Adani Group to invest $150B in pursuit of $1T valuation
Richest Asian Gautam Adani's group will invest over $150 billion across businesses—ranging from green energy to data centres to airports and healthcare—as it chases the dream to join the elite global club of companies with $1 trillion valuations.
On October 10,Chief Financial Officer Jugeshinder 'Robbie' Singh detailed the growth plans of the group, which started as a trader in 1988 and expanded rapidly into ports, airports, roads, power, renewable energy, power transmission, gas distribution, and FMCG, and more recently, into data centres, airports, petrochemicals, cement, and media, at an investor meet organised by Ventura Securities Ltd in New Delhi.
The group plans to invest $50-70 billion in green hydrogen business and another $23 billion in green energy over the next 5-10 years, he said. It will invest $7 billion in electricity transmission, $12 billion in transport utility, and $5 billion in the road sector.
Its foray into data centre business with cloud services would entail an investment of $6.5 billion in partnership with Edge ConneX, and another $9-10 billion is planned for airports, where it is already the largest private operator. Its foray into the cement sector with the acquisition of ACC and Ambuja cement entailed a $10 billion investment.
It is foraying into the petrochemical business with plans to set up a one million tonnes per annum PVC manufacturing facility at an investment of $2 billion and would enter the copper sector with a 0.5 million tonnes a year smelter at an investment of $1 billion, he said.
The healthcare sector foray, which will include insurance, hospitals and diagnostic, and pharma, would see an investment of $7-10 billion, with some coming from Adani Foundation.
"Whatever you see today, it might look like it has just happened in the last one or two years, but in reality, what we have done, both GSA (Gautam Shantilal Adani) and myself discussed this in 2015," Singh said at the investor meeting, adding the conglomerate is a result of a well-thought-out business plan that entailed foraying into adjacencies of existing business.
The group's market capitalisation was around $16 billion in 2015, and it is $260 billion in 2022 — a surge of over 16X in seven years.
"Given what we had as a set of companies, we believed that if we had assets and companies of that type, we should really be a $1 trillion group. So we went through the steps that we needed to take to get to the point," he said.
There are only a handful of companies valued at trillion dollars or more. These include Apple, Saudi Aramco, Microsoft, Google's parent Alphabet, and Amazon.
Singh said the Adani Group has set about building its infrastructure and logistics portfolio in a manner that it could emerge as the top five globally and not just India's largest player.
"Look at Adani Ports, Adani Transmission, Adani Total Gas, Adani Power, combined when you look at these businesses, these businesses are in total infra and utility portfolio was formed by four core portfolios," he said. "It is the fastest growing portfolio of any comparable size infra portfolio. Our primary industry vertical materials metals and mining again sits next to our core of the infrastructure."
Explaining the logic being the expansions, he said for a trading company, it made sense for Adani Group to be in the ports business. And since energy is vital for this, the foray into distributed energy, and finally, into gas to provide an integrated logistics and infrastructure portfolio.
The recent foray into metals and mining is an extension of this as logistics and warehousing is an integral part of the cement business.
Given that power and logistics are the largest components of any metals and materials business, the group has seen it fit to enter copper, aluminium, and cement businesses, he said.
Stating that power continues to be core to the group's future growth plans, he said Adani is making the biggest bet by any Indian group in building the chain for producing hydrogen—the fuel of the future—and renewable energy plants.
Most businesses of the Adani Group enjoy the best-in-class margins. The ports business has reported operating margins of 70%, while its closest competitor's margins are at 56%. Adani Total Gas has reported margins of 41%, while Adani Transmission's operating margin is at 92%. The businesses are profitable and efficient and generate high levels of free cash flows.
On financials, Singh said the group generates EBITDA of $8 billion. Of this, about $3.6 billion is spent on servicing debt (interest and principal), $700 million goes towards tax payments, and businesses spend $1.8 billion towards capex.
While in absolute terms the group's debt has gone up, so has its EBITDA, he said, adding over the last nine years, the group's EBITDA has grown 23% CAGR, while debt has grown by 12%.
Singh said flagship Adani Enterprises is the group's business incubator. Ports, power, transmission, and gas businesses were all incubated by this company, and when they reached a certain degree of maturity, they were spun off into separate companies and listed on bourses.
The same will be the approach for several new businesses such as airports nurtured under AEL. When they become independent and can fund their own capital expenditure plans, they will be separated, he said.
In the next two-three years, hydrogen and airport businesses can be demerged when they can be independent.
"Adani Group's transformation is a 25-year story of growth and ambition," he added.
Edited by Suman Singh