How Adani became 2nd richest person in the world? How long this will continue?

Gautam Adani on Friday has become the world’s second richest person with a net worth of $156.3 billion by surpassing Louis Vitton's Bernard Arnault and Amazon's Jeff Bezos.

The news was all around social media. Now, Let's look into the history of how Adani started his journey to become the second richest person in the world, the 1st Asian to reach this position.

Background

Gautam Adani was born on 24th June 1962 in Gujarat. His father was a small textile merchant.

After completing his schooling, Gautam Adani took admission in Gujarat University for a Bachelor of Commerce (B.Com) degree but dropped out after the second year. In 1978, he shifted to Mumbai and started working as a diamond sorter with the Mahendra Brothers.

After working with Mahendra Brothers for a few years he started his own diamond brokerage firm in Zaveri Bazar. At the same time, his elder brother Mansukhbhai Adani bought a plastic factory in Ahmedabad. Gautam has moved from Mumbai to Gujarat to oversee the operations of his brother's business. He started importing polyvinyl chloride (PVC).

In 1988, Gautam Adani established Adani Exports which is involved in the business of agriculture and power commodities. This company is today known as Adani Enterprises, the flagship company of the Conglomerate Adani Group.

Journey of becoming a billionaire

Gautam Adani started importing plastic granules through Kandla port in 1988 by obtaining letters of authorization (LOU) from small-scale vendors.

Later, he tied up with state PSU Gujarat State Export Corporation for expanding his business. So, now he can import materials without the need for LOU. He has satisfied the export commitments and traded the balance products in local markets and generated huge profits. Thereby his import volume has also increased.

He was granted an import license by the Government of Gujarat with a ceiling limit of INR 12 crores. The import volume of Adani's business increased from 100 metric tonnes in 1988 to 40000 metric tonnes in 1992.

Adani has started importing chemicals and petrol products along with PVC granules. He also increased his export volumes and emerged as a star trading house.

In 1991, by virtue of liberalization, Adani started expanding his businesses into trading metals, textiles, and agro products.

During 1991-92, Gujarat Government has given the land of Mundra port to Cargill Group and Adani for salt production. However, the Cargill group has backed out from the project because of various protests.

Gautam Adani planned to convert Mundra Port into a captive port due to the frequent delays that are occurring in Kandla and Mumbai ports. Gujarat Government has decided to enter into a joint venture with private companies to manage new ports. Adani got the managerial outsourcing contract of the Mundra Port in 1995. Mundra Port is the largest private sector port in India.

Citibank has given the contract to Adani Group for developing a non-LNG terminal at Hazira Port. Its construction was completed within a span of two years.

Gautam Adani has convinced railway minister Nitish Kumar a few years down the line to integrate ports into railways. This has allowed Adani to run his own railway track from the ports to the nearest railhead. Adani built rail and road links to it by individually negotiating with more than 500 landowners across India to create the largest port in India.

He also built a two-kilometre airstrip in his port which made the Mundra port the only one with its own airstrip in India. This would further aid the transportation of high-value but low-volume goods like pharmaceuticals and diamonds.

Adani Group is today the pioneer of the infrastructure sector of India. Only during the pandemic period, the group has added $79 billion to its total wealth. Unlike Ambani Group which relied more on equity, Adani group leveraged the debt along with equity.

Adani Group's plan to enter into the defence sector is well timed as the Government of India has also been planning to reduce its arms imports. Its decision to enter into establishing data centres is also very successful and in tune with the government's strategy to locally store the data generated by the Indians.

The key reason behind Adani climbing the ranks is the surge in Adani Group stocks in the recent past. Adani Enterprises, Adani Port and Adani Transmission were some of the Adani Group stocks that hit their record highs on the BSE, leading to a surge in the group chairman’s real-time net worth.

In the last 2 years, almost all Adani Group's stocks have seen a very good performance. But in July 2021, SEBI had stocked some of the Adani group companies due to some compliance reasons and we also saw a slight dip in timing. In addition, due to the investigation, SEBI had also put Adani Wilmar's IPO on hold for a short time. But despite that, almost all the companies of Adani Group have shown very good performance in the last year.

Adani has added $60.9 billion to his fortune in 2022 alone, five times more than anyone else. He first overtook Mukesh Ambani as the richest Asian in February this year.

