Port au Prince! Adani anchors Rs 30kcr empire

SMOOTH SAILING

Gautam Adani has seen his ventures prosper at a brisk rate over 3 decades

ENTREPRENEURS Gautam Adani and the late Dhirubhai Ambani have more in common than just home state Gujarat — the former shares with the Reliance patriarch the art of correctly reading India's political tea leaves.
    It is common knowledge that bureaucrats and politicians have to be kept in good humour if entrepreneurs have to achieve what they aim for, even when what they do is perfectly legal. But only a few succeed at this, the trick lying in how one approaches the powerful. Even seasoned businessmen such as Lakshmi Mittal and Ratan Tata indulge in the occasional outburst against the bureaucracy for inordinate delays. But not Gautam Adani, despite facing similar hurdles.
    The 48-year old may appear soft, but plays hardball. If all goes as planned, by 2020, the matriculate's ventures would produce 20,000 MW of power, handle 200 million tonnes of cargo at his port in Mundra and mine 200 million tonnes of coal and other ores.
    Adani, who started dealing in diamonds in Mumbai in 1980 has come to be worth more than Rs 30,000 crore in three decades. He did not make his money from the fancy 21st century businesses such as software or telecom, like NR Narayana Murthy of Infosys or Sunil Mittal at Bharti Airtel.
    Instead, the burly Adani ventured into what merchants during the Chola empire a thousand years ago and the British East India Company did: Build ports to facilitate trade. It did not require great technical knowledge, or massive funds. All that was needed was skills to persuade the bureaucracy to allot land and guide policies.
    "If you look at the group, there is nothing innovative," says Sanjay Gupta, former chief executive, infrastructure, at the Adani group, who brought some method to the madness of making money at Adani Enterprises, the group holding company.
    The company, founded with a capital of Rs 5 lakh in 1988 to trade, manages ports, develops real estate, produces electricity, trades in agricultural commodities and explores oil. In a matter of months, it would have raised Rs 5,500 crore, including the current share sale to funds. Adani's new ventures a leap in the dark
ADANIturned to the raw material of the main business, a method similar to that adopted by Dhirubhai Ambani. With Ambani, it was going back to oil from textiles, and for Adani it was to build ports to ship the commodities he traded in.
    "Since we were in import and export, we realised that there are congestion in ports," says Gautam Adani in an interview in his third floor office in Ahmedabad. "The BJP government came out with a white paper on ports, formulated the port policy and in 1998, they allowed us and we started construction."
    The execution was not that simple. The Adanis, who formed a joint venture with global trading company Cargill for salt exports, were left high and dry when management control issues led to the trading giant quitting the venture.
    It was out of necessity to find use for the land he owned which drove him to think of a port. But he had no idea where he would go for more land or who would build the port. The Adanis had no knowledge of building ports, and there were no construction companies specialising in it at that time.
    "I had no experience even in building a house then," says Adani who first visited the port in Kandla on an excursion as a fourth class student.
    He sought 5,000 acres for the port which sounded scandalous to bureaucrats in the Gujarat government who knew that the biggest port in the state, Kandla, was on 500 acres. This was key for all his future plans. But convincing the bureaucracy was a Herculean task and he almost gave up the idea, before something struck him. He bundled a bunch of officers and flew them over the barren land in Mundra and told them, "You lose nothing by giving this land to me. Only gains." And the rest, as they say, is history.
    "Gautambhai is able to understand the government and can see what lies ahead," says Gupta. "He has a remarkable ability to deal with government."
    Mundra is now an Adani province. Nearly 7,000 hectacres of a special economic zone, three terminals to handle cargo and two power units of 330 MW each. What was once arid land is now a port from which Maruti Suzuki exports thousands of cars.
    "The villagers here had nothing much to do," said Niranjan Engineer, a senior group executive posted in Mundra. "But now these drivers, who have been trained by expert drivers from Jawaharlal Nehru Port Trust, earn about Rs 8,000 to 9,000 a month." Mundra now boasts of a railway station, automated teller machines of major banks, a small mall and even an airport which is mainly used by the Adanis.
    The businesses of the group were not planned with excel sheet analysis and power point presentations. It was mostly a leap in the dark, egged on by entrepreneurial passion. The construction of ports and power plants is on in full swing well before the scores of government departments clear the proposals which professionals may hesitate to do. Getting all the clearances before construction would be like waiting for Godot.
    "There are many bottlenecks," says Adani. "So the promoter should stick his neck out... for professionals, it is difficult....so here the promoter has to take the call, whether to move ahead. Let risk remain and in due course we will mitigate it."
    He is pushing ahead with the construction of the 1,980 MW power plant in Maharashtra which has run into environmental trouble with regard to coal mining. "The governments have constraints, but we feel they are positive about infrastructure," he says, with one eye on a muted business television channel. "We feel the government will find some amicable solution and we should move ahead. The lenders might stop disbursing funds... it may have a cascading effect... which is not in the interest of the nation and the project."
