RISE’N’SHINE, ADANI GROUP

OCTOBER 2022
What’s The Buzz About?
The Adani Group is synonymous with
prosperity! Did you know that just two years
ago, Adani’s total wealth stood at $10 billion
and now he has a worth of over $131 billion?
Not just that, he has recently surpassed
Mukesh Ambani to become Asia’s richest
man.

More than any other billionaire in the world,

Adani has increased his wealth by $65 billion
so far in 2022. Elon Musk, CEO of Tesla and
SpaceX, is still the richest person in the world,
with a net worth of $241 billion.

This stellar rise in his wealth cannot be attributed to good luck, but to his sheer
perseverance. It took Gautam Adani three decades to establish a group with a
market capitalisation of $153 billion. In 1988, Gautam Adani dropped out of
college to establish an import-export business that went on to become the
Adani Group. The vast size and expansion of the conglomerate are a result of
his "nation-building" philosophy. He established companies like Adani Green
Energy in the year 2015, which shows how he was thinking about the future and
how he was ahead of the time.

Factors Behind the Meteoric Rise of Adani

This sudden rise of the Adani Group is because of two major reasons:
1. Investor’s Confidence: The meteoric rise in Gautam Adani's fortune can be
attributed to the investors' faith in the conglomerate's seven publicly traded
stocks. Five Adani stocks (Adani Enterprises, Total Gas, Green Energy, Ports and
SEZ, and Power) have appreciated between 1200% and 7992% in the last five
years or since its first public offering in 2018. In the last two years, the rate of
growth has accelerated and in the last six months alone, the market
capitalization of his publicly traded companies has more than doubled to
exceed Rs 20 lakh crore.
2. The Skill to Perfectly Time the Market: Gautam Adani entered lucrative new
industries that the government was examining, in which competition was
relatively weak. When Prime Minister Narendra Modi pledged to develop local
defence equipment manufacturing, Adani developed the capability to supply
the military by forming partnerships with defence contractors. Since 2019, the
company has shifted its focus to airports, data storage, and financial services.
Adani's track record of entering promising industries at the optimal time is the
most important factor in all seven stocks' meteoric rise, known as Adani’s 7
pillars. These Super 7 companies are- Adani Enterprises, Adani Green Energy,
Adani Ports, Adani Power, Adani Total Gas, Adani Transmission and Adani Wilmar.
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Recent Acquisitions
Adani Group recently announced the acquisition of Holcim's
63.19 per cent stake in Ambuja and 4.48 per cent stake in ACC
for approximately USD 10.5 billion. This was the largest
acquisition in Adani's history and the largest infrastructure
and materials M&A transaction in India's history.

This acquisition will play a very important role in the growth of the Adani Group. Let us see
how.

Backward integration is the primary motivation behind Adani's acquisition of Ambuja and
ACC. It is a type of vertical integration in which one company purchases another that supplies
it with production-related goods and services. This strategy increases a company's profit
margin, price control, and expansion. Moreover, the Adani family is widely recognised for its
construction business. They are constructing thousands of kilometres of expressways, ports,
airports, and power plants worth thousands of crores as well as developing residential and
commercial properties. These projects require a lot of cement and steel. The government
plans to develop 100 smart cities, 200 airports, and housing for all over the next few years as
part of the Pradhan Mantri Awas Yojana, resulting in a massive demand for cement that
will benefit the Indian cement industry and, ultimately, the Adani Group. So with the help of
this acquisition, Adani Group, which has become the second biggest player in the cement
industry in India, just behind UltraTech, will be able to purchase raw materials at a lower cost
as well as be a part of the supply chain in the construction industry. This will act as a
competitive advantage for the company.
Recently the Adani Group has also acquired NDTV through VCPL
and currently they hold around 29% of NDTV’s stake. They are
The NDTV Saga
further planning to get the maximum stakes of the company with
the help of an open offer. An open offer is a rule related to the
minority shareholders that the acquirer should abide by. Whenever
there is a drastic change in the ownership of a company, the
minority shareholders get an option to exit the company through
the open offer. So now Adani Group is trying to own the maximum
shareholdings by offering to buy the shares of the minority
shareholders.

Why a Media House?

Despite NDTV’s declining revenues, Adani Group was interested in the acquisition of the media
house because of the digitalised world. Currently, the Media and Entertainment industry has
a size of ₹1,90,000 crores and it can go to around ₹2,32,000 crores by the year 2024. Out of
this market, the news industry holds around 31% and of this 31%, Hindi news channels have a
market share of 70% and NDTV has a market share of 58.5% of the Hindi news channel market
share.

The companies that are spending on advertisements, most of them are concentrating on
digital advertisements. This is creating a huge potential for all media houses in the coming
future. This will help Adani Group to compete with Reliance Industries in the Media and
Entertainment Industry as Reliance owns Network 18 Media and Limited.
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 Concerns
While Adani was already a successfully established entrepreneur before 2014, his wealth has
expanded almost 20-fold in the last eight years, from $7.3 billion to almost $131 billion. The
Adani Group is reported to have benefited greatly from the Central Government's desire for
India to be self-sufficient or favouring privatisation.

Investors are confident that Adani Group has grown too large to fail, and the promoter's
strong closeness to India's ruling party provides it with a strong leverage. Despite factoring
this, along with the spectacular growth, leadership status, the group’s company stocks are
believed to be trading at valuations far higher than the industry average, and hence, are
believed to be overpriced.

