On October 10, Adani Group Chief Financial Officer Jugeshinder ‘Robbie’ Singh detailed the group’s growth plans, which began as a trader in 1988 and rapidly expanded into ports, airports, roads, power, renewable energy, power transmission, gas distribution and FMCG and more recently to data centers, airports, petrochemicals, cement and media, at an investor meet organized by Ventura Securities Ltd in New Delhi.
The group plans to invest USD 50-70 billion in the 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 transport 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 is planned for airports, where it is already the largest private operator. Its foray into the cement sector with the acquisition of ACC and Ambuja Cement required an investment of USD 10 billion.
It is venturing into the petrochemical business with plans to establish a PVC manufacturing facility of 1 million tons per year with an investment of USD 2 billion and will enter the copper sector with smelting of 0.5 million tons per year with an investment of USD 1 billion, he said.
The reach of the healthcare sector which will include insurance, hospitals and diagnostics and pharma will see an investment of USD 7-10 billion, with a portion coming from the Adani Foundation.
“Whatever you see today, it may seem like it has only happened in the last one or two years, but actually what we have done, both the GSA (Gautam Shantilal Adani) and myself discussed this in 2015,” said Singh to the investor. the meeting added the conglomerate was the result of a well-thought-out business plan that required inroads into existing businesses.
The group’s market capitalization was around USD 16 billion in 2015 and it will be USD 260 billion in 2022 – a jump of over 16x in seven years.
“Given what we have as a set of companies, we believe that if we have that type of assets and companies, we should be a USD 1 trillion group. So we’ve gone through the steps we need to take to get to that point,” he said.
There are only a handful of companies worth a trillion dollars or more. These include Apple, Saudi Aramco, Microsoft, Google parent Alphabet and Amazon.
Singh said the Adani Group has built its infrastructure and logistics portfolio in such a way that it can emerge as a top five globally and not just India’s largest player.
“Look at Adani Ports, Adani transmission, Adani Total Gas, Adani Power, combined when you look at this business, this business in the total infrastructure and utility portfolio has been formed by four core portfolios,” he said. “It’s the fastest growing portfolio of any infra portfolio of comparable size. Our core vertical materials metals and mining industries are again next to our infrastructure core.”
Explaining the logic behind the expansion, he said for a trading company it was natural for the Adani group to be in the port business. And since energy is essential to this, exploration into distributed energy and eventually into gas to provide an integrated logistics and infrastructure portfolio.
Recent research into metals and mining is an extension of this as logistics and warehousing is an important part of the cement business.
Since power and logistics are the biggest components of any metals and materials business, the group sees it as appropriate to enter the copper, aluminum and cement businesses, he said.
Stating that power continues to be central to 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 of the Adani Group’s businesses enjoy best-in-class margins. The port business has reported an operating margin of 70 percent, while its nearest competitor’s margin is at 56 percent. Adani Total Gas has reported a margin of 41 percent, while Adani Transmission’s operating margin is at 92 percent. The business is profitable and efficient and generates a high level of free cash flow.
On financials, Singh said the group generated earnings before interest, tax, depreciation and amortization (EBITDA) of USD 8 billion. Of this amount, approximately USD 3.6 billion was spent on paying off debt (interest and principal). USD 700 million was used for tax payments and businesses spent USD 1.8 billion on capital expenditure.
Although 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 company Adani Enterprises is the group’s business incubator. Port, power, shipping and gas businesses are all incubated by these companies and when they reach a certain level of maturity, they are separated into separate companies and listed on the stock exchange.
The same is the approach for some new businesses such as airports that are fostered under AEL. When they become 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 businesses can be phased out as they become self-sufficient.
“Adani Group’s transformation is a story of growth and ambition over 25 years,” he added.