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ADANI ANNOUNCES ARRIVAL

Group in Makeover Mode to encashits next phase of growth

Low-profile Gautam Adani addressed 1,000 staff in Ahmedabad recently, a speech that was aired live overseas to those posted abroad. This was an announcement for those are rather challenged on business knowledge on the position the group rightfully deserved among the Indian corporations.

The Adani group is now close to registering $7 billion in annual revenues. Long past are the days when it was a supplier of salt for American commodity giant Cargill in the 1980s. In a little over two decades it has reached the upper echelons among the new generation of Indian conglomerates. With acquisitions abroad, the mines in Australia and Indonesia, the group now has the best network of supplying raw material to India’s energy sector.

By 2020 it is estimated that the private sector will account for 40 per cent of electricity generation in India. Adani is emerging as the largest player, with its eight plants and 20,000 mw capacity. Now Adani’s capacity is pegged at 3,960 mw. This is slated to soar to 10,000 mw by the end of 2012 once the projects under construction go on stream. In the next three years the Group plans to invest $6 billion (around Rs30,000 crore). It will develop three businesses — resources, logistics and energy. For resources a large portion will be invested into its new Australian coal mining exploration which is expected to produce up to 60 million tonnes (mt) annually from 2015. Apart from coal mines and trading, resources business will include oil and gas in the future. The group is considering acquisition of BG Group Plc’s 65 per cent stake in Gujarat Gas. BG had announced its intention to sell the stake in the western India-focused gas distribution company in November.

Adani had acquired in 2010 from Linc Energy coal mining exploration in Galilee Basin in Queensland, Australia for A$3 billion ($3.2 billion). This is a win-win acquisition. Cash and experience rich Adani can provide much needed infrastructure development for the overseas asset while in India it can bring the coal supplies. What India as a country failed – matching competition from China in global rush for coal – Adani managed to do with its single point agenda on resource business. This, one likes to admit or not, is a great service for the nation Adani represents.

Of late government policies abroad are making coal imports costlier. Indonesia changed its policy in July last year and linked the sale price to international indices. This made redundant all the long-term contracts Indian power producers signed with coal miners at competitive prices. Few months later in November, Australia imposed a carbon tax of $24.70 per tonne on coal exports. Projects with a total capacity of around 14,000MW are stuck because of the changes in policy by the two countries. But the same will resume once the resultant rise in input cost sinks in. Adani stands ahead in resource hunt for India’s energy sector.

What has helped Adani to excel is its focus. Starting as a trading company it built on best possible coal import infrastructure in the country. The same focus to its core business made the Group exit from the real estate business, which will now be privately owned by the group’s promoters.

Adani has built a world-class deep-water port in Mundra. Next to the ports it built huge power plants. have been built close to the port. In Australia, the two large acquisitions at the Galilee Basin coal mine, with reserves of 10.4 billion tonnes, and Abbot Point port, with a capacity of 50 million tonnes the group has no shortage of resources unlike its competition in India. The painstaking effort in sourcing coal from abroad and bringing the same for use in Indian plants have seen Adani emerge as the largest coal importer . Even the most recent tender by the state-run NTPC saw Adani Group company emerge as the lowest bidder for importing 4 million tonnes of coal.

In the last twenty years the Adani Group has come a long way from a scrappy entrepreneurial group from Gujarat with a history of run-ins with the regulators, law-enforcement authorities and environmentalists to one among the largest in the energy chain. The group has now hired a brand consultancy firm, the same firm that has helped burnish the image of staid industrial stalwarts such as the Tatas and the Munjals. In July last year the group engaged Wolff Olins, a marquee international brand consultancy firm. Charles Wright, member of the leadership team of Wolff Olins, with the specific responsibility for business in India told the Economic Times, India’s largest business newspaper that they had been hired to help Adanis manage their reputation. “He (Gautam Adani) felt they are at a size when they have to take control and manage their reputation actively.”

The move is timely. Not only the group has come to the fore in its chosen area of business the times are difficult for corporations globally. More so in India, where the relationship between big businesses and the government is under scrutiny due to a succession of scandals. As the group crosses geographies, its main promoter, the low-profile Gautam Adani can no longer afford to ignore public perception of him and the group. The talk to its employees was an effort of Gautam Adani to announce the group’s pre-eminent position to its employees.

“The company needs to manage its reputation. They need to know what it does,” told Wright to Economic Times. His firm carried out over 60 interviews starting from Gautam Adani to new recruits in the firm and later commissioned a research outfit to reach out to policymakers and customers before getting down to crafting a vision of what the Adani group should represent. From a trader to owning assets, the group has now entered the third phase of growth which is oriented to delivering benefits through integration of all its global assets. Sources say there are other firms working on different aspects of the group. Adani is working with different consulting firms including PWC which is working on enhancing “corporate values,” of the group. Ask Wright about his client, he says, “Gautam Adani may not be the most eloquent of our clients. But he is a rare visionary.” According to Wright, Adani is perhaps the only Indian industrialist from the first generation to have successfully connected all the dots in the Indian power infrastructure sector.

The Group rechristened its port operator arm, Mundra Port and SEZ Ltd, as Adani Port and SEZ Ltd. It has now ventured outside Gujarat and got ports such as Goa, Visakhapatnam and Paradip for development projects. A major achievement of Adani Port and SEZ Ltd was that its neighbour-cum-competitor, Kandla Port, run by the Government of India, awarded it a Rs 1,000-crore project for developing a satellite port in the Gulf of Kutch.

The first generation businessman has used the opportunities that came in his way due to the liberalization in the early 1990s. He sensed his opportunities rightly, stuck to a planned course and thus emerged as a largest and the most successful in the energy and infrastructure domain. For the next phase, complicated as the scenario is given the involvement of various governments, national and international, people of India and abroad and also competition from strong nations like China, Adani must change its branding. It can no longer remain as quiet as it used to be but seen as one delivering value to people at large. The rebranding exercise is part of that.

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