Adani (right) has given a signal to Mukesh Ambani that he’s no longer keen on direct confrontation. — Bloomberg
A beleaguered Indian billionaire is redrawing the contours of his empire in a way that minimises friction with his bigger rival. That may be a sensible strategy.
Gautam Adani can’t afford a costly distraction.
While his core infrastructure business is booming, there’s little reprieve from the governance issues that have dogged the Adani Group since New York-based Hindenburg Research’s allegations of stock-price manipulation and undisclosed related-party transactions earlier this year. Despite its strenuous denial of the short-seller’s report, the conglomerate’s market value has sagged more than US$100bil since January.
To shore up investor confidence, the Adani family has raised billions of dollars. The group has also doubled down on expansion by acquiring a cement company and announcing a US$3.7bil capital-expenditure plan for the current fiscal year.
But most importantly perhaps, Adani has given a signal to Mukesh Ambani that he’s no longer keen on direct confrontation.This time last year, it looked like the two tycoons were set to compete in everything from petrochemicals and renewable energy to telecommunications, media, consumer staples and finance. That threat is receding.
Adani’s consumer finance franchise, which he was preparing last year for a public float, is being sold to Bain Capital. This is an area where Ambani has recently made a splashy foray by spinning off Jio Financial Services Ltd from his flagship Reliance Industries Ltd and announcing an asset-management tie-up with BlackRock Inc.
By stepping back from consumer finance, Adani might also be dialling down his super-app ambition, which was threatening to set up another potential conflict with Ambani’s digital unit, Jio Platforms Ltd.
Separately, Bloomberg News has reported that Adani is exploring a sale of his US$2.6.bil shareholding in Adani Wilmar Ltd, which owns a top-selling cooking-oil brand. Any such move, which the group has refused to comment on, may serve a twin purpose. It would raise funds that could be put to better use in core infrastructure – for instance, the fast-growing power transmission unit needs fresh equity.
Besides, by exiting the consumer-oriented business, Adani would demonstrate a willingness to leave the field to his competitor. Ambani, who is also India’s largest retailer, is looking to expand aggressively into branded consumer goods.
Finally, the strongest evidence that two of Asia’s richest men are headed for at least a détente came from the most recent post-earnings conference call of Adani Enterprises Ltd, the group’s beachhead for getting into new areas.
As Ambani, 66, and Adani, 61, move into their non-overlapping orbits, clean energy may still be one area where both would have significant interests. But here, too, Adani’s focus may be on using his planned 45 gigawatts of renewables power capacity by the end of the decade to produce low-cost green hydrogen for use in ammonia, urea and methanol – and in steel plants. Ambani’s trajectory may be somewhat different.
Reliance’s oil-to-chemicals unit is one of the world’s biggest consumers of dirty or gray hydrogen, extracted from petcoke, a heavy refinery residue.
Ambani’s biggest challenge will be to switch to a non-polluting feedstock without compromising on profitability. He will also look to decarbonise some of India’s auto-fuel demand.
The risk of a head-on collision has lessened considerably from last year, when the younger entrepreneur had pulled ahead of his older rival on global wealth rankings.
Adani is still India’s second-richest corporate czar, but his post-Hindenburg net worth of US$62bil is a third behind Ambani’s.
That’s just as well, at least for their investors. Given the ample leg room for Adani in infrastructure and for Ambani in India’s consumer economy, it may not be a bad thing for the billionaires to avoid stepping on each other’s toes. — Bloomberg
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. The views expressed here are the writer’s own.