    He has tasted success so far with this approach when it came to the ports. There are some issues that are yet to be settled with the state government. "We only look at our side of the story. But, on the other side, the government has to see what are the larger benefits to the people. Promoters feel the government is not taking decisions fast...but every time, the delay is not intentional."
    Compare this to what Dhirubhai had said about a quarter of a century ago. "The most important external environment is the government of India," he had said in the early 1980s. "You have to sell your ideas to the government... And for that I'd meet anybody in the government. I'm willing to salaam anyone. One thing you won't find in me is ego." Small wonder that today's investors see a sort of Dhirubhai in Gautam Adani.
    UK-based private equity fund 3i was the first among international investors to place bets on Adani, when most dismissed him as yet another small time trader with sky-high ambitions that may never take off. "He is not one who would haggle for small things, and does not get bogged down by hurdles," says Anil Ahuja, head, Asia Business at 3i Group Plc. "He is bold and his pace is measured. He has clarity of vision which is necessary when one moves from point A to point B." 3i invested $50 million in the port project and $227 million in Adani Power.
    Adani's bed of roses has not been without thorns. There were failed businesses, agonising moments and financial distress. Like many, Adani was also bitten by the business process outsourcing (BPO) and retail bugs. But he did not realise that handling customers in these areas is not like handling bureaucrats.
    The BPO unit was sold after two years and the retail unit merged with Reliance Retail, which after many years is yet to earn profits. "Sometimes you enter without a proper strategy," Adani says. "I admit that we entered retail and IT without a long-term strategy. If I am not giving enough time, no business will grow the way I want it to grow. So it is always necessary to quit in time."
    There were many occasions where the group was on edge when it came to finances. It sold a terminal in the Mundra Port for $195 million in 2003 to Peninsular & Occidental, now owned by Dubai Ports, to tide over a financial crisis. Another slippery slope was when the stock markets collapsed in 2008 following the credit crisis. All his electricity generation plans were about to get short circuited, if the market did not recover. When the stock markets showed signs of recovery, he was the first off the block to float an initial public offering. He did not wait or wrangle with investment bankers for valuations, aware that a bird in the hand is worth two in the bush.
    Both Adani and investors have benefited, at least for now. But for all his entrepreneurial acumen, he lags in long-term planning of managerial structure for the group. For outsiders, it looks like a one-man show, with very little professional management.
    "I really appreciate the way the group has grown and admire its risk-taking abilities, but most of the eggs are in one basket," says a chief executive of a city-based company, who did not want to be identified. "After all, governments change. At the moment, one man is doing all the thinking. If he were to take a break, the system would collapse."
    3i's Ahuja is the only professionally qualified manager on the board of Adani Enterprises, and there are a few professional accountants. The Mundra Port board has three former Indian Administrative Service officers, reflecting Adani's priorities.
    MBA graduates are not lining up to join the group, despite it being headquartered in a city which is home to the country's best management institute. Budding managers would naturally prefer to trade in derivatives from the swanky offices of Morgan Stanley and Goldman Sachs rather than sweat it out in the heat and dust of a port, amid dirty coal.
    But Adani does not miss them. Arts and science graduates perform a good job, at less than half the price, at least to begin with, and they are responsible for what the group is today. To prove his theory, he recalls a commerce graduate who rings in crores of rupees as a commodities trader. "I don't regret not having had a formal education," says Adani. "Our HR people threw a candidate out because he was not proficient with computers. He returned in three months for a salary of Rs 8,000 and seven years later, he is earning Rs 70-80 lakh a year. Today, he is the best trader in Adani Wilmer."
    There is no clear-cut succession plan. But it is also a family business. There are relatives roaming around the modest office in Ahmedabad with gun-wielding body guards and at power plant sites, which resemble a mini China, with signs in Mandarin.
    Rajesh Adani, the younger brother of Gautam Adani who was briefly in police custody for an alleged Customs violation, manages the day-to-day affairs as managing director at Adani Enterprises. He may succeed his brother. Karan Adani, the eldest of Gautam Adani's two sons, with an MBA from Purdue University in the US, is being trained at the Mundra Port for a bigger role.
    Ask him about his succession plan and Gautam Adani switches to philosophy. He says he does not get disturbed by events, even one like the infamous terrorist attack on Mumbai's Taj Palace, where he was locked up. Neither was he afraid when he was kidnapped by underworld don Anees Ibrahim in 1999. "I was playing cards with those fellows who kidnapped me. Whatever has to happen will happen and nothing can be done about it."

A LOT VENTURED, EVEN MORE GAINED: Gautam Adani

Gautam Adani