ONCE AFTER at one time, long before the hoodie was invented, pioneers of commerce preferred to call themselves self-made men rather than entrepreneurs. They built durable goods like ports, railways and oil terminals. They cajoled – and gossiped with – governments. They have built vast conglomerates. In America, such men made history in the Golden Age. In India, one of their modern avatars is Gautam Adani, a trader who started his career trading diamonds and now controls more ports, power plants, solar farms and airports than almost any other private tycoon. A stocky 59-year-old man, not very talkative, with a strong political antenna and a stomach for debt, he couldn’t be further from the Elven founder-CEOs of the digital age. And yet, as of June, the value of its businesses had more than quintupled in 12 months, to $ 133 billion. This is the technology-like growth of what is normally one of the heaviest parts of the old economy — infrastructure.
In India’s ‘Billionaire Raj’, Mr. Adani is usually overshadowed by the other ‘A’, Mukesh Ambani, India’s richest man, who controls Reliance Industries, a petrochemical conglomerate in the United States. telephony. Yet Mr. Adani, whose personal net worth almost caught up with Mr. Ambani’s in June, is equally intriguing, especially for some of the contradictions he embodies. In a country whose banks have lost fortunes lending to infrastructure projects, its debt-fueled acquisition frenzy has only grown stronger. He is a champion of Prime Minister Narendra Modi’s drive for self-sufficiency, but relatively few shares in his companies are held by Indian institutional investors. And he courted the environment, the social and the governance (ESG) funds around the world, but parts of his empire are knee deep in coal. Anyone who can endure such a precarious act of juggling probably deserves to make history as well.
The interests of the Adani group dovetailed with the economic ambitions of Mr. Modi’s government. For example, since listing in 2018, the Adani Green Energy share price (AGEL), his renewable energy company, climbed more than 2,700%. In addition to building what she considers to be the largest solar energy company in the world, she is helping Mr. Modi achieve his clean energy ambitions. And Mr. Adani is not afraid of bold bets to win public contracts. Take Adani Enterprises (AEL), another listed entity, for example. In 2018-19, it took over six privatized Indian airports, despite no previous experience in the industry. Since then (and despite the scourge of air travel caused by the covid-19 pandemic), its market value has eclipsed that of Adani Ports, historically the jewel of the group.
This expansion is not as reckless as it sounds. Adani Group boasts an “adjacency model” in which it operates in complementary areas: from ports to electricity to logistics to data storage, for example. Its debts are backed by increasing cash flows. He relied more on bond markets rather than good Indian banks. And it has brought foreign groups, such as TotalEnergies, the French supermajor, and the Qatar sovereign wealth fund, in joint ventures. The government, unenthusiastic about foreign competition in India, welcomes this kind of influx of capital as much as Mr. Adani.
Its financing, however, creates a paradox. While the group attracts foreign funding for companies that focus directly on India, ordinary Indian investors barely have a peek. Besides the flagship port business, domestic mutual funds hold miniscule amounts of its other listed entities, including those whose share prices have skyrocketed in recent times, such as AGEL and AEL. The group says that these holdings should expand “in the near future”, explaining that the small floats are the result of relatively recent listings.
But in the meantime, questions about the group’s obscure shareholding structure have helped wipe out tens of billions of dollars from the combined value of its six listed entities since mid-June. Besides Mr Adani, who owns huge stakes in all of his listed companies, most of the remaining large investors are offshore funds, some of them based in Mauritius. Some have almost all of their investments in Adani group companies, and questions about their ownership have been raised in parliament. In response, a government minister said last month that the Securities and Exchange Board of India, the capital markets regulator, was investigating some of the companies in the group. The Adani Group said it had always been transparent with its regulators and had not received any requests for information recently.
The group’s thirst for capital creates another conundrum. It is increasingly selling its clean energy business to ESG fund managers. Still AEL owns Carmichael, an Australian thermal coal mine that has been the target of a popular “Stop Adani” campaign and has been rejected by banks and insurers concerned about the climate implications of financing coal projects. Tim Buckley of the Institute for Energy Economics and Financial Analysis, a pro-renewable think tank, believes exposure to coal could cause a ESG backlash injuring other parts of the Adani Empire. He maintains that to strengthen his ESG reputation, the conglomerate should commit to phasing out coal-fired power.
Beautiful present, dark future
Mr Adani does not appear to have any plans for this yet. He believes that a developing country like India cannot give up coal overnight. The group still intends to derive 30% of the gross operating income of its public service activities from thermal electricity production in 2025 (it was 52% last year). When Carmichael produced his first piece of charcoal in time for Mr. Adani’s birthday on June 24, he tweeted, “There couldn’t be a better birthday present.”
Perhaps he acknowledges that foreigners, despite enduring claims, find India irresistible, especially with investments in China in the doldrums. Perhaps he hopes they will flock to giants like Adani, not least because of his knack for dealing with Indian bureaucracy. Yet if they do, the group faces a problem. The stronger it gets, the more unsavory it will seem that few ordinary Indian shareholders share the hike. ■
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This article appeared in the Business section of the print edition under the headline “India’s Other A-lister”