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ShareHoncho is finalising moves to consolidate position in agriculture by acquiring or developing palm oil plantations
Gujarat has an unusual cultural practice of collaboration, though there are times when some industrialists have forgotten this practice and chosen to be combative instead.
The best example is how Gujarat could create the biggest and the most successful co-operative movement in milk production --- through the joint efforts of Seth Tribhovandas and V V Kurien.
The state has not been witness to industrial unrest, and both workers and management -- even the government, irrespective of the political party ruling the state -- prefer to negotiate a deal rather than see business and cash go down the drain.
There have been fewer corporate closures in Gujarat than in any other state in India.
It was also witness to the country's first and only corporatised co-operative power generation plant in the Gujarat Industrial Power Production Company Ltd (GIPCL) which remains even today one of the best power producers in the country. And this list could go on and on.
Gautam Adani, 45, has given collaboration a new meaning in India's corporate history. Instead of viewing other industrialists as combatants who must be mowed to the ground, Adani has, instead, sought them out as partners, to mutual benefit.
The first partnership came --- as with most Indian entrepreneurs --- with a foreign equity partner. Adani set up Adani Wilmar Ltd, a 50:50 joint venture with Wilmar of Singapore.
This in itself was a bit unusual. Normally, one party has a 51% equity stake to rule out any misgivings about who is in control.
Adani kept the ratio as 50:50 and the plan has gone from strength to strength despite this unusual equity holding structure. Set up for selling edible oil in the Indian market, the plant is located at Mundra and gets all its edible oil in
tankers to the Mundra Port from where it is piped -- virtually untouched by hand -- right into the AWL plant.
Today, it has become the largest selling edible oil brand in the country under the 'Fortune' name.
And it now wishes to increase its crushing capacity from 2,900 tonnes per day (tpd) (inclusive of 2,100 tpd capacities from other units) to 10,000 tpd, which in
turn will allow it to increase its refining capacities from 3,200 tpd to 7,200 tdp.
It was then, possibly, that Adani realised the benefits a partner brings. But unlike many Indian entrepreneurs who only trusted foreign partners, but not Indians, Adani has broken fresh ground by announcing at least two major deals that could change the way businesses collaborate in India.
He has announced a new energy initiative -- for oil & gas exploration through Adani Welspun Exploration Ltd -- in partnership with the Welspun group of B K Goenka. Equity control will be in the ratio of 65% to Adani and 35% to Welspun.
But management decisions will be left with the Welspun group.
Why did Adani do this?
"I did this on two counts," he says. "First to share management responsibility. Second, also to get the expertise of different like-minded promoters in different fields in order to ensure a faster growth."
Adani Welspun already has three exploration blocks under its purview in India and Thailand, and has recently been awarded another block (L2250) in Thailand in its latest bidding round.
It is also exploring opportunities for other blocks in India and overseas including bidding through the NELP VII programme. Total investments envisaged for this business are around $1 billion.
Another interesting partnership is the Aashapura project where Adani has tied up with Chetan Shah of the Aashapura Group for setting up a Rs 10,000 crore plant for producing 1 million tpa alumina, and 500,000 tpa of aluminium near the Mundra SEZ.
Shah initially wanted to set up an alumina plant to convert bauxite available in abundance in Gujarat into alumina.
The problem for converting alumina into aluminium is that it is energy intensive, and would require at least 850-900 mw of power each year. It would also require caustic soda.
Adani came to learn of this and offered to supply power for this plant at competitive rates and later also consider the possibility of either procuring caustic soda from other suppliers or producing it through another enterprise.
Applications have already been made to the government to set up this plant, and the first phase will involve an investment of Rs 3,000 crore for the bauxite to alumina plant, and then to move over to the second phase of making aluminium in around three years cost with the additional capital investment.
In the meantime, Adani is finalising a series of moves to consolidate his position in the agriculture sector by acquiring or developing palm oil plantations --- financed directly or with other partners --- all over the world, particularly in Indonesia, Malaysia, Africa and the Phillippines.
This is likely to strengthen his hold over the edible oil market on the one hand, and in the trading of de-oiled cakes on the other.
Similarly, he wants to increase his presence in fruits and vegetables and pulses, and is busy setting up controlled atmosphere sheds to store them before finally shipping them to the eventual purchaser.
Investments in this area are likely to be in the region of Rs 6,000 crore.None of this frenetic pace of growth would have been possible without good partnerships. And that is possibly where Adani's biggest strength lies - of being able to identify the right partner, and hand over management charge, even though he may hold substantial stakes
