India Finance Adani Ports
India’s Oligarchs Are Face-to-Face as Adani Group Spreads its Wings
Competition heated up between India’s two richest men as the Adani Group announced its foray into telecommunications, a sector dominated by Mukesh Ambani’s Reliance Industries Group. Until recently, the two did not encroach on each other’s turf. But that’s no longer the case. The claws of the oligarchs are out.
On 9 July 2022, the Adani Group issued a statement confirming the latest expansion of its operations, this time into the telecommunications sector. The statement sought to downplay the decision somewhat, saying the group would not seek to enter the consumer telecom business – that is, providing mobile and broadband connections to the public a large – but would limit itself to providing telecom services to businesses and to the group’s own facilities.
Analysts and media are, however, buying into none of these claims. A day earlier, news broke that a company in the Gautam Adani-led conglomerate would now be competing directly with Reliance Industries, led by Mukesh Ambani, in an impending government auction to gain access to a key resource – 5G or fifth-generation electromagnetic spectrum. Should the Adani Group win a bid to obtain telecom spectrum at the auction, it is believed that it would not be constrained by its own statement.
This represents the latest round in a squaring-off between the corporate conglomerates headed by India’s two richest men – Mukesh Ambani and Gautam Adani – as their business interests have increasingly come into competition. (In recent days, it has been reported that Mr Adani has overtaken Bill Gates as the world’s fourth richest person.)
For several years, it was believed that the two corporate groups would not come face to face in this manner, as their key business interests were in separate sectors. The Reliance Group was focused on petrochemicals, oil refining, telecommunications, retail and media; whereas the Adani Group was focused on ports, logistics, power generation, power transmission and ‘green’ energy.
Truce or Détente?
Against this backdrop, a corporate lobbyist has related to this writer a first-person account of an interesting encounter that took place in 1993. Very few had heard of Gautam Adani those days. He was then just a trader of rough diamonds and imported recyclable plastic waste. The biggest Indian player in plastic products then (and even now) was the Reliance Industries Group founded by Dhirubhai Ambani (who died in July 2002 at the age of 69).
Two ships carrying imported plastic waste for Adani had been impounded at two seaports over a dispute over payment of customs duties. One port was Porbandar in Gujarat in western India and the other was Machhlipatnam in Andhra Pradesh in southern India. The Commerce Minister of India at that time was Pranab Mukherjee (who went on to become the country’s President). Mukherjee, who died in August 2020 at the age of 84, was known to be close to the Ambani family, a fact he openly acknowledged.
Gautam Adani, who presumed that the impounding of the ships had something to do with his ‘encroaching on the turf of the Ambanis’, sought an appointment with Dhirubhai’s trusted executives in Delhi and then went to Mumbai to meet the patriarch of the Reliance Industries Group. The lobbyist, who was personally present at the meeting and spoke on condition of anonymity, told this writer: ‘Mr Adani was most apologetic about having entered into an area of business that was dominated by the Reliance Group. He said that this would never happen again.’
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Dhirubhai died without leaving a will. His two sons Mukesh and Anil fought a bitter and well-publicised war of succession that lasted several years. The undivided business empire that Dhirubhai established was eventually carved up and the two brothers worked out an uneasy truce at the behest of their mother. Older brother Mukesh went on to forge ahead as head of the Reliance Industries Group while the group, led by the younger sibling, Anil, languished.
Any truce or detente between the corporate groups led by Mukesh Ambani and Gautam Adani now appears to be well and truly over.
Apart from the Adani Group’s latest foray into telecom, in which Reliance’s Jio brand is the market leader, the former has recently made a number of announcements and investments that position it as a competitor in sectors in which Reliance dominates. These sectors include petrochemicals (in which the Reliance Group controls over 90 per cent of the market) and, notably, the media.
In addition, both groups have been making nimble moves in new sectors that are opening up in India such as data storage, manufacturing of defence equipment such as drones, and different parts of the renewable energy sector including hydrogen-based and solar-power generation, manufacture of solar panels and batteries, and setting up charging stations for electric vehicles, where they are competing to capture new markets.
The Reliance Group is an established player in the petrochemicals business. It owns the world’s largest crude-oil refining complex at Jamnagar in Gujarat. Reliance is also a leading manufacturer of polymers, polyester and man-made fibres. Dhirubhai Ambani was known as the ‘Polyester Prince’, which is also the title of his biography by Australian journalist Hamish McDonald.
Starting in 2019, the Adani Group has made various attempts to breach this Reliance fortress.
The Adani Group signed a memorandum of understanding (MoU) with BASF (Badische Anilin und Soda Fabrik), Borealis, and the Abu Dhabi National Oil Company (ADNOC) to study the possibility of establishing a chemical complex at Adani’s Special Economic Zone in Mundra, Gujarat. BASF, a German multinational, is the world’s largest chemical company, while Borealis, an Austrian company, is the world’s eighth largest producer of polyethylene and polypropylene, chemicals that are used in the fertiliser industry. The plant at Mundra would produce polypropylene and related chemicals.
In July 2021, Adani Petrochemicals Ltd was incorporated as a wholly-owned subsidiary of Adani Enterprises Ltd. The company told the market regulator that it intends ‘to carry on the business of setting up refineries, petrochemicals complexes, speciality chemicals units, hydrogen and related chemicals plants and other such similar units.’ In its 2021-22 annual report, Adani Enterprises said that ‘it is exploring opportunities to develop a petrochemical cluster at Mundra.’
