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Exclusive Interview
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“We will exit any business that we cannot be a leader in”
In this exclusive interaction with B&E, Adani Group Chairman Gautam Adani deliberates on the group’s strategy to grow as an integrated infrastructure company and also take its business global, and also on how the group is tackling the current challenges that it faces from environmental groups and regulators
Issue Date - 15/03/2012
Ahmedabad-based Gautam Adani, Chairman of the $6 billion conglomerate Adani Group, is on a growth path to rapidly expand presence in the global and domestic market with its focussed business interests on sectors such as power, ports, coal; which have less competition. The group’s three listed companies have grown at a brisk pace, which places it among the top10 private business houses in India. By taking the total generation capacity of the Adani Group to a massive 4,000 MW in line with its vision of achieving 20,000 MW by the year 2020, Adani Power has become India’s largest private sector power generation company. However, the group, which is exiting its real estate business, is also facing significant hurdles in terms of regulatory and environmental challenges. Adani talks to B&E’s mona mehta on the group’s domestic & global plans. Some edited excerpts:

B&E: Amidst economic upheavals, how do you see the opportunities emerging in the global market and what is your strategy to grow your business presence in the infrastructure sector within and beyond India?
Gautam Adani (GA): On the business front, Adani Group is strongly thinking and acting global and planning to invest over $6 billion in global expansion. The group has successfully commenced its mining exploration programme in the Galilee Basin in Queensland through Adani Mining Pty, the Australian arm of the Adani Group. This marks the culmination of the first phase of its foray into Australia. The Adani Group is the single largest Indian investor in Australia in coal mining, creation of dedicated railway infrastructure to transport the coal to ports and dedicated coal terminals such as Adani Abbott Point Coal Terminal. Besides, we have synchronised another super critical unit of 660 MW at our state-of-the-art power plant in Mundra in the Kutch district of Gujarat, thus taking the generation capacity of the Adani Power to 3,960 MW.

These achievements will mark the beginning of another illustrious chapter for the Adani Group in the days and years ahead. Additionally, Adani Enterprises has also commissioned India’s largest 40 MW solar power plant in the state of Gujarat, thus taking the total generation capacity of the group to a massive 4,000 MW. In line with its long term vision of achieving a capacity of 20,000 MW by the year 2020, Adani Power has now become India’s largest private sector power generation company.

B&E: You are currently involved in a bid for Gujarat Gas. How confident are you of your prospects?
GA: Adani group is keenly interested in bidding for British Gas’ (BG) stake in city gas distribution company, Gujarat Gas. Currently, the due diligence process of BG’s stake in Gujarat Gas is going on. Adani Group is interested in evaluation and the process of evaluating it is on. We will be able to divulge more details at the right time. Actually, British Gas has decided to exit from the business in which it has 65% stake. If the acquisition comes through, it will have synergies with its own gas distribution business. The company will have to fight off many suitors who are known to have shown interest in the business like a consortium of public sector oil companies, Gaz de France-Suez, German power company E.ON, and a few private equity players.

B&E: Where do you see Adani Group in the next 10 years and which businesses will contribute the maximum to the group’s revenues?
GA: Power, ports and mining business are expected to contribute the maximum to Adani Group’s revenues and profits to the tune of 80% of the Group’s profits.

B&E: How are your expansion plans in the power sector progressing? What hurdles do you see in your path towards achieving 20000 MW capacity?
GA: Currently, in the overall power sector, which is facing hurdles of fuel supply blocks, Adani Power is also facing issues with regards to its power purchase agreements signed with two states – both Maharashtra and Gujarat. As for the Tiroda power project, Adani Group has signed a power purchase agreement based on the Lohara mines, which was cancelled by the environment ministry, as it is close to tiger reserves. However, Adani is not seeking to terminate the power purchase agreement with Maharashtra. In fact, we have recently approached the government and asked them to re-adjust the terms since the mine is not available.

A change in law in Indonesia after which fuel imports have become expensive is also hurting the Adani group. The issue of setting-up 4,620 megawatts power capacity at Mundra based on imported coal from Indonesia is being addressed by the government. The Prime Minister has asked the principal secretary to deal with this issue, and it is being actively pursued by the government. Location-wise, Adani Power is based in the western region and has got a locational advantage; both in terms of sourcing and distribution. The power plants are located in the rapidly industrializing areas of Maharashtra and Gujarat and will benefit from the growth of these states. Also, we are focusing on sectors with low competition such as power, ports & coal, which will enable us to achieve our targeted business growth.

B&E: The group has undertaken a major rebranding initiative recently. How do you see it helping your business going forward?
GA: Adani Group started off as a trading company. However, in 1998-99, it started infrastructure development of ports and in 2007, the group entered into power generation and coal mining, which has today become an integrated infrastructure business. We have now set up our footprints in the global market and so the aim is to have a common theme. In an effort to fulfil our ambitions of global expansion, Adani Group has launched a new logo to symbolise the modernity, international potential of the group’s business and the simplicity of its integrated business model. We will now focus on three clusters of businesses notifying specific colours namely – Resources in Green, Logistics in blue and Energy in orange. Resources comprises of coal mines and trading and will also include oil and gas in the future. Logistics denotes a large network of ports, SEZs and multi-modal logistics-railways and Energy involves power generation. Actually, the current logo is a result of a re-branding exercise that was undertaken six months back. The logic behind the new brand is also encapsulated in the phrase, `Thinking big. Doing better,’ meant to explain the spirit in which the Adani Group works, where ‘Thinking big’ captures both the scale of the group’s activities and the ability to see new potential. And `Doing better’ not only defines the group’s history of delivering on its promises, but also hints at a wider social benefit.

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