InvestorQ : What do you see as the business strategy of the Adani group and do you see any risks to its growth in the coming years?
shrinidhi Rajan made post

What do you see as the business strategy of the Adani group and do you see any risks to its growth in the coming years?

1 year ago

It is one thing to say that the group has created a huge amount of market cap but there has also been a conscious strategy which has appealed to the markets. The Adani group began as a trading venture back in 1988 as a trading venture and has since expanded to various core infrastructure properties, agricultural businesses and control over minerals.

You can say that the Adani group has combined the old-world hard assets focus with an extremely quick, flexible and fleet footed approach to business with a permanent eye on the future. Just to take an example, just to have control over coal supply for power, Adani group has invested $10 billion in a highly risky and controversial coal mining project in Queensland in Australia. But at the same time, it is also hedging its risks by betting big on green power.

The Adani group now controls the keys to some of the biggest infrastructure and trade gateways to India including some of the biggest ports as well as most of the airports in large and even smaller towns. Adani group has made big forays into agricultural business, Agri-infra, gas distribution, defence & aerospace, solar manufacturing etc. In the past, Adani also showed that it could be quick to exit businesses like it did with its retail business.

But it is not roses all the way, and there are major challenges too. Adani group has come a long way since 1988 and now the challenge is to bring its market, sales and profits in sync. For example, the group reported $13 billion revenues but has a market value of $100 billion. In terms of profitability, Adani Ports and SEZ is the only company that makes some real serious profits, while the rest are still struggling to give consistent profits.

The bigger challenge in managing such a diversified business is financial. Adani group businesses stretch all the way down to the coal mines of Australia and Kalimantan in Indonesia. Adani group is already heavily leveraged and debt servicing needs profits to grow really fast to avoid solvency risks. Expansion at this pace needs a continuous flow of resources and that could be the real big challenge for the group in the coming years.