In the meantime, Reliance also joined a chemical-manufacturing business plan with one of the same companies that the Adani Group has partnered with. In May 2022, Reliance Industries Limited signed a US$2-billion partnership deal with ADNOC to set up a production facility for EDC (ethylene di-chloride) and PVC (poly-vinyl chloride) in Ruwais in Abu Dhabi. EDC is a precursor to an intermediate product used in the manufacture of PVC, a commonly used plastic used in all sorts of applications, including pipes, doors, windows and floors.
Consider also the case of the media. Like telecom, the Reliance Group has been a major player in the media industry in India after it acquired control over Network18 in 2014. The Adani Group has announced its intention to compete in the media with Reliance on all fronts. It set up AMG Media Networks in April 2022 as a wholly-owned subsidiary of Adani Enterprises Limited, and appointed Sanjay Pugalia, a veteran Indian television journalist as its CEO and editor-in-chief. In March, the Adani Group bought a minority stake in Quintillion Business Media Private Limited, the company that partners with international media company Bloomberg to run Bloomberg Quint, an Indian business news website.
Adani’s intentions in the media, however, appear to go beyond a single news website. Filings to the stock market say that AMG Media Network intends to be get into publishing, broadcasting, distributing and advertising – all segments of the media in which the Reliance Group has a dominant position.
Competition in New Sectors
There are also instances of relatively new sectors in India where both the Adani and the Reliance groups are seeking to compete with each other.
A very visible sector is ‘green’ energy. Here Adani is the bigger player, but the two groups are adopting different strategies. The Adani Group’s green energy arm, Adani Green Energy Limited, already generates 5.8 gigawatts of electricity per annum, and has a portfolio of 20.4 gigawatts under construction. It is currently one of the world’s largest, if not the largest, producer of renewable energy and has set for itself a target of installing 45 gigawatts capacity by 2045.
The Adani Group has also entered into a partnership with France’s Total Energies to invest US$50 billion in ten years to produce green hydrogen, a fuel that is intended to replace oil. A regulatory filing says that Adani and Total will ‘create the world’s largest green hydrogen ecosystem (sic).’ (The word ‘ecosystem’ is gradually being perverted to apply to enterprises that are actually damaging to ecosystems- Ed.)
The Reliance Group, meanwhile, is setting even more ambitious targets for itself. In June 2021, group chairman Mukesh Ambani announced a goal of being ‘net carbon zero by 2035’. He announced the setting up of four very large factories in Jamnagar off the coast of Gujarat – one each for solar panels, batteries, and green hydrogen and fuel cells.
Both groups are also establishing charging stations for electric vehicles. Reliance set up its first one in Mumbai in October 2021, while Adani set up its first in Ahmedabad in March 2022.
Both groups are setting up data centres across India. The Reliance group owns and operates three data centres already, while the Adani Group is still constructing its first one.
Finally, both groups are getting into the manufacture of drones – or UAVs (unmanned aerial vehicles). Here, the Adani Group is the first mover. It is India’s first private-sector UAV manufacturer and exporter. Adani Defence and Aerospace is India’s first company to implement counter-drone systems for airports.
The Adani Group entered the defence business on 25 March 2015 by incorporating Adani Defence Systems and Technologies Limited. Adani Aerospace and Defence Limited was incorporated on 17 July 2015. In November 2016, the company formed a Joint Venture (JV) with Israeli company Elbit Systems (Adani-Elbit Advanced Systems India Ltd) and entered UAV manufacturing. In November 2017, it formed another JV with Sweden’s SAAB for making UAVs and military helicopters.
A few months earlier, in July 2017, India’s Prime Minister Narendra Modi became the first head of the government of the country to visit Israel. Gautam Adani was in the Prime Minister’s entourage and the two are perceived to be close to each other, not only because they are from the same state (Gujarat) but also because Modi campaigned all over India in the run-up to the 2014 general elections in an Adani aircraft.
On 14 December 2018, the Adani Elbit Unmanned Aerial Vehicles Complex was inaugurated. In the same month, the company acquired for a sum of Rs 400 crore (or around US $50 million dollars) a 25% stake in the Bengaluru-based Alpha Design Technologies, a company with a proven track record in manufacturing aerostructures for helicopters and fighter aircraft, and which is also in defence electronics. Alpha Design reportedly makes one-third of the structure of the Sukhoi-30 fighter jets being made at Hindustan Aeronautics Limited (the Indian government-owned manufacturer of defence aircraft). Alpha Design also manufactures one of three main surface structures of the indigenous light combat aircraft Tejas.
In Feb 2020, Adani-Elbit JV exported the first Indian-made complete military drones in a fly-away condition. The company said that it had launched the production of hundreds of mini-UAVs for a global customer.
In comparison, Reliance has entered the UAV business rather late. In December 2019, it bought a majority stake in Bangalore-based Asteria Aerospace.
As of now, Asteria has a production capacity of 100 drones per month which are used for both defence and civilian purposes. Reliance has started using these drones for surveillance of its oil and gas pipelines and Jio telecom towers, replacing manual and helicopter surveillance.
Competing to be India’s richest man
The competition between the two corporate groups also extends to their chairmen – Mukesh Ambani and Gautam Adani Over the past two years, the title of India’s richest man has repeatedly and frequently interchanged between the two – usually as a result of rallies or falls in the share prices of Adani Group companies.
Mukesh Ambani is a second-generation billionaire – running a portion of the business empire that his father Dhirubhai created, and has been reported to have set in motion a succession plan to hand over his empire to his children.
Gautam Adani, on the other hand, is a first-generation billionaire, and the corporate conglomerate he heads is currently in a phase of extremely rapid expansion.
Both businessmen are politically well connected and are reported to be close to India’s Prime Minister Modi. The competition between them, however, promises to have seismic consequences for India, both politically and economically.
The writer is a Delhi-based analyst of India’s corporate sector.
