The Adani Group is a Gujarat based Indian conglomerate with the industrialist Gautam Adani as its CMD and promoter. The core businesses of the group include commodities trading, edible oil manufacturing, Mundra port operations, power generation and the distribution of natural gas. The group has more than 50 companies under its ambit; key ones being Adani Enterprises Ltd, Adani Power Ltd and Mundra Port and Special Economic Zone Ltd. It recently catapulted to the top five conglomerates in the country, going by the market capitalisation of listed companies on Indian bourses.
By the end of August 2010, the combined market capitalisation of Adani Enterprises (AEL), Adani Power ( APL) and Mundra Port & SEZ (MPSEZL) stood at Rs 1.33 lakh crore. This surge is largely due to the number of shares in AEL going up by 33 crore on account of the company’s Rights Issue and the merger of MPSEZ with AEL. The restructuring exercises have brought all group businesses under one entity, Adani Enterprises Limited.
Growth and Integration
Acquisition of Coal Mines
Adani’s next phase of growth envisions taking the group’s asset base from $6 billion to $15 billion in the next five years. To fuel his ambitious plans, Adani is acquiring coal mines and ships. These would serve to insulate the group from the price vagaries of the commodities and shipping markets. Adani Enterprises would thus offer an integrated infrastructure play with coal, power and mining under one umbrella.
The flagship company of the Adani group, Adani Enterprise (AEL) acquired the coal mines of Australia’s Linc Energy in a cash and royalty deal worth A$ 2.9 billion (Rs 12,220.6 crore) early in August this year. The deal is reported to be the biggest acquisition by an Indian company in Australia. Linc said it can produce up to 60 million tonnes per year once the mine was fully operational.
The deal would give a major boost to the Rs 27,800-crore Adani group’s expanding energy business and would enable Adani to source coal at $45 a tonne against an average international price last year of $76. In the pipeline are plans to invest about A$6 billion to create infrastructure — ports, railway and development of mines — Down Under over the next five years. According to the group’s chairman, Gautam Adani, the acquisition would help the company achieve self-reliance in fuel supplies for its power generation business.
Coal from the Galilee basin would support the rapid expansion of the power business of Adani Power in India as well as the expansion of AEL’s coal business. It may be pointed out that the Adani group is the largest importer of thermal coal in India.
Last month, the group has also signed a preliminary agreement in Indonesia to build a railway line and coal terminal in remote southern Sumatra, Indonesia. Adani would invest $1.6bn to lay down a railway line between a major coal pit and the island’s southern port of Tanjung Api Api. The move by the Adani group is considered to be a strategic foray to tap the underexploited coal stores in Sumatra.
Expansion of Power Generation Capacity
The coal mine deals would give a significant impetus to the company’s plans to increase its power generation capacity. Adani Power Limited (APL) is looking to expand aggressively, with plans to commission 1,980 MW of generation capacity by the end of fiscal 2011 and 6,600 MW by mid 2012. Currently, APL operates 990 MW of generation capacity and aims at achieving 90% plant load factor during the current quarter.
APL’s 16,500 MW capacity generation projects include Mundra (4620 MW), Tiroda (3300 MW), Kawai (1320 MW), Dahej (2640 MW), Bhadreshwar (3300 MW) and Chhindwara (1320 MW). It is also exploring the opportunities in the international market to commission power generation capacity.
The first unit of 330 MW at Mundra became operational in May, 2009. The Mundra facility will continue to commission one 660 MW super critical unit each at an interval of every three-four months, and the entire capacity of 4,620 MW will be operational by March 2011
APL’s 3,300 MW power generation facility at Tiroda in Maharashtra is in advance phase of implementation, the first unit of 660 MW will start generation by August 2011 and the entire facility of 3,300 MW will be commissioned in a phased manner by 2012. Its other projects at Dahej, Chindrwara, Kawai and Bhadreshwar have received terms of reference from the ministry of forest and environment and are in advance stage of clearance. The projects are likely to be on stream by 2013-14. All plans of Adani are based on super critical technology units of 660 MW each.
Meanwhile, APL is also setting up transmission lines for evacuating the power to the national grid. The major transmission power line projects by APL include 400 KM Mundra -Dehgam line, country’s first 1000 KM HVDC line in private sector between Mundra -Mahindragarh in Haryana, 50 KM Mahindragarh-Bhiwani and 200 KM line between Tiroda-Warora.
Strategic Positioning of Mundra Port
Another Adani Group company, Mundra Port and Special Economic Zone Limited, owns and operates one of the largest private sector commercial ports in India, a Special Economic Zone at Mundra and a railway line between Mundra and Adipur; leading to strong synergies with the company’s projects being set up in close vicinity. In order to increase coal carriage capacities, Adani is doubling the 65-km rail line connecting the port of Mundra to the national rail network. This will help it carry three times more cargo. Mundra, once a sleepy town known for its date palms until just a decade ago, today handles 40 million tonnes of cargo, and will soon start handling 100 million tonnes once a coal import terminal comes up by October 2010.
The company is fast emerging as the only power generating company in the country that has a strong chain of vertical integration – from mining to ports and shipping to power generation and transmission. This integration has enabled the Adani group to achieve its meteoric growth, and will hold it in good stead as it looks to further expand its business.