Adani Group has raised $5 billion to $7 billion for acquisitions over the next six months, renewing the aggressive growth strategy that was the hallmark of the airports-to-power conglomerate until U.S. short seller Hindenburg Research levelled its stunning allegations against it.
Adani Group plans to acquire companies in cement, airports, defence, ports, power and consumer products this fiscal year, two people with direct knowledge of its plans said, in the most aggressive growth strategy yet by the three-decade-old conglomerate.
Over the past decade, Adani Group has mainly adopted private acquisitions, acquiring about 65 companies in 10 years. However, in January 2023, Hindenburg Research accused the group of carrying out “the biggest scam in corporate history”, and the group had to slow down its acquisition pace.
While the Securities and Exchange Board of India is still probing the allegations, the cloud hanging over the Adani Group eased somewhat after the Supreme Court in January this year dismissed a separate probe into Hindenburg’s allegations.
Adani Group has earmarked $15 billion for greenfield capital expenditure this fiscal, one of the people cited above said. The funds planned for acquisitions and capital expenditure this fiscal have increased as share prices of its companies have been rising steadily, creating opportunities to raise funds through share sales.
“The Adani Group was well positioned for expansion through both organic and inorganic routes many years before the short seller reports sparked perceptions in 2023,” said Monish G. Chatrath, managing partner at MGC Global Risk Advisory.
He added that many of the conglomerate’s investments in sectors such as infrastructure, utilities, renewable energy and defence had long gestation periods.
The total market capitalization of Adani Group’s listed companies is now about $205 billion, almost double what it was after the Hindenburg report was released last year. Although the threat from Hindenburg has diminished, the short-seller’s allegations against the group have changed several times recently.
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Adani Group’s acquisition strategy aims to tap growing demand in infrastructure and construction materials; India’s emphasis on self-reliance in defense capabilities; the country’s desire to compete with China on international trade routes linking India to West Asia, Africa and Europe; India’s growing demand for energy and rising consumer appetite for ready-to-eat foods and spices, according to two people with knowledge of the group’s plans, who declined to be identified.
Adani Group’s acquisition plans also include buying companies through Adani Power Ltd, Adani Enterprises Ltd and its fast-moving consumer goods unit Adani Wilmar Ltd, the first person aware of the development said.
Mint Adani Group’s efforts to acquire a thermal power plant owned by Reliance Power Ltd may get a boost, according to reports on September 18.
Adani Group did not respond to email queries.
Consolidating growth
Adani Group’s main acquisition focus in the current fiscal year ending March is the cement industry as it aims to become India’s largest cement company within five years.
“The group is in talks with three prominent cement companies in India, including one in the south with a capacity of 15-20 million tonnes per annum, and companies in central and north (India) with a capacity of 5-10 million tonnes per annum,” said the first person who outlined the group’s greenfield capital expenditure plans this year. “Around $2-2.5 billion is earmarked for acquisitions in the sector.”
In June, Ambuja Cements Ltd announced the acquisition of Penna Cement Industries Ltd ₹10,422 crore, or about $1.2 billion, as part of the conglomerate’s ambition to surpass Ultratech Ltd., India’s largest cement maker.
Also Read | Ambuja Cements lays out $9 billion battle plan for Ultratech battle
“The talks are at a preliminary stage… The group is conducting feasibility tests on the companies it plans to acquire. Feasibility tests include litigation assessment, financial due diligence, payables, loan cycles, etc,” the person said, adding that Adani Group aims to increase its total cement production capacity to 100 million tonnes per annum by the end of this fiscal from around 79 million tonnes per annum at present.
Adani Group also owns ACC Limited.
“We expect Adani Cement’s total capacity to be around 120 million tonnes per annum in the next six months to a year,” the person said. “We don’t have any debt and have around $3.5 billion in cash on our books for acquisitions. We can also raise more funds through internal accruals.”
Adani Group is also looking at defence and aerospace as key areas for acquisitions, two people familiar with the matter said. The group has earmarked $1 billion for defence acquisitions through Adani Defence and Aerospace Ltd, the people said.
The Indian government has been emphasising on indigenisation of India’s defence capabilities as part of its goal to become a net defence exporter.
“The group’s plans are aligned with the nation’s goal to enhance the application of space technology for defence,” the person said. “We have identified certain (acquisition) opportunities, particularly in the areas of advanced technology, artificial intelligence and machine learning, to improve efficiency.”
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Entering international waters
Adani Group’s expansion strategy for the ports business is equally aggressive.
On August 28, Karan Adani, managing director of Adani Ports and Special Economic Zone Limited, announced that the company will set up a propellant manufacturing facility in Shivpuri, Madhya Pradesh.
Adani Group has earmarked at least $1.5 billion for acquisitions in the ports sector as it seeks to capitalise on India’s ambition to strengthen its presence in international trade corridors linking West and Central Asia to Europe, two people familiar with the group’s plans said.
Adani Group wants to become one of the world’s largest port operators within five years, according to a recent presentation to investors. This will be achieved mainly through acquisitions, the first person said.
“The port’s container throughput is currently around 660 million tonnes and it aims to cross 700 million tonnes by the end of this fiscal,” said a second person aware of the development.
Currently, the Adani Group operates port-related businesses in Israel, Sri Lanka, Indonesia, Tanzania and Australia, and has signed memorandums of understanding for port-related businesses with Vietnam, Malaysia and the Philippines.
Adani Group has set its sights on at least three major ports in Europe, Africa and Southeast Asia for potential acquisitions. Mint It was reported in May.
“The group is in talks with ports in Eastern Europe and Africa that have a capacity of 100,000-200,000 tonnes. Some of these ports are ready but have not started services yet. Due diligence is underway,” said the second person aware of the development. “The plan is to cross 8 million tonnes by 2028. It will create a logistics ecosystem for the group’s businesses such as energy, offtake and derivative exports and finished product (edible oil) delivery.”
The acquisition will also help the group save on raw material costs as its thermal power generation business requires imported coal.
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