According to a Bloomberg report, another reason why Adani has been able to move past some of the world’s richest US billionaires this year is partly because, some of the US’ richest recently boosted their philanthropy. In July, Bill Gates said he was transferring $20 billion to the Bill & Melinda Gates Foundation, while Warren Buffett has already donated more than $35 billion to the charity.

Adani Group's Conglomerate Portfolio

Gautam Adani owns a lot of companies out of which there are 7 listed companies and the others are unlisted.

The seven listed companies are:

• Adani Enterprises Ltd
• Adani Power Ltd
• Adani Ports and Special Economic Zone Ltd
• Adani Wilmar Ltd
• Adani Total Gas Ltd
• Adani Transmission Ltd
• Adani Green Energy Ltd

Adani started the expansion of his business into the energy sector in the year 1996 and started Adani Power Ltd. At present, this company is the largest private thermal power producer in India. The collective power generating capacity of thermal power plants of the Adani group is 4620 MW. Adani got into power generation in 2009.

Adani Ports and Special Economic Zone Ltd was incorporated in 1998. It is into the business of development, operations and maintenance of port infrastructure and has linked multi-product Special Economic Zone (SEZ) and related infrastructure contiguous to Port at Mundra. It has managed to achieve an operating margin of 71% for over a decade. Adani Group has stakes in 13 ports across the eastern and western coasts.

In 1999, the company started its journey in coal trading and then in the year 2000 started the work of edible oil refining and formed Adani Wilmar Ltd. It is a leading FMCG food company in India that offers most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar.

Adani Total Gas Ltd was incorporated in 2005. This company is involved in City Gas Distribution (CGD) business and supplies natural gas to domestic, commercial, industrial and vehicle users.

Adani Transmission Ltd was established in the year 2006. Today this company is the largest private sector power transmission and distribution company in India.

Then Adani Green Energy Ltd was included in the year 2015 to grab the opportunity of green energy. It is primarily involved in renewable power generation and other ancillary activities. It is also a holding company of several subsidiaries carrying business of renewable power generation within the group.

Adani Group's Acquisitions

Gautam Adani is also known as the Silent Shopper because of several acquisitions made over the last few years. In the past two-and-a-half years, the Adani Group has made about 30 acquisitions shelling out over 20 billion dollars. A few of his big acquisitions are as follows-

• From 2009 to 2012, he acquired Abbot Point Port in Australia and Carmichael coal mine in Queensland.
• Adani Group acquired Dhamra Port in 2014, Mumbai power utility in 2017 and GVK Airport Developers in 2020.
• In September 2020, Adani acquired a 74% stake in Mumbai International Airport, India's second busiest airport.
• In May 2022, Adani's Group acquired Ambuja Cements and its subsidiary ACC from Holcim Group.
• In May, Adani Green Energy Ltd struck a deal with SoftBank to buy its renewable power business for $3.5 billion.
• The pivot to green energy and infrastructure has won investments from firms including Warburg Pincus and Total Energies SE, Helping Adani enter the echelons previously dominated by US business magnates.
• In August 2022, AMG Media Networks Limited (AMNL), a unit of Adani Group, declared that it planned to buy RRPR Holding, owner of 29.18% of national news broadcaster NDTV, and made an open offer to buy a further 26%.

Controversies and Darkest Moments in Adani's life

(1) According to Nilanjan Mukhopadhyay, Gautam Adani and Narendra Modi have been knowing each other since 2003. The bid made by AMNL for acquiring a 26% further stake in NDTV raised concern regarding editorial independence in India since Adani is considered to be close to Narendra Modi’s ruling BJP.

(2) The CAG has flagged two instances of the Gujarat Government giving undue benefits to Adani Group-

• During 2006-09, Gujarat State Petroleum Corporation (GSPC) sold gas to Adani Group at lower prices.
• Gujarat Urja Vikas Nigam recovered only INR 79.8 crore penalty as against INR 240 crores as estimated by CAG.

(3) Adani also had to see a global boycott during the 'Stop Adani Movement' in Australia. While its Carmichael mine in Australia has been criticised by environmentalists, it pledged to invest $70 billion in green energy to become the world's largest renewable energy producer.

(4) In 1997, Gautam Adani was held for ransom by bandits, according to his Mundra Port website.

(5) When terrorists attacked Mumbai in 2008 (26/11 attacks), Adani was among the hostages held at the seafront Taj hotel, according to the website.

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Hemanth Uppala

Chartered Accountant

Content Writer | TAX DESTINATION