Indian businessman Gautam Adani has seen a rapid surge in his wealth that has propelled him to the ranks of the world's top few richest people. Diversification and Mr Adani's focus on sectors that are central to the Indian government's economic growth ambitions put him in a strong position to see a continued rise in his fortunes, analysts say.
“[Mr] Adani has made many smart moves to expand in many critical sectors and has been a beneficiary of government contracts in many industries where the government wants India to become self-reliant,” said Sonam Srivastava, founder at Wright Research, an investment advisory based in Mumbai.
Mr Adani, 60, chairman of conglomerate Adani Group, is worth $143 billion, making him the third-richest person in the world, according to the Bloomberg Billionaires Index, beaten only by Elon Musk ($262bn) and Jeff Bezos ($157bn). This represents a remarkable increase in the industrialist's wealth compared with only two years ago, when his fortune stood at $8.9bn. It comes during a period of enormous volatility, which eroded the wealth of many.
A first-generation entrepreneur from Ahmedabad in the western Indian state of Gujarat, Mr Adani started his group in 1988 as a commodity trading business. He then expanded into energy, utilities and infrastructure, with a focus on coal and ports.
In recent years, he has continued to expand these businesses, and moved into sectors including airports, media, health care and digital services. These come with risks, analysts while also presenting major growth opportunities.
“He has great diversification in all these businesses,” said Manish P Hingar, founder of financial advisory platform Fintoo. “Wherever there is a futuristic business in India, I think he has a stronghold. He's in the right place at the right time, which, we think, will help him in future growth of his businesses.”
Mr Adani has benefited from the government's heavy focus on infrastructure development over the past few years. His strong relationship with the government, along with a focus on capital intensive businesses where there is less competition, had helped the conglomerate to prosper, Mr Hingar says.
“The big driving factor is the company’s organic growth and inorganic growth, which came from rapid acquisition in various sectors,” he added.
As part of its acquisition strategy, Adani group earlier this year announced a deal to acquire a controlling stake in Ambuja Cements and its local subsidiaries from Swiss company Holcim.
Fintoo's analysis shows that since March 2020, the stock prices of the seven Adani group companies have rallied between 250 per cent and 4100 per cent. Meanwhile, the combined market cap of the group's companies has risen to $254bn from $16.4bn in March 2020.
This has, however, led some analysts to raise questions about valuations of some of the companies.
A rise in oil and gas prices globally has also played a role in boosting Mr Adani's wealth.
But the group's energy business is becoming increasingly focused on green energy. Last November, Mr Adani outlined plans to invest $70bn with the ambition of becoming the world's largest renewable energy producer and to generate the cheapest hydrogen on the planet.
“One of the biggest triggers for the success of Adani group is their ability to enter into potential sectors at the right time,” said Raghvendra Nath, managing director at Mumbai's Ladderup Wealth Management.
He added that one of the main factors that has driven Mr Adani’s surge in wealth and should ensure future growth was "the company incubating and investing in many new businesses like end-to-end manufacturing of green hydrogen, data centres, roads, airports, petrochemicals, water, copper, aluminium, defence manufacturing”.
A strong outlook for the group was “facilitated by emergence of the strong value chain across the businesses and capturing the immense opportunity in the green hydrogen space”, Mr Nath says.
Prime Minister Narendra Modi's government is increasingly focusing on cleaner forms of energy, as it targets net-zero carbon emissions by 2070. This year, Mr Modi launched the country's national hydrogen mission, aimed at turning India into a green hydrogen hub. The government is aiming to produce five million tonnes of green hydrogen by 2030.
“All [of Mr Adani's] businesses will harness maximum advantage from India’s economic transition,” Mr Nath said.
“From the near to medium term, I believe, due to their resource accessibility and execution with cost efficiency, the company will be able to achieve milestones in all its initiatives.”
However, analysts say there are major risks for the group.
Debt research firm CreditSights, part of Fitch Group, last month released a report which described the conglomerate as “deeply overleveraged”, warning that there was the potential to spiral “into a massive debt trap”.
It cited high interest rates and a long gestation period for some of the group's infrastructure projects as negative factors.
But last week, following a conversation with the group's management, CreditSights said it had made calculation errors in the report for some of the companies.
Mr Adani's “management views that the group's leverage is at manageable levels, and that its expansion plans have not been mainly debt funded”, CreditSights said last week.
While CreditSights retracted some of the figures for the group as a whole, Reuters reported that the research company told the newswire in an email last week that “we still stand by our original financial calculations and credit ratios, which leads us to remain concerned over the Adani Group's leverage”.
Moves into sectors such as the media, with Adani group recently launching a hostile takeover bid of the Indian news organisation NDTV, and bidding in the 5G spectrum auction, could be major risks for him, experts warn.
“Too much diversification is a challenge in executing the strategies,” Mr Hingar said.
He also raised concerns about debt.
“Acquisitions and expansions, which are mostly debt funded, have become a cause for concern,” he said. “If anything happens on the wrong side for Adani, maybe due to debt trap or something like that, definitely it will impact India.”
But overall, given India's economic growth trends, the group looked to be generally in good stead, Mr Hingar adds.
“Wherever the government is focusing on a bigger way, [Mr Adani] has a good hold into that," he said. "So if the India growth story is robust and positive for the long term, we see a good and decent rally in his wealth and share prices in the coming years.”
In turn, Mr Adani is playing a significant role in the country's economic growth.
He talks about “nation building” being a pivotal part of the group's strategy.
“This philosophy makes them well positioned to take advantage of the India opportunity and move towards a monopolistic approach,” says Ms Srivastava.
As the conglomerate expands in areas including 5G and media, this is increasingly seeing Mr Adani going to head-to-head with sprawling conglomerate Reliance Industries' Mukesh Ambani, who, for years, was India's richest man.
Ultimately, though, the outlook for Mr Adani's group largely hinges on the broader economic environment,” Wright Research’s Ms Srivastava says.
“If the economy stays strong, the group companies involved in infrastructure development, power, green energy will flourish and the same for the consumption sector,” she said.
“In the scenario of high global volatility, the stocks with high valuation and vast amounts of debt will be a concern, though.”
Leadership coach and wealth manager Prateek Toshniwal is optimistic about Mr Adani, attributing the industrialist's success to business acumen, determination and hard work.
It was his “sheer brilliance to understand and foresee the potential growth of future sectors and with right mix of debt and equity structuring, Adani has captured the market in no time”, he says.
Mr "Adani may soon become the world's richest man within a blink of an eye”.