By Madhusha Thavapalakumar
The sale and lease of state-owned infrastructure and resources to foreign countries or companies, signing Free Trade Agreements (FTAs) with regional peers, and entering into joint ventures with foreign institutional and individual investors to develop such infrastructure, are common occurrences in Sri Lanka that have never failed to turn heads.
Thanks to consecutive Governments, there has been no short supply of such incidents, with examples being the signing of the Sri Lanka-Singapore FTA, the proposed Economic and Technology Co-operation Agreement (ETCA), the 99-year lease of the Hambantota Port to China, leasing of Trincomalee oil tanks to Lanka Indian Oil Corporation (LIOC), and the proposed signing of the Millenium Challenge Corporation (MCC) Compact, a US foreign aid agency.
The most recent such local attraction to turn heads was the partnership of John Keells Holdings (JKH) with an Indian company for building and operating the West Container Terminal (WCT) of Colombo Port for a period of 35 years. The Indian company is Adani Ports and Special Economic Zone Ltd., a name which was taking over local headlines in the past few days. In fact, “Adani” has become a company of note in Sri Lanka.
In the meantime, what is more interesting is the fact that Adani Company, which has been in business since 1988, has suddenly become a topic of discussion in India and many other countries in the past few days, partially due to its recent partnership with JKH to build and operate the WCT, and also partially due to Adani Group Founder and Chairman Gautam Adani adding more billions to his wealth this year, making even former Indian National Congress party Leader Rahul Gandhi fume at Adani’s wealth surge.
Fascinated by the recent development locally involving Adani Group and the Group Founder’s impressive surge in wealth to surpass several global multi-billionaires, which has subsequently led to suspicions in India’s political sphere, Market Mine of The Sunday Morning Business is this week taking a look at Adani as a whole, delving deep into the company and Sri Lanka’s deal with them.
Adani Group, the largest port developer of India
Before jumping right into Adani Group’s bullish share prices, we will look at Adani Group. An Indian multinational group headquartered in Gujarat, Adani has left its footprints in the sectors of energy, resources, aerospace, agribusiness, logistics, financial services, real estate, and many more through the 33-year period since its inception.
Adani Group reportedly records an annual revenue of over $ 13 billion from about 70 locations in 50 countries. The Group, as of 2 March 2021, had a market cap of over $ 80 billion, comprising six publicly traded companies, making it the third Indian company to hit INR 1 trillion in market capitalisation.
Being the largest commercial port operator in India, Adani Group contributes to India’s growing trade, with a strong presence spread across 10 domestic ports in six maritime states: Gujarat, Goa, Kerala, Andhra Pradesh, Odisha, and Tamil Nadu. The port facilities of the Group are reportedly equipped with the latest cargo-handling infrastructure, capable of handling larger vessels calling at Indian shores.
Digging further into Adani Group unearths truths that do not fail to amaze, such as the fact that Adani Group’s stock has shot up by over 1,000% from a low in March 2020. India’s Business Standard had the following to say on this matter: “Shares of Adani Green Energy, on Tuesday (16), hit a new high of Rs 1,245, up 4% on the BSE (Bombay Stock Exchange) in intra-day trade, thus surpassing its previous high of Rs. 1,220, touched on 24 November 2020. With today’s gain, the stock has zoomed 1,004% from its 52-week low level of Rs. 112.70, hit on 17 March 2020.”
Adani Airports, a subsidiary of Adani Enterprises, in February this year completed the acquisition of a 23.5% stake in Mumbai International Airport. The Airport is primarily engaged in business development, construction, and operation of Chhatrapati Shivaji Maharaj International Airport of India.
Last year, as Business Standard reports, Adani Airports also won the mandate to modernise and run six airports – Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram – for 50 years through a globally competitive tendering process conducted by the Airports Authority of India (AAI).
According to Recharge, a global news website on energy transition, India’s Adani Green Energy secured a $ 6 billion, 8 GW solar contract from the Indian Government, which it claimed as a world-record scale for the sector, in June last year. Adani Green was set to undertake the massive build-out over five years, with the first 2 GW by 2022, after being selected by the Solar Energy Corporation of India (SECI).
