Adani Group Investments: Adani Group to invest $150 billion in pursuit of $1 trillion valuation | Rare Techy
On October 10, Adani Group Chief Financial Officer Jugeshinder ‘Robbie’ Singh outlined the group’s growth plans, which began as a trader in 1988 and expanded rapidly into ports, airports, roads, electricity, renewable energy, power transmission, gas distribution. and FMCG and more recently into data centers, airports, petrochemicals, cement and media, in an investor meeting organized by Ventura Securities Ltd in New Delhi.
The group plans to invest USD 50-70 billion in green hydrogen business and another USD 23 billion in green energy over the next 5-10 years, he said. It will invest USD 7 billion in electricity transmission, USD 12 billion in transportation utilities and USD 5 billion in the road sector.
Its foray into the data center business with cloud services will require an investment of USD 6.5 billion in partnership with Edge ConneX and another USD 9-10 billion planned for the airport, where it is already the largest private operator. His foray into the cement sector with the acquisition of ACC and Ambuja Cement required an investment of USD 10 billion.
It is foraying into the petrochemical business and plans to set up a 1 million ton per annum PVC manufacturing facility at an investment of USD 2 billion and will enter the copper sector with 0.5 million tons of smelter a year at an investment of USD 1 billion, he said.
The healthcare sector which will include insurance, hospitals and diagnostics and pharmaceuticals will see an investment of $7-10 billion, with some coming from the Adani Foundation.
“Whatever you see now, it may seem that it just happened in the last one or two years, but the fact is what we are doing, both GSA (Gautam Shantilal Adani) and myself discussed this in 2015,” said Singh at investors. The conglomerate increase meeting is the result of a well-thought-out business plan that entailed foraying into existing business adjacencies.
The group’s market capitalization was about $16 billion in 2015 and $260 billion in 2022 – a jump of more than 16x in seven years.
“Given what we had as a set of companies, we believe that if we have assets and companies of the type that we should really become a USD 1 trillion group. So we go through the steps that we need to take to the point.” ” he said.
Only a few companies are worth a trillion dollars or more. These include Apple, Saudi Aramco, Microsoft, Google parent Alphabet and Amazon.
Singh said the Adani Group has set out to build its infrastructure and logistics portfolio in such a way that it can emerge as a top five globally and not just the largest player in India.
“Look at Adani Port, Adani transmission, Adani Total Gas, Adani Power, combined when you look at these businesses, these businesses in the total portfolio of infrastructure and utilities are formed by four core portfolios,” he said. “This is the fastest growing portfolio of all infrastructure portfolios of comparable size. Our primary industry is vertical metal materials and mining again sits next to the core of our infrastructure.”
Explaining the logic of the expansion, he said for a trading company, it makes sense for the Adani group in the port business. As energy is essential for this, it enters into distributed energy and finally into gas to provide logistics and an integrated infrastructure portfolio.
The latest foray into metal and mining is an extension of this as logistics and storage 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 sees fit to enter copper, aluminum and cement businesses, he said.
Saying that power continues to be the core of the Group’s future growth plans, he said Adani is making the biggest bet of any Indian group in building a chain to produce hydrogen – the fuel of the future – as well as renewable energy plants.
Most businesses of the Adani Group enjoy best-in-class margins. The port business reported an operating margin of 70 percent, while its closest competitor’s margin was 56 percent. Adani Total Gas reported a margin of 41 percent, while Adani Tranmission’s operating margin was at 92 percent. Businesses that are profitable and efficient and generate high levels of free cash flow.
On the financials, Singh said the group generated earnings before interest, tax, depreciation and amortization (EBITDA) of $8 billion. Of this, approximately USD 3.6 billion was spent on debt servicing (interest and principal). USD 700 million towards tax payments and businesses spend USD 1.8 billion towards capex.
While in absolute terms the Group’s debt has increased, so has its EBITDA, he said adding that over the past nine years, the Group’s EBITDA has increased by 23 percent CAGR, while debt has increased by 12 percent.
Singh said flagship Adani Enterprises is the group’s business incubator. Ports, electricity, transmission and gas businesses are all incubated by these companies and when they reach a certain level of maturity, they are spun off into separate companies and listed on the stock exchange.
The same would be the approach for some new ventures such as airports fostered in AEL. When they are independent and can finance their own capital expenditure plans, they will be separated, he said.
In the next 2-3 years, the hydrogen and airport business may be phased out when they become self-sufficient.
“Adani Group’s transformation is a 25-year story of growth and ambition,” he added.