We will talk about Adani Group and its Founder Chairman Gautam Adani, how Gautam Adani created an empire worth billions of dollars and how the profit or loss of such a big industrialist affects us or what is the impact on the economic interests of the country.
Gautam Adani was born on 24 June 1962 to Shantilal Adani and Shanta Ben. There was a plastic pressing business in the family. One day in the year 1978, 16 year old Gautam Adani, who was studying in school, took a ticket and took a train to Mumbai. Gautam Adani's cousin Prakash Bhai Desai got him a job in Mahindra Brothers. Taught him the job of sorting diamonds. After 3 years he started his own diamond trading brokerage in Zaberi Bazaar. He got his first job when he helped a Japanese buyer in the diamond business and earned a commission of Rs 10,000. This was a huge amount in those days. Next year in 1982, Gautam Adani's elder brother bought a plastic manufacturing company and called Gautam Adani for help. Gautam Adani returned to his home in Gujarat and started helping in the family business. At that time, shortage of raw material was troubling small plastic factories. In 1985, Rajiv Gandhi's government gave some relaxation on import and export. At the same time Adani started importing raw materials. He not only imported raw material for himself but also started supplying raw material to many nearby factories.
Earned good profits for a few years, how much was earned can be estimated from the fact that when the IPO of Adani Exports came out, it was oversubscribed 25 times. This means that 25 times more people were willing to buy shares of this company than the number of shares floated in the stock market. This is from the time when there was no online system for IPO nor were many people interested in the stock market and had knowledge about it.
A turning point came in 1991. Narasimha Rao's government was formed and Dr. Manmohan Singh became the Finance Minister. Dr. Manmohan Singh adopted the policy of liberalization. Connected India to the world market. Along with the country, Adani also benefited from this. Export-import business started growing rapidly and Adani Exports started gaining momentum. This company had now become a big company. By 1988, Adani started coal trading. He benefited from this also. Let us understand those things which became the foundation of Adani empire.
Foundation of Adani Empire
Liberalization of 1991 had taken place. Indian markets were opened to the world. Now coming to Gujarat, let us tell you that Gujarat has the longest beach in India and at that time Gujarat Chief Minister Keshubhai Patel wanted to develop this beach, so that both business and employment would increase. An American company named Cargill got an opportunity. The idea was to build a jetty in the Kutch area, so that salt could be extracted from the sea. Jetty means a very small sized port where goods are loaded and unloaded from the boat. A jetty was selected for this, till now everything was going well but then this project got stuck incomplete. What actually happened was that the plan did not make any sense to the American company later. Adani was waiting for this opportunity. He had already realized that the American company would not be able to do this work. By now Dhiru Bhai Ambani had converted Jamnagar into a port town, so a success model was in front. Similarly, Adani also wanted to convert this jetty into a profitable port. On his way out, in 2001, Keshubhai Patel gave permission to Adani to build a port in exchange for a jetty. Adani got a lease of 30 years. The port was built and today this port is the largest private port in the country. This is called currency port.
In 2007, the IPO of Mudra Port and Special Economic Zone Limited, a company of Adani Group, came out which was oversubscribed 116 times. Later this company was named Adani Ports and under it, apart from currency, responsibility for many other ports also came. At present, Adani Ports manages a total of 13 ports in India. Which includes Haldia Port of West Bengal, Balingam Port of Kerala, Kattupalli Port of Tamil Nadu. Adani Ports is the biggest identity of the Adani brand, although Adani expanded his business to other sectors as well. In 1999, Adani Group formed Adani Wilmar Limited in partnership with Wilmar International of Singapore. Fortune Oil is a product of Adani Wilmar Limited.
Adani Group's expansion phase
By 2007, Gautam Adani had become the 10th richest person in the country. He had money in his pocket. There was credibility and he had the confidence of investors. These three things are the necessary fuel to make a company big. Adani Power started in 2009, Adani owned land in Mudra. Since his first power plant was set up and he was already the largest coal importer in the country, the work of power generation became easy for him. By the year 2014, Adani Power became India's largest private power producing company. With this, Adani Group got the job of managing many airports in India, such as the airports of Mumbai and Delhi.
Adani Group was also accused many times for controlling the airport. The opposition said that they have collusion with the government. He got additional benefits but this could never be proved by the court. In the later period, Adani Group also invested in green energy. In 2015-16, the Narendra Modi government set a target of producing 175 giga watts of renewable energy other than large hydro projects by 2022. The target of 100 giga watts of solar energy was set by March 2023. If you look at these targets, they were very ambitious for that time, but these targets gave fuel to Adani for his green energy plans. Adani Group also has projects going on in many other countries.
How much debt does Adani Group have?
Adani Group has taken a loan of about Rs 2,41,000 crore till the year 2023-24. These are two types of loans-
1. Long Term Loans
- Loans for which the repayment period is more than 1 year.
- Companies often take such loans to expand their business or start a new project.
92% of the total debt of Adani Group i.e. Rs 2,22,000 crore was taken in the form of long term loan. Adani Group has raised the maximum money from Indian banks. Approximately Rs 75,800 crore, out of which the maximum loan has been received from State Bank of India. Apart from this, Access Bank, ICICI, Punjab National Bank, YES Bank have also sanctioned large loan amounts to Adani Group from time to time. Apart from this, foreign banks have also given about Rs 61 thousand crores to Adani Group in the form of long term loan. Adani Group has also raised a huge amount from the capital market. Bonds are issued to raise money from the capital market. The date of payment of money is written in the bond. The buyer of the bond is given the fixed interest along with the principal. There is a report from CNBC. According to him, Adani Group has raised about Rs 12 thousand crores from the Indian capital market, while it has raised Rs 69 thousand crores from the foreign capital market.