“Adani Group has been a bit aggressive in acquisitions in the infrastructure and public utility space. Adani Ports and Special Economic Zone (APSEZ), India's largest private port operator, has completed the acquisition of Krishnapatnam Port Co. Ltd. (KPCL) for an enterprise value of Rs. 12,000 crore (INR 120 billion) in October. Adani Transmission (ATL) has recently acquired Alipurduar Transmission Limited from Kalpataru Power Transmission Ltd (KPTL) for an enterprise value of Rs. 1,300 crore (INR 13 billion). In August, Adani group announced the acquisition of GVK Group's stake in Mumbai airport,” Business Today added.
In fact, there is enough to talk about Adani Group;s businesses to fill a page, but that is a topic for another day.
First-generation billionaire entrepreneur Gautam Adani 
Apart from the awe-inspiring diversified business, billions of dollars of annual revenue, and many more billions of dollars in market capitalisation, what is more impressive is the fact that Gautam Adani is a first-generation entrepreneur.
According to Bloomberg’s recent Billionaires Index, the net worth of Gautam Adani soared by $ 16.2 billion in 2021 to reach $ 50 billion, making him the year’s biggest wealth gainer, surpassing Amazon’s Jeff Bezos and Tesla’s Elon Musk, who according to The Hindu, “tussled” in 2021 for the title of world’s richest.
The surge is reportedly due to the upsurge in share prices of Adani Group’s publicly listed companies. According to Business Today, while shares of Adani Enterprises have gained over 87% as of mid-March, those of Adani Total Gas surged nearly by 97%, and Adani Ports and Adani Port and Special Economic Zone by over 50%, so far this year. According to Al Jazeera, shares of all Adani group stocks, except one, have rallied at least 50% this year.
Further, the surge was also backed up by the recent 50:50 joint venture formed by Adani Enterprises with global data centre operator EdgeConneX to provide data centre solutions in India.
The entrepreneur billionaire’s surge in wealth led to Rahul Gandhi questioning the sudden hike. According to Indian media reports, Former Indian National Congress Chief and Wayanad MP Rahul Gandhi recently questioned how business tycoon Gautam Adani managed to increase his wealth by over 50%, while every other individual and business struggled to overcome the disruptions caused by the prevailing Covid-19 pandemic.
“How much did your wealth increase in 2020? Zero. You struggle to survive while he makes Rs. 12 lakh crore and increases his wealth by 50%. Can you tell me why?” Gandhi asked, while posting a news report on Twitter, The Indian Express quoted. Gandhi has been targeting the Bharatiya Janata Party (BJP)-led central Government, accusing it of favouring billionaire industrialists like Ambani and Adani.
The billionaire’s entry into SL and the port game saga
The name Adani started becoming familiar locally when reports citing that Adani Group is the front-runner to develop the East Container Terminal (ECT) in Colombo Port started circulating by late last year. Prior to these reports, Business Line of The Hindu in July last year reported that “indications are that India will participate in the East Coast Terminal through the Adani Group”.
The report went on and added that India will likely field the said Group as its nominee in a planned India-Japan-Sri Lanka partnership that would jointly run the ECT. This was following a Memorandum of Co-operation (MoC) signed between Japan and India to jointly develop the ECT in May 2019. According to the MoC, the ECT will be run by a jointly-owned company, in which Sri Lanka Ports Authority (SLPA) will hold 51% stake, and SLPA was to retain full ownership of the ECT.
After consistent and strong opposition from trade unions, the Sri Lankan Government reneged the aforementioned agreement with India and Japan to jointly develop the ECT, and the Government noted that the ECT would be developed by SLPA alone. The pulling out from the deal was seen by Indian media reports as a blockage by China for India’s effort in gaining presence in Colombo Port.
In what seems to be a bid to compensate India for pulling out of the ECT deal, the Cabinet of Ministers soon approved the development of the West Terminal at the Port of Colombo as a Public Private Partnership (PPP) with India and Japan. Then, out of thin air, it was announced that Adani Ports had partnered with Sri Lanka’s blue chip conglomerate John Keells Holdings (JKH) and SLPA to develop the West Container Terminal (WCT) on a Build-Operate-Transfer (BOT) basis for 35 years.
Reportedly, Adani Ports and Special Economic Zones Limited (APSEZ), a company that comes under the purview of Adani Group, received a Letter of Intent (LOI) from the Sri Lankan Government early last week to develop and operate the WCT. It was stated that WCT would have a quay length of 1,400 m and a depth of 20 m, thereby making it a prime transhipment cargo destination to handle ultra-large container carriers. While the LOI itself is nothing special, what is more engrossing is the fact that Indian Government was not consulted in issuing the LOI to Adani Group.
