The Adani group’s resurgence: A $5-7 bn war chest for cement, ports, defense and other acquisitions

The Adani group has created a war chest of $5-7 billion for acquisitions over the next six months, reviving an aggressive growth strategy that had defined the airports-to-electricity conglomerate before US-based short-seller Hindenburg Research hit it with its alarming assertion.

Two people directly aware of the Adani group’s plans said the conglomerate plans to acquire companies primarily in cement, airports, defense, ports, power, and consumer goods this financial year. This is the most aggressive growth strategy the three-decade-old conglomerate has ever devised.

Adani group has primarily taken the inorganic route over the past decade, acquiring about 65 companies in 10 years. But it had to slow its pace after Hindenburg Research in January 2023 alleged that the group had pulled off the “largest con in corporate history.”

Although the Securities and Exchange Board of India is still investigating those accusations, the cloud over the Adani group eased after the Supreme Court ruled out a separate probe into Hindenburg’s guilt in January this year.

One of the persons mentioned above said the Adani group has earmarked $15 billion for greenfield capital expenditure this fiscal year. The fund planned for acquisitions and capex is higher this fiscal year since the shares of the group’s companies have been steadily rising, creating an opportunity to raise money by selling shares.

“The Adani group had set itself up for expansion, both through the organic and inorganic routes, many years before the perceptions were triggered in 2023 through the short-seller’s report,” said Monish G. Chatrath, managing partner at MGC Global Risk Advisory.

Several of the conglomerate’s investments in sectors such as infrastructure, utilities, renewable energy, and defense have long gestation periods, he added.

The total market capitalization of listed Adani group companies is currently about $205 billion, almost double what it was after the Hindenburg report last year. While the specter of Hindenburg has eased off, the short-seller’s recent commentary involving the group have taken multiple twists.

Also read | Adani Group to nearly double FY25 capex at ₹1.3 trillion

The Adani group’s acquisition strategy seeks to capitalize on the rising demand in the infrastructure and building materials space; India’s emphasis on becoming self-reliant in defense capabilities; the country’s ambitions to compete with China in the international trade route connecting India with West Asia, Africa and Europe; India’s growing need for energy, and increasing consumer demand for ready-to-cook edibles and spices, according to the two persons familiar with the group’s plans. They declined to be identified.

The Adani group’s acquisition plans also include takeovers of companies through Adani Power Ltd, Adani Enterprises Ltd, and its fast-moving consumer goods subsidiary Adani Wilmar Ltd, the first person said.

Mint reported on September 18 that the Adani group’s efforts to acquire a thermal power plant formerly owned by Reliance Power Ltd may get a boost.

The Adani group did not reply to emailed queries.

Cementing growth

For this fiscal year ending in March, the Adani group’s primary acquisition focus is on the cement sector, as it aspires to become India’s No.1 cement player in 5 years.

“The group is in talks with three prominent cement companies in India, which includes a south-based cement company with capacity in the range of 15-20 mtpa (million tonnes per annum), and companies in central and north (India) with 5 -10 mtpa capacities,” said the first person who outlined the group’s greenfield capital expenditure plans for this year. “About $2-2.5 billion has been set aside purely for acquisitions in this space.”

In June, Ambuja Cements Ltd announced the acquisition of Penna Cement Industries Ltd for ₹10,422 crore, or about $1.2 billion, as part of the conglomerate’s ambition to emerge bigger than India’s largest cement-maker Ultratech Ltd.

Also read | Ambuja Cements draws up $9-billion war plan for Ultratech battle

“The discussions are in a preliminary stage… the group is conducting a viability test for the companies planned to be acquired. The viability test includes assessment of litigations, financial due diligence, payables, lenders’ cycles, and so on,” said this person, adding that the Adani group aims to cross 100 mtpa in total cement capability by the end of this fiscal year, from around 79 mtpa now.

The Adani group also owns ACC Ltd.

“We can expect in the next six months to one year the total capacity of Adani Cement to be around 120 mtpa,” this person said. “We don’t have any debt and have around $3.5 billion cash in books for the acquisition. More “can be brought in from internal accruals.”

The Adani group has also identified defense and aerospace as key areas for acquisitions, said the two persons. It has set aside $1 billion purely for defense acquisitions via Adani Defense and Aerospace Ltd, said the person quote above.

The Indian government has been emphasizing the indigenization of India’s defense capabilities as part of its goal for the country to become a net defense exporter.

“The group’s plan is aligned with the country’s goal to strengthen the technology play in defense space. Certain (acquisition) opportunities have been identified, especially in the field of advanced technology, artificial intelligence and machine learning to bring in higher efficiency,” said this person.

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Adani Wilmar is out shopping for three food companies with a billion-dollar wallet

Into international waters

The Adani group’s expansion strategy is equally aggressive for its ports business.

On 28 August, Karan Adani, managing director of Adani Ports and Special Economic Zone Ltd, announced that the company was setting up a propellant production facility at Shivpuri in Madhya Pradesh.

To capitalize on India’s ambition to enhance its presence in the international trade corridor on the route connecting India with West Asia, Central Asia and Europe, the Adani group has set aside at least $1.5 billion for acquisition in the ports space, said the two persons familiar with the group’s plans.

The Adani group aspires to become one of the world’s largest port operators in five years, according to recent presentations made to investors. This will be primarily driven by acquisitions, said the first person quoted above.

“The current port capacity (in container-handling) is around 660 mt (million tonnes) and the plan is to cross 700 mt by the end of this fiscal year,” said the second person.

The Adani group currently has port-related operations in Israel, Sri Lanka, Indonesia, Tanzania and Australia. It also has signed memorandums of understanding for port-related activities in Vietnam, Malaysia and the Philippines.

The Adani group has set its sights on at least three large ports in Europe, Africa and South East Asia for potential acquisitions, Mint reported in May.

“The group is in talks with ports in east European and African ports which have capacities of 10-20 mt. Some of them are ready but yet to begin services. Due diligence is on,” said the second person. “The plan is to cross 800 mt by 2028. It will create the logistics ecosystem for group businesses such as energy, export of offtakes and derivatives, and delivery of ready products (edible oil) “

The acquisitions will also help the group save on raw material costs since it imports coal for its thermal power production business.