Adani Group to invest approximately $150 billion valuation

Asia’s wealthiest In an effort to join the exclusive global club of corporations with USD 1 trillion values, Gautam Adani’s organisation will invest over USD 150 billion across industries like green energy, data centres, airports, and healthcare.

At an investor meeting hosted by Ventura Securities Ltd. in New Delhi on October 10, Adani Group Chief Financial Officer Jugeshinder “Robbie” Singh discussed the group’s growth strategies. The group, which began as a trader in 1988, quickly expanded into ports, airports, roads, power, renewable energy, power transmission, gas distribution, and FMCG, and more recently into data centres, airports, petrochemicals, cement, and media.

Over the next five to ten years, the group intends to invest between US$50 to US$70 billion in green hydrogen industry and another US$23 billion in green energy, according to him. It will spend $7 billion on electricity transmission, $12 billion on transportation infrastructure, and $5 billion on roads.

In conjunction with Edge ConneX, it would invest USD 6.5 billion in data centres with cloud services, and another USD 9–10 billion is planned for airports, where it is already the largest private operator. It invested USD 10 billion in its entry into the cement industry with the purchase of ACC and Ambuja cement.

“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.

He stated that the company is entering the petrochemical industry and has plans to invest USD 2 billion in a 1 million tonnes per year PVC manufacturing facility as well as USD 1 billion in a 0.5 million tonnes per year copper smelter.

“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 USD 1 trillion group. So we went through the steps that we needed to take to get to the point,” he said.

A total of USD 7–10 billion will be invested in the healthcare sector, including money from the Adani Foundation. This investment will go toward insurance, hospitals, diagnostic centres, and pharmaceutical companies.

“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.”

Adani
credit: businesstoday

The market capitalization of the group increased by more than 16 times in just seven years, from about USD 16 billion in 2015 to USD 260 billion in 2022. Only a small number of businesses have a valuation of $1 trillion or above. These include Amazon, Apple, Microsoft, Saudi Aramco, and Google parent company Alphabet.

Singh claimed that the Adani Group has started developing its infrastructure and logistics portfolio so that it may not only become the biggest player in India but one of the top five worldwide.

He explained the reasoning behind the expansions by stating that the Adani Group’s involvement in the port industry made sense for a trading company. And because energy is essential for this, the venture into distributed energy and lastly into gas to offer a comprehensive logistics and infrastructure portfolio.

Given that logistics and warehousing are essential to the cement industry, the current entry into metals and mining is an extension of this.

The group has decided it is appropriate to enter the copper, aluminium, and cement industries given that electricity and logistics make up the majority of any metals and materials industry, he said.

He said Adani is placing the largest bet of any Indian firm in developing the chain for manufacturing hydrogen, the fuel of the future, as well as renewable energy projects, adding that power remains central to the Group’s future growth objectives.

The majority of the Adani Group’s companies have best-in-class margins. The ports industry has declared operating margins of 70%, whereas the margins of its closest rival are only at 56%. Adani Total Gas reported margins of 40%, while Adani Transmission reported an operating margin of 90%. The companies are efficient and successful, and they produce a lot of free cash flow.

According to Singh, the firm earns USD 8 billion in profits before interest, tax, depreciation, and amortisation (EBITDA). About USD 3.6 billion of this is used to pay off debt (interest and principal). Businesses spend USD 1.8 billion on capex while paying USD 700 million in taxes.

He added that over the past nine years, the Group’s EBITDA has expanded 23 percent CAGR, while debt has grown by 12 percent, even if the Group’s debt has increased in absolute terms.

Singh claimed that the group’s business incubator is its flagship company, Adani Enterprises. This company served as an incubator for the ports, power, transmission, and gas industries. When those industries achieved a particular level of maturity, they were spun off into distinct companies and traded on stock exchanges.

The similar strategy will be used for a number of new businesses, including airports that are being developed under AEL. They’ll be split up until they’re self-sufficient and able to pay for their own capital plans, he said. When they become autonomous, the companies of hydrogen and airports may be separated within the following two to three years.

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