2. Working Capital Loan
- Those people whose payback period is less than 1 year.
- Companies often use this loan for their daily tasks, like paying salaries to employees or paying rent.
- She repays this loan as soon as she earns income.
In the case of Adani Group, 8% of the total loan i.e. about Rs 19 thousand crore is in the form of working capital loan. Working capital loan is also called short term loan. Adani Group has raised about Rs 12,223 crore from Indian banks in the form of working capital loan.
Overall, Adani has taken loan of about 36 percent money from Indian banks. According to a report published by CNBC in August 2024, till now State Bank of India has given a loan of about Rs 27 thousand crores to Adani Group. Apart from this, Access Bank has given a loan of about Rs. 9200 crores, PNB has also given a loan of about Rs. 7 thousand crores so far. The share of Indian banks in the total loan received by Adani so far is continuously increasing. Apart from banks, Adani Group has also taken a loan of Rs 5790 crore from LIC.
Adani Group's profit
Despite all the debts, Adani Group is a matter of confidence for investors. Investors from Abu Dhabi and Japan are ready to bet on Adani Group despite the recent news against Adani in America. What is the profit of Adani Group?
To know the condition of companies, two types of profit are often calculated-
The first method is operating profit, its simple calculation is how much was spent and how much was sold in a year. In the year 2013, the total operating profit of Adani Group companies was about Rs 2.5 thousand crores. In 2022, it will increase to around Rs 14.5 thousand crores and in the last financial year i.e. 2023-24, it will increase to around Rs 83 thousand crores. Operating profit increased 33 times in a decade.
The second method is Net Profit, in which the actual savings are obtained after deducting expenses like tax, loan EMI from the operating profit. It is called net profit i.e. pure profit. In the year 2009, the net profit of Adani Group was around Rs 500 crore, which has crossed Rs 30 thousand crore in 2024, that is, the net profit has increased 60 times in just 15 years. Now what about the shareholders, let us understand the condition of the shares of Adani Group.
Adani Group shares
Let's look at the big companies of Adani Group. Adani Group's parent company Adani Enterprises was listed in the stock market in January 1999, when its share price was Rs 6. The value of its shares on 29 November 2024 is 2409 i.e. an increase of 39718% in 25 years. Another company of Adani Group is Adani Ports, this company got listed in the stock market in 2007. Its share price increased by 531% in just 17 years. The example of the next company is even more interesting, Adani Green Energy Limited, this company was listed in June 2018, it has been only 6 years and its shares have increased by about 3967% in just 6 years. A share of Rs 29 is today Rs 1197, although its price was more than Rs 1800. Recently it fell a bit, when in two reports of Hindon Berg, Adani was accused of manipulation etc. and the case with America is still going on. The company's shares are still relatively strong. What is the reason behind this strength?
Above we discussed that Adani Group has a lot of debt but who is afraid of debt, people like you and me. Debt is not considered a bad thing in capitalism. Loan is actually a tool to expand one's business and does not reduce the confidence of investors. Provided that the company is capable of repaying the loan. How do we know that Adani is capable of repaying the loan? In fact, whenever you apply for a loan. Then first of all the bank collects information about your income and your assets. It is natural that without income the loan cannot be repaid. The same is done with companies also. For this, how much debt does the company have compared to its profit? It is calculated as Debt to Ebitda Ratio. The lower this ratio is, the better for a company. The debt to EBITDA ratio of Adani Group companies has continuously decreased in the last 5 years.
Diplomacy Through Business
After understanding all the accounts of Adani Group, now let us understand what impact the rise or fall of Adani Group can have on India. How do the actions of any industrialist of such a large scale affect the country? If seen from the perspective of diplomacy, two types of diplomacy are used between countries. The one you often see in headlines. When talks take place between two heads of state or at the level of foreign ministers or secretaries. But there is another method of diplomacy, business houses are useful in this. For example, Apple, Coca Cola, McDonald's and General Electric, all these companies are an important part of America's economic diplomacy. What impact do these companies have?
First, trade relations, American companies strengthen trade relations with other countries. Due to which America's political crisis increases. Through these companies, the American lifestyle, business habits and cultural values are spread around the world. Generally it helps in business only.
The second cultural influence is the brands of the company. Like CocaCola, Nike, STARBUCKS, through these America spreads its culture across the world. Similarly, American media companies like Disney, Netflix promote America's cultural standards and values all over the world.
Third, creating dependency, when a country's economy becomes dependent on American companies, it gives America a tool to exert political pressure.
We can understand the value of Adani Group or any other Indian company from the example of America. There are many Indian companies, whether government or private, that invest in other countries, for example, NTPC is India's government power generation company. It is building a 1320 MW power plant in Bangladesh. Power generation is a strategic sector. This increases our influence in other countries. We are talking about Adani Group otherwise this can be said for Tata or Ambani or any big corporate group.
Adani Group has many projects and investments abroad such as coal mines in Australia, Haifa Port of Israel, Adani Ports also has 51 percent stake in Colombo, the capital of Sri Lanka. This port is located at a very strategic location in the Indian Ocean. Apart from this, Adani Group has also made deals for power generation in Nepal, Bhutan, Kenya, Philippines. All these projects are not only a profitable deal for Adani Group, but also help in increasing India's geopolitical influence. Both business and politics are closely related to economics. That is why both are often intertwined and hence sometimes allegations are made. India's opposition parties often say that Gautam Adani has escaped all difficulties due to his proximity to the government and the ruling party, however, the projects of a big company like Adani have the potential to bring employment and progress opportunities in any state.
By Anil Paal
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