Adani group an introduction?
Adani Group is an Indian multinational conglomerate that has a diverse range of business ventures including port management, electric power generation and transmission, renewable energy, mining, airport operation, natural gas, food processing and infrastructure. It was founded by Gautam Adani in 1988.
The group started out as a commodity trading business with its flagship company, Adani Enterprises. As of now, the company has an annual revenue of over $20 billion with operations taking place in over 70 locations in 50 countries. The company has a market cap of over $241.12 billion as per the records on August 21, 2022.
Adani Business Profile
Talking about the business ventures, Adani Exports first started out as a commodity trading firm with a capital of INR 5 lakhs. They partnered with their flagship company, Adani Enterprises and started trading in the primary economic sector. Adani Enterprises is a holding company that was initially involved in the mining and trading of coal and iron ore respectively. They also act as incubators for Adani Group’s diversified business ventures. Their three main subsidiaries include; Adani Wilmar, Adani Airport Holdings, and Adani Road Transport. The enterprise is not just limited to these subsidiaries as their operations expand towards solar PV module manufacturing, water infrastructure, data centers, agri output storage and distribution, bunkering, defense and aerospace, rail and metro infrastructure, real estate, financial services, oil exploration, petrochemicals, and cement.
The company had constructed its own port in Mundra for its trading operations in 1995. By 1998, they were one of the top net foreign exchange earners for India Inc. In 2002, the company became the largest private port in India by handling 4 MT (Metric Tonnes) of cargo, in Mundra.
Adani Group: The Port and Power
The company initiated their coal trading business in 1999. This was followed up by a joint venture with Adani Wilmer that was formed for the edible oil refining business. In terms of coal trading, the company became the largest coal importer of India, in 2006. They expanded their coal business furthermore with the purchase of Bunya Mine in Indonesia. In 2009, Adani Group started generating 330 MW of thermal power. They also built an edible oil refining facility in India with a capacity of producing 2.2 MT of oil per annum. By 2009, the firm was also able to establish itself as the largest trading house in India for coal imports with a market share of 60%.
Adani Group: The Coal Power
Adani Group was India’s largest privately owned coal mining company after winning the rights to the Orissa mine in 2010. They began to expand their operations at the Port of Dahej in 2011 by growing their capacity to 20 MT. Furthermore, their business stretched to Australia with the purchase of Galilee Basin Mine extending their capacity to 10.4 GT (Giga Tonnes) of coal reserves. They began to make their mark in the coal industry by commissioning 60 MT of handling capacity for coal import terminals in Mundra. The firm also purchased Abbot Point Port in Australia with a handling capacity of 50 MT. They were also responsible for the commissioned work of India’s largest solar power plant. The business conglomerate also became the largest thermal power producer in India with a capacity of 3690 MW.
Things were looking up for the Adani Group as Adani Power emerged as India’s largest power producer in 2014 with a total installed power capacity of 9280 MW. On the 16th of May, Adani Ports in association with Tata Steels and L&T Infrastructure Development Projects acquired the Daharma Port that was located on the east coast of India for INR 5500 crores. In 2015, Adani Renewable Energy Park – yet another subsidiary of Adani Group partnered up with the Rajasthan government to establish India’s largest solar park with a capacity of 10000 MW. In November, they began construction work for yet another port in Vizhinjam, Kerala.
Adani Group: Weapon Investment
The company also extended their business ventures to the defense and aerospace industry by signing a pact with Elbit-ISTAR and Alpha Design Technologies to work in the field of Unnamed Aircraft System (UAS) in India. The company also established of the world’s largest solar power plant at that time in Kamuthi, Ramanathapuran. The plant was built for a cost of INR 4550 crores with 640 MW worth of capacity by Adani Green Energy in Tamil Nadu.
The company also inaugurated a 100 MW capacitated power plant in Bhatinda, Punjab. Their acquisition spree continued in 2017 with the procurement of the power arm of Reliance Infrastructure for INR 18800 crores. Total Energies, a French based oil and gas company bought 34.7% of Adani Gas’ stake for INR 6155 crores in 2019. They also got joint control of the company after its purchase. Total Energies also invested a total amount of 510 million USD in one of Adani Group’s subsidiary in 2020.
Adani Group: Airport
Investments continued for the Adani Group in 2020, as the firm obtained majority of the stakes for Mumbai and Navi airport after a debt acquisition agreement with the GVK Group. They also obtained a 50 year lease on airports in Ahmedabad, Guwahati, Jaipur, Lucknow, Mangalore, and Thiruvananthapuram through concession agreements with the Airport Authority of India.
SB Energy, a joint venture of Softbank group and Bharti Enterprises, was also acquired by Adani Green Energy for INR 18800 crores in 2021. Similarly, the group also acquired Ambuja cement and ACC for 10.5 billion USD making them the largest cement producers in India. In the following year, UAE based conglomerate – International Holding Company invested 2 billion USD in three of Adani Group’s subsidiaries namely; Adani Green Energy, Adani Transportation, and Adani Enterprises. Similarly, Total Energies also obtained a 25% stake in Adani’s new industry. With such heavy investments in different sectors of India, there’s no doubt as to how this group has managed to make its mark in the Indian economy.
SWOT Analysis of Adani Group
Now, we’ll further analyze the strongpoints along with the pain points of Adani Group through SWOT analysis. We will assess the strengths and weaknesses of the business conglomerate along with determining the opportunities that lie ahead for the company. We will also assess the limitations that this firm has in the market through this analysis.
Strengths
In terms of its strength, the Adani Group is a company led by a strong vision. If we look at their investments, not only have they invested in the core sectors of the economy but they’ve also had some sustainable initiatives made on its path to progress. The company also functions on the basis of their core values which include commitment, trust, and hardwork. This in turn has helped the business keep all their employees in synergy with their vision. One of the main reasons why Adani Group has been able to stand their ground in the global market is due to their diverse set of investments.
Adani Group has made diverse investments in the core industries like coal, power, energy, infrastructure, steel, real estate, and logistics management. With a market cap of $242.12 billion, Adani Group has been very steady in terms of maintaining their financial records. Reinvesting the equity share capital and debts into assets has yielded them higher revenues. There’s an incline in the ratio of operating profit to sales indicating the growth of operational efficiency. Adani has a huge investment in ports and harbors, which strengthens the distribution channel for any type of expansion.
Weaknesses
The Adani Group hasn’t been any further away from controversies while expanding their business ventures globally. Despite its claim towards their commitment to the society, they have faced allegations of illegal coal mining. They’ve also been involved in allegations related to land encroachment in Mundra. The Adani Group has also made some risky investments in the mining sector along with some additional investments in the real estate and infrastructure sector that haven’t yielded them profitable returns as expected.
Opportunities
With the world shifting towards a sustainable model, the Adani Group that has already made huge investments in the power sector has huge potential to capitalize on renewable energy sources. Similarly, expansions of roadways and airport infrastructures will always provide a window of opportunities for a company like Adani Group that already has a diversified investment in the infrastructure industry. Influencing stake in Mumbai and Navi Mumbai Airports provide exposure to international contracts. Similarly, Adani Group has a controlling stake in the PLR system, exploring the opportunities in defense and weapon manufacturing.
Threats
With India aiming to be one of the dominant forces in the global economy, foreign investors will be seeking to capitalize on investment opportunities in India. This, however, can be a threat to companies like Adani Group who will have competition from international businesses. Adani Group’s involvement in major controversies will also be a threat to the company’s image as people might develop negative perceptions about the business. Adani Group has made a huge investment in the coal business. The raising environmental concerns and changing international policies definitely pose some threat to the business.