group says it will set up electrolyser making units to split hydrogen and plans to get into production of green ammonia, green urea and methanol — the future way of making them with green hydrogen.

In this quest for the renewable energy chain, for the first time, Adani will come head to head with RIL in green chemicals, coal to PVC as well as hydrogen. “Competition between the Adani group and the Ambani group will make the green energy market more competitive, help develop green energy ecosystem and the entire value chain — R&D, development, storage, distribution and boost new employment opportunities too,” says professor Ashish Pujari of DeGroote School of Business at McMaster University, Canada.

From ports to airports to data centres and at his main hub in Mundra, Adani envisions a greener future in all his current businesses. A journey that has already begun. For instance, fly ash from thermal plants will be used in cement plants; Adani Ports plans carbon neutrality by 2025; the group plans to run the entire Mundra operations powered by renewable energy; renewables share in Mumbai power distribution is targeted to grow from 10-15% to 30-40%; besides hydrogen value chain it plans investments in biogas, biomethane and low-carbon mobility; and, Adani has tied up with US-based EdgeConneX to set up green data centres, and the group plans to make green airports and smart buildings.

“One cannot take a static view of the market and we have two trends coming mainstream — one is the irreversible growth of renewable power and second, the continued improvement in technologies that will keep dropping cost of generation,” observes Adani, who predicts price of power can even go to zero in future. “While there may be some site-wise variations and instances of aggressive bidding in the market by some players, large mega solar power parks that have scale is precisely where we will have competitive advantage and can create value. Execution, scale, backward and forward integration, procurement expertise, learning curve advantages, financial discipline and operational excellence, all of these must be synchronised to create value and it is our belief that there are very few companies in the world that can do this as well as us,” he says.

Fossil Fuel Play To Go On

Adani also knows his big coal mining project, which has finally started production in Australia, will need to continue to contribute to revenues in the coming years. “For the next couple of decades, coal will be needed alongside renewables — the future is not about coal versus renewables. It is about coal and renewables contributing to a sustainable energy mix as the world transitions to a lower carbon future,” says Adani.

Eyeing the vast untapped coal reserves of Galilee basin in Western Australia, he had bought the Carmichael mine in 2010, with reserves of 11.05 billion tonnes. From that mine, the group can dig out 10 million tonnes of thermal coal every year.

Despite environmentalist protests, he went ahead and invested over $3.5-4.5 billion over the past decade. Already three ships have come to India with coal. “They (environmentalists and ‘so called philanthropists') should understand that we are going to replace every two tonnes of India’s dirty polluting coal with one tonne of higher grade and cleaner Australian coal,” explains Adani.

The group is setting up one metric million tonnes per annum (MMTPA) capacity of coal to PVC (polyvinyl chloride) project at Mundra, with plans of using green hydrogen as fuel in future. India consumes about 3 million MTPA of PVC and the domestic supply caters to only 50% of total demand. India’s PVC consumption is likely to grow at a CAGR of 7.6% due to rapid industrialisation and speedy growth in urbanisation, say industry observers. Ambani is also entering into PVC production and other chemicals in a JV with Abu Dhabi Chemicals Derivatives Company RSC Ltd, with production facilities planned in West Asia.

A Mountain Of Challenges

Even as the Adani empire expands at a pace never seen before in India’s corporate history, industry observers believe Adani faces multiple challenges. While the adjacency theory has widened the breadth of operations into nearly two dozen businesses does the group have the management and execution bandwidth to acquire and absorb new ones such as Holcim or airports, enter solar, wind manufacturing and generation, steel, aluminium and data centres and yet transition old businesses such as power plants, ports — all at the same time?

Family business expert Kavil Ramachandran says it is difficult to imagine the next generation can operationally drive the group's businesses without bringing a significant level of professionalism and empowerment of non-family professionals. “This is not easy to achieve in a family business. Corporate governance will have to be strengthened further with the creation of a more active board to balance stability and entrepreneurship,” he says.

Adani counters this saying if he can create a board and professionals sitting on the same table and divide responsibility, he will get the best of governance, best of growth and best of shareholder returns. “Family does not think of one-two quarters' performance. Therefore, in the operations, no family members are involved, except when doing reviews of monthly and quarterly budgets. A blend of entrepreneurship, family and professionals is the best combination,” says Adani. He takes enormous pride in his team of family and professionals that execute his vision, without naming any from his brothers, sons and nephews. There is also an army of professionals and former senior bureaucrats to manage the business empire.

The other challenge emerges from the ballooning debt from the ambitious expansion. Total debt has grown from ₹104,519 crore in FY17 to ₹224,408 crore in FY22. Net debt in FY17 was ₹99,830 crore, which grew to ₹200,021 crore in FY22, the third highest among India’s largest business houses, already 44.62% higher than a year ago. As interest rates rise, servicing debt at this scale gets costlier. Following the Holcim acquisition, Adani group's revenues will jump to ₹2.30 lakh crore and debt to ₹3 lakh crore. Even though the Holcim acquisition has been done through a private family entity, Adani plans to service debt by deleveraging books of Ambuja and ACC, both listed in India, say analysts.

Gautam Adani knows his first-generation business, which has overtaken many century old business houses, has miles to go. With group strategy firmly aligned to India's strategic vision of a green future, all eyes are now fixed on how this ambition will translate into viable businesses on the ground.

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