Adani, Ambani at a turning point in their rivalry

Wednesday 03rd August 2022 07:00 EDT

Gautam Adani, the world’s fourth richest person, has added almost $30 billion to his wealth this year, more than any other billionaire. His net worth of $106 billion is only about half of Tesla Inc. co-founder Elon Musk’s, but $10 billion more than Mukesh Ambani’s. While both would like markets to reward them for scripting India’s future in renewable energy, what’s ticking for them right now is all the polluting stuff in short supply: coal, palm oil, gasoline and building materials. Investors are loving Adani more - simply because he’s the bolder of the two.

Ambani, who turned 65 last month, was the toast of the global M&A market with his $27 billion fundraising in the middle of the 2020 Covid-19 disruption - first from the likes Facebook and Alphabet Inc. for his digital business and then from Silver Lake Partners, KKR & Co. Inc. and others for his retail chain. That zeal seems to have now transferred over to Adani, who celebrated his 60th birthday last month as India’s newly anointed cement king, having just picked up Holcim Ltd.’s business in India.

In just the past year, Adani has spent $17 billion on 32 acquisitions, according to Bloomberg News, and is showing no signs of slowing down even though the combined net debt across his listed companies stands at almost $20 billion, or more than four times annual earnings before interest, taxes, depreciation and amortization (Ebitda). That’s a high leverage burden to carry through a tightening global interest-rate cycle.

Contrast this with Ambani’s flagship, Reliance Industries Ltd. At an estimated $13 billion, its planned annual capital expenditure isn’t low. But the data Ambani sells has gotten pricier as competition in India’s telecoms market has shriveled. The natural gas he produces in India has seen a 62% jump in its state-mandated price cap. A fuel shortage is lifting margins at his refinery complex in Jamnagar, the world’s biggest. All this may keep Reliance’s net-debt-to-Ebitda at a comfortable 0.7 this financial year, says Fitch Ratings, which assesses the conglomerate’s foreign-currency creditworthiness at BBB, a notch higher than India’s sovereign debt.

Yet, Ambani’s fortress-like balance sheet isn’t exactly setting the equity market on fire. Adani had only a few years earlier set up what would become the fulcrum of his empire: the Mundra port on India’s west coast. Now he controls 24% of India’s port capacity, and has a similar lock on airports. The stock market admires how Adani has extended his hold on transport infrastructure to other parts of the economy’s humdrum plumbing: coal mining; power generation and distribution; city gas; edible-oil refining; storage for everything from crops to data; and now cement.

This, too, is a very different strategy from Adani’s older rival who’s now accelerating his succession plan. But while Ambani is going for the consumer, Adani is sticking mostly to infrastructure. That’s useful to New Delhi, not only to generate fiscal resources by monetizing public assets but also as a foreign-policy tool. Adani, too, should be happy if more people buy into the narrative that he’s running a business with a nationalist purpose.

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