Financial Daily
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Wednesday, October 17, 2001



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Adani group races full steam ahead, casts a wider net

Vinod Mathew


IT has been one long roller-coaster ride for the 38-year-old Gautam Adani, Chairman of the Adani Group, ever since he came on the trading horizon in 1994-95 with a business that barely breached the Rs 10 crore mark. The last seven years has seen the flag ship company, Adani Exports Ltd (AEL), leapfrog into the big league with turnover touching Rs 3,065 crore, and the Adani house integrate both backward and forward as also establish itself as a major presence on the Indian maritime sector.

The AEL subsidiary, Adani Port Ltd (APL), has since been spun off into a separate entity, the last year's turnover being pegged at about Rs 125 crore. True to form, Mr Adani is hungry for more of the same and he has signed up with the Orissa Government t o set up a greenfield port at Gopalpur where the first phase investment mark-up is at Rs 220 crore. The next stop is Dahej where the Petronet LNG is planning a gas terminal.

Under financial closure is the Rs 95-crore capacity doubling of the Adani-Wilmar edible oil refinery at Mundra from 600 tpd to 1200 tpd. Simultaneously, land acquisition is on at Kakinada in Andhra Pradesh for another 600-1,000 tpd edible oil refinery.

However, Mr Adani is much more circumspect now as he talks of there being enough room for three SEZs along the Gulf of Kutch as he mounts his strategy for the Mundra SEZ with the USP of lesser lead time. Yet one cannot take away the gambler in him as he casts his net wide on a clutch of future projects -- retailing, gas distribution and call centres.

Mr Adani thinks astute shuffling of the commodity basket is crucial. Thus, rice will be the new favourite in the export desk for the coming season, piggyriding on government subsidies that were announced a few months back.

Another day may bring another commodity and ultimately, all these are but means to an end. As Mr Adani puts it, the aim of this `golden super star trading house' is to be as close as possible to its role model, the Marubeni Corporation. In an interview, Mr Adani explained how the trading house proposed to do this. Excerpts:

The threat of war looms large for all, especially for the international trade and merchandising. Are you planning any reshuffle of your commodity basket to weather this storm?

Adani Exports has de-risked its business model by trading in a diversified basket of commodities and with varied international destinations/ sources. Thus we have bulk, non-basmati rice emerging as a favourite in the coming days as the Government of Indi a has ushered in subsidy as it did in wheat some time back. And we are likely to focus on buyers in Africa.

In the context of the prevailing war scenario, we expect the insurance premium to go up, but it would be factored in the prices. Edible oil imports have been registering impressive growth, a trend we expect to continue. We also trade extensively in coal, a sure bet in power starved country like India. In a worst case scenario, despite maintaining top line growth as in the past, our bottom line may remain same as last year.

The Adani-Wilmar seems to be on a major expansion spree. On the anvil is a refinery at Kakinada and also doubling of capacity at Mundra. Where do you go from here and how close are you to seed crushing?

The 600 tpd Adani-Wilmar edible oil refinery at Mundra has completed a forward integration exercise with the launch of the branded oil -- Fortune. Now, we are looking for a favourable decision from the government before venturing into importing seeds for crushing which right now is not economically viable vis-a-vis import of crude for refining. We need a policy framework where there is at least a difference of 30 per cent in favour seed imports before oil seed crushing takes off in a major way.

Meanwhile, we are actively considering Kakinada as our next manufacturing base for edible oil to cater both to the southern and eastern markets in the country. At the same time, we are also looking at the palm growing regions of Malaysia and Indonesia. L and acquisition is currently on at Kakinada which would start as soon as we finish our Rs 95-crore Mundra capacity doubling project which has a gestation period of nine months and will get going a month from now.

The Adani Port Ltd has ventured out of its backyard in Mundra to Gopalpur in Orissa. What is your strategy for the eastern coast and how much of a setback is Tata Steel's decision to pull out of Gopalpur?

The Gopalpur port is a component of our long-term strategic plan to develop a port in the eastern coast of India. It is our call that eastern India will see explosive economic growth in the years to come, initially by leveraging its rich mineral deposits and later on, by moving up the value chain. We want to gain early-mover advantage.

True, Goplapur is sandwiched between Vizag and Paradip but as we have demonstrated in Mundra, we can compete with any port in terms of operating efficiency and value to customers. As regards Tata Steel's decision not to proceed with the steel plant, we k new it even as we decided to proceed with Gopalpur. Right now, the project blue print is getting readied by A F Ferguson and we are looking at a first phase investment of Rs 250 crore at Gopalpur.

APL has been shortlisted for the solid cargo port at Dahej. Are you looking for more port terminals either on the east or west coast?

Our interest in Dahej is strategic as it gives us competitive access to the hinterland of south Gujarat - the industrial hub of the state. We are keen to develop another port on the western coast as Mundra and Dahej together will be able to attract large volumes of cargo. As an infrastructure developer it makes sense for us to keep our eyes open and we are willing to look beyond Dahej at other ports on the west coast.

How crucial is the Special Economic Zone (SEZ) status to Mundra?

The SEZ tag for Mundra will boost trade in the earthquake ravaged Kutch. The SEZ concept has already worked successfully at Jebel Ali in UAE and Shenzen in China. The government of Gujarat is in the process of forwarding to the Centre our request for SEZ at Mundra. Our country's economic well being hinges on infrastructure development, liberalised international trade and the services sector - all part of the SEZ mix. At Mundra, we definitely have an edge as there would be no gestation period for putting up a port that is so vital for any SEZ.

Have you put up enough berths at Mundra to make the label of `alternative port to Kandla' stick? With P&O blowing hot and cold at Kandla have you gained the vital early bird advantage with Adani Containers Terminal Ltd (ACTL)?

We never were, nor are, an alternative destination to Kandla but to be the preferred port of call on the Indian west coast. We do not consider ourselves a port but a complete logistics solution provider.Our investments in ports are geared towards reducin g turnaround time for ships, larger cargo parcel size and guaranteeing higher cargo throughputs. We are also quite selective about cargo unlike many of the older ports.

We were aware of P&O Port's proposed investment in Kandla prior to signing up Polygon Consultants of Malaysia as our operations consultant for ACTL. We are looking way into the future when even the 12,000 TEU vessels which are the next generation Panamax es, would have no difficulty in using the box terminal, given the 18 metre draft at Mundra. Our $ 43 million container terminal will be up and running by July 2002.

Are you still going ahead with 500 MW power plant at Mundra where BSES is also in the fray?

Yes, we are quite serious about power and Hyundai Corporation, which has vast experience in developing mega power projects the world over, will be our partner. The fact that it will be based on coal which can be imported through the Mundra port adds to t he project's synergy.

How critical is your plan for a retail network in the group's value chain? Are you not getting into too many diverse things with call centres and gas distribution?Three years ago we identified infrastructure development, trading and niche technologies as future growth areas. Unlike many of our peers, we decided to get into brick and mortar presence in retailing before moving into e-tailing. We have acquired the Ravji Supermarket network which is ready to open its fourth outlet in Ahmedabad. The plan is to consolidate in Gujarat before pushing into northern hinterland of Rajasthan, Delhi and Punjab.

I-Call, the call centre is part our niche technology frontier while in gas distribution, we are awaiting government to freeze on its policies. We are planning a natural gas distribution network between Vadodara and Mehsana, where Ahmedabad would also fig ure.

Pic.: Mr Gautam Adani, Chairman, Adani group.

Related links:
Adani - A Samaritan in rural Kutch
Adani Exports net at Rs 118.30 cr

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