Adani vs Ambani: the battle of Indian tycoons

NEW DELHI: From the pier at Mundra, the largest private port in India, it is possible on a clear day to see the largest oil refinery in the world, 50 kms to the south across the Gulf of Kutch.

In the early 1990s, both sites in Gujarat state were malarial swamps and farmland. Today, they are monuments to India’s economic promise and to the tycoons who built them. Gautam Adani and Mukesh Ambani, both billionaires, have become the best-known faces of Indian business in recent years. To those who support them, they are patriotic nation builders using their influence and resources to further India’s economic progress. To criticise, they only do it for themselves. His motivation seems to be somewhere in the middle, reported international media.

The duo’s growing influence over Indian business is indisputable. Many observers now speak of the “oh economy.” That is an exaggeration, but the combined revenue of the companies controlled by Messrs Adani and Messrs Ambani is equal to 4% of India’s GDP. They are also responsible for 25% of the capital spending of publicly traded non-financial companies at a time when overall investment has been subdued. “We have never backed away from investing in India, we have never slowed down our investments,” Adani said at his group’s annual meeting on July 26. Not to be outdone, Ambani, at his own annual meeting on August 29, pledged to double the size of Reliance, the conglomerate he heads, adding that “patriotism inspires and energises everything we do.”

They play such an important role in India’s economic development because they have succeeded where others in the country have all too often failed, by creating companies that are large and fast growing. Under the management of Ambani Reliance, Founded by his father, Dhirubhai, it has grown from petrochemicals and refining to encompass retail, telecommunications and renewable energy.

Adani’s operation is more speculative and generates modest cash flows, but has progressed in a decade from a small office in Mumbai to an empire of ports, airports and energy companies, distributed in seven public companies and several private companies. The two men’s publicly traded companies are worth a combined $452 billion, up from a collective valuation of $112 billion four years ago.

Both have amassed considerable wealth along the way. In the past four years, their personal fortunes have quadrupled, according to Hurun India, a research firm, from $65 billion to a combined $237 billion. Adani is now considered to be the third richest man in the world behind Elon Musk and Jeff Bezos.

However, there are strong arguments that they are not simply favoured industrialists collecting rents. Your desire to invest seems to have little regard for profit. Reliance has not generated a return on equity greater than 10% in a decade. Only two of Adani’s listed companies are doing better and both are joint ventures with foreign companies: Adani Wilmar, a food processor co-owned with a Singapore company (returning 15%), and a natural gas distribution business jointly with Total, a French energy giant (which yields 19%).

Adani started trading diamonds in the 1980s. Metals and grains followed until he won the government concession to develop the port of Mundra, which started in 1998 and now has a rail link and cargo airport, as well as facilities that allow the shipment of oil, natural gas, aviation fuel, dry cargo and containers. In terms of traffic, the port ranks 26th worldwide.

Adani intends to make it the world’s largest by 2030. It has also acquired a dozen other smaller ports and now controls 24% of the country’s capacity, as well as 43% of container traffic and 50% of cargo port revenue. Such expansion fits perfectly with the government’s goals of India becoming an export powerhouse.

Other businesses often dovetail with existing operations. Entities controlled by Adani import more than a third of the country’s coal and transmit 22% of its electricity, much of it generated from coal, but a growing amount from a network of solar farms. Its expanding storage operations contain 30% of the country’s grain. Seven airports, acquired in 2019, handle a quarter of India’s passenger traffic and a third of air cargo. A vast empty field in an area known as Navi Mumbai is destined, within two years, to be the location of the city’s second airport. Both Adani and Ambani have announced plans to spend more than $70 billion on energy projects including batteries, hydrogen and solar power. To unite his sprawling empire, Adani in August became a surprise bidder in the government auction of 5GRAM bandwidth, a possible prelude to competing with Reliance in telecommunications. Among Adani’s industrial projects in Mundra is a refinery that will bring Ambani’s operations close to some competition.

That kind of competition “could lead to some unwise financial decisions on both sides,” CreditSights, a research firm, warned, hoping one of the men would listen. Adani, 60, has become a prominent presence in the Indian business firmament; Ambani has retired.

Many suspect that Ambani, five years older than Adani, is unwell (a rumor the company has denied). Perhaps sensing the questions this raised, Ambani noted that he had attended all 45 of Reliance’s annual meetings, the first held when the company occupied a room with two tables and a shared phone. But the role Ambani’s three sons played on the occasion has been widely interpreted as developing a succession plan.