The approval of the joint venture was implied by the Sri Lankan Government, and the Department of Government Information officially stated that the APSEZ consortium has been cleared and approved by the Indian High Commission in Sri Lanka to develop the WCT, which sparked controversy and allegation in India of Modi’s Government favouring the Adani Group. But the story did not end there.
India came back vehemently denying giving “approval” to Adani Group. The Wire had the following to say on this matter: “While Indian officials speaking under the cover of anonymity told that the Sri Lankan Government’s claim that the Indian High Commission had green-lighted the Adani proposal was incorrect, they were not prepared to say this on the record. However, they insist that the Indian Government has not been talking to Sri Lanka about the WCT project.”
As the Indian High Commission shrugged its shoulders on not approving Adani Group for the WCT, it became evidently that the LOI was a decision solely made by the Sri Lankan Government. Poor Japan had no say on this, even though the WCT was initially proposed to be a joint venture between India, Japan, and the SLPA. So, as they say, what has happened has happened, and what we can focus on now is whether this deal with Adani Group would be beneficial to Sri Lanka or not.
Adani – biggest mistake or the best decision?
Adani’s port business is up to date the largest in India, and is headed by Karan Adani. In fact, as of early 2019, Adani became the first Indian port operator to handle cargo movement of 200 million tonnes in 2018-19. Given the performance of Adani Port Company, Sri Lanka might have signed up for a better deal, regardless of what Transfin, a content platform, had to say below.
According to Transfin, as of 11 November 2020, Adani’s total outstanding debt was over $ 30 billion, including $ 7.8 billion worth of bonds and $ 22.3 billion in loans. It added that high debt is not a “shocking prospect for big businesses, but Adani cannot really boast of a reliable cash cow unlike its big peers such as RIL (Reliance Industries Ltd.) and Tata Sons.”
“The Group has continued to raise impressive funds via bond sales and overseas lenders. Part of the reason behind Adani’s lure is the perception that Chairman Gautam Adani has Prime Minister Narendra Modi’s ear,” Transfin added.
Adani was considered the “commercially best option” by the Sri Lankan Government, which could be because of Adani Group’s close ties with Indian Prime Minister Narendra Modi, although the Sri Lankan Government does not say this publicly. According to the international Financial Times, when India decided to privatise the six airports mentioned earlier, it reportedly relaxed the rules to widen the pool of competitors, and the one clear winner from the rule was Gautam Adani alone. Adani became the biggest private airport operator overnight, which is alleged to be due to a political favor, while already being the largest private port operator and thermal coal producer of India.
“Along with Reliance Industries Chairman Mukesh Ambani, Mr. Adani is today one of the most visible tycoons in the country, whose prominence has accelerated in the years since Narendra Modi was elected Prime Minister in 2014,” the publication said.
“Since Modi came into office, Adani’s net worth has increased by about 230% to more than $ 26 billion as he won government tenders and built infrastructure projects across the country. ‘Nation building’ is Adani’s motto and he likes to talk about helping India achieve energy security.”
Regardless of Adani’s empire increasingly becoming the focus of criticism regarding capital being concentrated on favoured corporates, Indian Government thus far seems immensely supportive of the Group, albeit indirectly. It is safe to presume that the surge in Adani’s wealth and the record-breaking performance of the company is most likely to remain until Indian PM Modi is in power, at least that is what Indian analysts think.
Interesting facts involving Gautam Adani & his group
- Gautam Adani had a spectacular rise in fortune in the last few years, climbing 20 places to be the 48th-richest person globally and the second wealthiest Indian.
- Adani Enterprises Ltd. and Adani Transmission Ltd., part of Adani's group, are among the 50 most valuable listed entities in India.
- Gautam Adani is the biggest wealth gainer of this year, surpassing even the multi-billionaires of the world, Elon Musk and Jeff Bezos.
- Adani Group is the third Indian company to cross INR 1 trillion capitalisation and this was amidst pandemic.
- Gautam Adani is a first-generation multi-billionaire entrepreneur who became a millionaire in his early 20s.
- Adani Group is the largest port operator in India, and the share prices of the companies under the group, except one, has soared by over 50% this year.
- Since Narendra Modi came into office, Adani’s net worth has increased by about 230%.