India’s billionaire race sees tycoon walk away
Ambani, who turned 65 last month, was the toast of the global M&A market with his $27 billion fundraising amid the Covid-19 disruption in 2020 – first from Facebook ( now known as Meta Platforms Inc.) and Alphabet Inc. for its digital business, then Silver Lake Partners, KKR & Co. Inc. and others for its retail chain. That zeal now appears to have transferred to Adani, who will celebrate his 60th birthday next month as India’s new cement king, after taking over operations from Holcim Ltd. in the country for 10.5 billion dollars.
In the past year alone, Adani has spent $17 billion on 32 acquisitions, according to Bloomberg News, and shows no signs of slowing down, even though the combined net debt of its listed companies is nearly $20 billion. dollars, more than four times a year. earnings before interest, taxes, depreciation and amortization (Ebitda). This is a heavy debt burden to support a global cycle of interest rate tightening.
Compare that with Ambani’s flagship Reliance Industries Ltd. At around $13 billion, its projected annual capital spending isn’t low. But the data sold by Ambani has become more expensive as competition in India’s telecom market has narrowed. The natural gas it produces in India jumped 62% in its state-imposed price cap. A fuel shortage is increasing margins at its refining complex in Jamnagar, the largest in the world. All of this could keep Reliance’s net debt to Ebitda at a comfortable 0.7 this fiscal year, according to Fitch Ratings, which rates the conglomerate’s foreign-currency creditworthiness at BBB, a notch above sovereign debt. India.
Still, Ambani’s fortress-like track record isn’t exactly igniting the stock market: Reliance stock, which soared as much as 29 times 12-month earnings in 2020, is now available at a multiple of 21. Shares in Adani Enterprises Ltd., which closed the valuation gap with Reliance upon Prime Minister Narendra Modi’s re-election in 2019, now trades at a PE ratio of 124.
Adani and Modi have a relationship that dates back two decades, when the latter was chief minister of Gujarat. While pilloried by other business leaders following the deadly Hindu-Muslim riots of 2002, Modi won the backing of the little-known first-generation Gujarati entrepreneur. Adani had established a few years earlier what was to become the pivot of his empire: the port of Mundra on the west coast of India. Today it controls 24% of India’s port capacity and has a similar lockdown on airports. The stock market admires how Adani has extended his grip on transportation infrastructure to other parts of the monotonous plumbing of the economy: coal mining; production and distribution of electricity; city gas; refining of edible oils; storage for everything from crops to data; and now cement.
It is also a very different strategy to that of Adani’s former rival who is now accelerating his succession plan. The petrochemical empire Ambani inherited from his father has diversified into consumer-focused businesses and acquired a more glamorous sheen, including a billion-dollar mall in Mumbai filled with international brands and a possible switch to television broadcasting and cricket streaming this summer. His influence is still indisputable, as Amazon.com Inc. discovered during a takeover where Ambani took over the stores of a bankrupt Indian retailer right under the US giant’s nose.
But while Ambani targets the consumer, Adani mainly sticks to infrastructure. It is useful in New Delhi, not only to generate fiscal resources by monetizing state assets, but also as a foreign policy tool. When Sri Lankan President Gotabaya Rajapaksa wanted to move closer to India last year after annoying his neighbor with his pro-China leanings, he awarded Adani a 51% stake in a new port terminal in India. west of Colombo.
Adani, too, should be happy if more people buy into the narrative that he is running a business for nationalistic purposes. “A great India must be an India which is visibly a more ‘aatmanirbhar’ India,” he said in a speech last year, using the Hindi word for self-sufficient. “A great India must be a visibly more muscular India.”
The musculature was exposed even in the Holcim transaction. Ambuja Cements Ltd. and ACC Ltd., the two units controlled by the Swiss company, had a few other Indian billionaires willing to pay more. But Ambuja and ACC are currently fighting a $300 million antitrust award for alleged price-fixing in the Supreme Court of India. In taking them back, Adani offered Holcim full compensation, according to media reports. Given that Adani was not in the cement before the deal, which is entirely structured overseas, there is unlikely to be any lengthy scrutiny by the Indian monopoly breaker or a claim for gains in capital imposed on Holcim.
Going into the pandemic, Ambani gave Google and Facebook a promising entry into India. As the virus receded, Adani offered Holcim a hassle-free exit. Both are useful services in an economy that is beginning to resemble the board game Monopoly. But maybe only one of them, or none, is worth $100 billion and changing – the difference in wealth between the two Indian billionaires and Musk.
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Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.
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