Thomas White Global Investing
Emerging Leaders

Emerging Leaders

August 2011

Gautam S. Adani, Executive Chairman and Founder of Adani Group

Gautam S. Adani

Image Credit: Paras Shah / Ahmedabad.

“I want Adani Enterprises to be India’s number one company in power generation, mining, ports and logistics.”

— Gautam S. Adani in an interview to Outlook magazine

In the early 1970’s when India was still under the License Raj, an era when the Indian Government dictated terms to businesses across the country, India’s youth had few avenues to secure a job. While the lucky few got a cushy job with the government, many of India’s young and aspiring jostled for employment in the remaining few industries, like textile manufacturing and diamond-cutting. Both these industries were a huge draw for migrant laborers hailing from India’s numerous villages. Millions of young men, often borrowing petty cash from their parents, set foot on rickety buses and shabby trains to reach industrial cities such as Surat and Mumbai in search of employment. Mr. Gautam S. Adani, now India’s sixth-richest man with interests in power and infrastructure, was one among them.

Barely 18 years old, Gautam reached Mumbai to work as a diamond-sorter in the late 70s. Over the next four decades as India opened its economy, the entrepreneurial diamond-sorter rode the tide and built ports and power stations, bought coal mines and laid railroads. Today with a personal fortune of close to $10 billion, Mr. Adani, the ex-diamond-sorter, is worth a few diamond mines himself.

Unlike a few first-time Indian entrepreneurs of his time, Adani did not make his money in India’s burgeoning technology and outsourcing sectors. Many of his contemporaries were technocrats. Narendra K. Patni, a MIT-educated engineer, founded Patni Computers and N.R. Narayana Murthy, another computer engineer, was the man behind Infosys, a technology outsourcing giant. Mr. Adani was on the other side of the spectrum. He dropped out of his university studies to share a cramped stool on the assembly line among other diamond sorters diligently going about their work.

Yet Mr. Adani kept his eyes wide open for the nuances of businesses. Blessed with the entrepreneurial-energy inherent to the mercantile class to which he belonged, the Gujarati, within two years this son of oilseed merchants set up his own diamond-trading unit in the narrow by-lanes of the Zaveri Bazaar of Mumbai.

The trading-outfit was a success. The young Gautam made his first Indian rupee million within a year, a big deal during the 80’s. This success caught the eye of Mansukhbhai, Gautam’s elder brother and a self-made entrepreneur. Mansukhbhai called Gautam back to their hometown of Ahmedabad, a city in the western part of India, to run his newly purchased plastic factory. Still, it was the mid-80s and India’s entrepreneurs were still working under the yoke of the licence Raj that set quotas for factories to control how much they could produce and sell. Instead of complaining about the stringent regulations, Gautam Adani waited patiently and often worked out imaginative ways to keep bureaucracy and government regulations from blocking the development of his myriad import-export businesses. In 1988 he established Adani Exports Limited (now known as the Adani Enterprises Ltd) that traded in a variety of power and agricultural commodities. The rapid growth of the business and the huge profitability of Adani Exports provided further capital for the astute businessman to expand.

He is able to do so well partly because he is very entrepreneurial and has found the right opportunity.

— Mr. Eswar Prasad, an economic advisor to India’s Finance Minister in
The New York Times

Then came the year 1991, a time when India learned that it was paying a huge price for keeping itself closed from the outside world. Now the country opened the floodgates of its economy to the world. Adani, who was a small-time trader until then, was well aware of India’s pent-up demand for trade. He gradually moved to establish a port that would serve India’s exports and imports. Befriending local politicians and other business partners, he spent a decade accumulating capital and aggregating huge parcels of land to build a port in Mundra, in the western part of his home state of Gujarat.

Almost two decades later now, Adani’s idea to set up a private port looks like a stroke of genius. In fact, the Mundra Port is now Gautam Adani’s trump card. Mundra is currently India’s largest private port, giving Adani immense sway over a number of other businesses. Among India’s businessmen who routinely complain about India’s inadequate port and transport infrastructure, Mr. Adani stands out as the victor.

Now, Gautam Adani has forayed and eventually has succeeded in the power generation industry as well. India’s cumbersome mining regulations have driven its utilities to import coal from other countries rather than extract their own reserves.

Indian utilities often shop for coal in countries like Indonesia and Australia. Transporting these heavy loads by sea to India often takes as long as two weeks. But when that coal reaches India, Adani has the most efficient way to transport this black gold to the utilities from the coast; because of course he owns a port. In the mid-2000’s, Mr. Adani also laid down his own rail lines within the port, an idea that was never thought possible in a country where the government has an absolute monopoly in operating the rails. In mid-2009 when Adani launched an initial public offering of his utility company, Adani Power Limited, investors paid a premium partially due to the company’s strategic advantages.

In an attempt to grow his utilities business, Adani is now scouting for mines in Australia and Indonesia. Although he runs the ship tight, Gautam Adani is known for giving a free-hand to able managers. When Adani Power’s managers were negotiating a $2.8 billion purchase of coal assets from Linc Energy, an Australia-based company, Mr. Adani largely stayed out of the negotiations, letting his professional managers run the show.

Still, Adani Group’s journey from virtually nothing to one of India’s top ten conglomerates has had its lows as well as its highs. The rapid growth of the company has earned more than a few enemies for Gautam Adani. At one time in the late 90’s, Adani was kidnapped and was held hostage for a ransom. He was detained for a brief time by India’s police over a case relating to a business fraud. He even had a tryst with a near-death moment while inside the Taj Mahal Palace hotel in Mumbai where terrorists went on a rampage killing India’s elite.

There are other charges leveled against Gautam Adani as well. He is particularly close to Mr. Narendra Modi, the Chief Minister of Gujarat, who has been accused of complicity when Hindu nationalist rioters went on a killing-spree against India’s Muslims. Fishermen near the Adani-owned Mundra-port have accused his company of grabbing their land and are fighting it out in India’s courts. Although Mr. Adani acknowledges that some fishermen are worse-off due to the port, he has promised to spread the eventual economic benefits of the port to fishermen and other downtrodden communities around the area. Regarding his relationship with the government elite, he cites that his connections are nothing more than professional.

For all the charges leveled against him Mr. Adani though, he has emerged as a man who can get things done. In an interview to the New York Times, Eswar Prasad, an economic advisor to India’s Government said “… he (Gautam) is able to deliver something more effectively than the State.”

And deliver he has. For the aspiring young man who once traveled far to Mumbai to begin work as a diamond-sorter, he indeed is now shining like a fine diamond himself. And most importantly, he has also left his mark indelibly on the future progress of India.





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