Some experts are questioning how much of Adani Enterprises’ stock price rise was due to a
lack of trading liquidity. The pool of shares actually available for trading by the public - the
free float - is quite limited, due to 60% promoter stake. This increases the volatility of stock
prices. There are inherent risks when there is a low float and high demand, which can lead to
soaring prices.

The “Debt” of it all

Some other analysts are discreetly mentioning the Group's
mounting debt level and the expensive value that the Adani
equities command.
Over the last five years, Adani Group's debt has ballooned from ₹1
lakh crores to ₹2.3 lakh crores as of September 2022. Based on a
report published by CreditSights, Adani Group is a highly leveraged
business that is rapidly investing in its existing as well as newer
acquisitions, primarily through debt. The Group is expanding itself
through loans, irrespective of the requirement of the acquisitions.
The latest green power and hydrogen ventures are also particularly
capital intensive, which would undoubtedly raise the requirement
for further debt incurrence to meet capex needs, leading to the
group's consistent high leverage. This strategy with ambitious
debt-funded expansion plans can potentially snowball into a
major debt trap.

Economic Ramifications
Many agencies recommend being “cautiously watchful” of
the Group’s expansion appetite. Some credit analysts believe
the group's high leverage ratio will have a cascading negative
effect on the credit quality of the bond issuing firms within the
group, increasing the danger of contagion in case of distress
failure by any single entity. This would ultimately affect the
broader Indian markets and the economy. If the Group
defaults, the government will have to intervene and use
taxpayer funds, like in the past, to help revive the economy.
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 The Brighter side
Eight of the conglomerate’s companies, including its recent acquisitions, have
contributed more than a fifth to the rise in the 109-member MSCI India Index since
the end of June'22. With a 12% increase, the index has outperformed Asian and
developing market counterparts during the period. These Adani stocks are also
included in the MSCI Asia Pacific Index and the MSCI Emerging Markets Index, with
India only behind China, demonstrating the tycoon's expanding prominence.

Source: IIFL
Adani's wealth has
surpassed that of Bill
Gatesand Bernard
Arnault (CEO of Louis
Vuitton, world’s largest
luxury good company)
in the last two months,
making him the first
Asian to be in the top
tier of the Bloomberg
Source: IIFL Billionaires Index.

As far as the debt is concerned, analysts at Credit Suisse noted that while debt
levels have risen, the Group's cash flows have also increased consistently, with
additional assets streamlining and becoming operational. As a result, the Group's
Net Debt/EBITDA ratio has dropped to approximately 5x in 2022, down from a little
less than 7.5x in 2016.
Adani Group also has healthy banking ties, a good track record of delivering
stable enterprises and is well aligned with the government's massive green
program. Gautam Adani's friendly relations with the ruling Modi administration
also ensures that the Group's expansion strategy will not be hampered in the
foreseeable future 5
 Future Expansion Plans of the Adani Empire
The Adani Group is eyeing to expand and spread its wings internationally. They are all set to
test the unchartered international waters. With Reliance Industries limited all set to foray into
the Fast-Moving Consumer Goods sector, Adani group is actively expanding its food
empire. From the Adani Wilmar initial public offering (IPO), Rs 500 crore ($62.9 million) has
been set aside for brand acquisitions to diversify its range of branded staples and food
products and increase its consumer goods reach. They have recently welcomed
Switzerland-based brand ’Kohinoor’ into its own brand – Fortune.

Upon venturing into the cement sector recently, Gautam Adani is looking to add one
more business to his diverse, expanding corporate empire by investing another $5.2
billion in setting up an alumina refinery in Odisha. Following the announcement of plans
for steel and copper plants earlier in the year, he is now progressively expanding the
metals portfolio of his firm. A ₹60.7 billion syndicated club loan was obtained by Adani
Enterprises for a new 500-thousand-ton copper refinery complex in Gujarat. In January,
the business also disclosed a partnership with South Korean steel giant Posco to
investigate business potential in India, including the establishment of a green steel mill.

With CCI giving a nod for Adani Power's proposed acquisition of

DB Power and Diligent Power, the company is all set to expand its
offerings and operations in the thermal power sector. Adani
wants to develop 3 GW of solar panel manufacturing capacity
and 45 GW of hybrid renewable energy generation capacity. The
objective is to become one of the most affordable producers of
green hydrogen and green electricity.
The company is looking to create ‘lifestyle destinations’ for
customers both inside and outside the airport. They have plans to
develop real estate projects alongside their airports in the nation
in addition to their aeronautical operations. The business is in
preliminary discussions with hotel brands like Marriott
International, InterContinental Hotels Group (IHG), and Hilton.
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 DID
YOU
KNOW?
Despite hailing from a family that ran a textile company, Gautam was enticed to
Mumbai's glitzy diamond sector. He learned all the trade secrets while working
for Mahindra Brothers and went on to make his first million rupees by starting his
own diamond brokerage company in Mumbai's renowned Zaveri Bazar.
In 1998, Adani was taken hostage and held for a $1.5 million ransom.
One of the survivors of the Mumbai terrorist attacks on November 26th, Gautam
Adani was eating dinner at the Taj when terrorists attacked.
The Adani Family has promised to donate Rs 60,000 crore to a number of
philanthropic causes in honour of Gautam Adani’s 60th birthday. The Adani
Foundation will be in charge of managing this corpus.
The largest private port in India is owned by the Adani group. The Adani group
owns and operates the Mundra Port, which is located on the coast of the Gulf of
Kutch.

Meet the team

Senior Members Junior Members

Mahima Agarwal B Avantika Deepanshu Ashara

Deven Sethi Rounak Sarangi Nikhil Mahanandani
Prachi Mehta