What next Mr Gautam Adani?

After snapping up whatever private ports he could lay his hands on, to grab a 30 per cent market share pan-India in a short span, billionaire Gautam Adani’s next focus area would be inland logistics, including mounting an aggressive bid for Container Corporation of India when it is put up for privatisation.

Then, there are global ambitions tucked away in the ‘boilerplate’ of press statements issued by Adani Ports and Special Economic Zone Ltd (APSEZ).

“Our vision is to be the largest ports and logistics platform in the world in the next decade,” it proclaims. A ‘boilerplate’ is usually found at the end of a press release and briefly describes the company.

For India’s biggest private port operator, there are not many big private ports to buy except one or two smaller ones struggling to stay afloat. There are, however, private firms operating cargo terminals at Centre-owned major ports, which could possibly kindle interest.

“There are sufficient acquisition targets still in the marketplace,” says Ramesh Singhal, Director at i-maritime Consultancy Pvt td.

In terms of cargo volumes, APSEZ could still double its traffic volume just by industry consolidation and achieve the target of handling 500 million tonnes (mt) of cargo ahead of 2025, he said.

There is about 270 mt of cargo handling capacity run by a clutch of firms fragmented across major and private ports.

Adani has hardly reposed faith by putting money in terminals at major ports, largely due to the inflexible and restrictive operational regime prevailing there. This explains why eight of the 12 ports/ terminals run by APSEZ are private ports (excluding the under construction Vizhinjam port which falls in this category), while only four are terminals at major ports, some of them even under-performers.

Adani Logistics Ltd, a unit of APSEZ, is already India’s biggest private container train and rail operator. But, acquiring Concor would give it more heft and help take the game away from its rivals.

“Gautam Adani wants to become the biggest player in ports and inland logistics. He wants to own the entire logistics chain,” Singhal said.

Adani plans to build 15 multi-modal logistics parks by 2025 from the current five, own over 200 trains from the present 60 and expand warehousing capacity to 5 million sq feet from 0.4 million sq feet to offer integrated logistics solutions to customers.

Inland logistics is where the money is; it gives revenue that is multiple times that of ports.

Adani’s overseas sojourn so far is nothing to rave about given the controversy surrounding the Group’s coal mine project and its impact on the Abbot Point coal terminal in Australia and the under-construction container terminal in Myanmar, which has landed in a spot of bother after the February 1 military coup that over-threw the democratically elected government in that nation.

The lacklustre overseas gamble may be about to change.

Last month, APSEZ won a deal from the Sri Lankan government to build the West Container Terminal (WCT) at Colombo port after it was nominated by India for the government-to-government project. Colombo is a regional transshipment hub through which a large chunk of India’s cargo containers is transshipped every year.

The deal, according to APSEZ, is to “multiply and accelerate the transshipment options that will become available to serve various shipping lines and other potential port customers across the South Asian waters, benefiting both, India and Sri Lanka in multiple ways”. In short, Adani is nursing container transshipment ambitions in South Asia.

In April 2020, Adani picked Douglas Charles Smith, an industry veteran, as the chief executive officer of its Mundra (India’s biggest commercial port by volumes handled as well as the top container gateway and the Group’s flagship) and Tuna ports.

In his long career, Smith spent more than 16 years with A P M Terminals Management B V, the container terminal operating unit of A P Moller-Maersk A/S, in various roles, including a short stint as board member on South Asia Gateway Terminals (Pvt) Ltd, one of the four terminals in Colombo port.

Ports and shipping industry sources reckon that Smith could be tapped to pursue Adani’s global ambitions.

In April 2017, APSEZ signed a memorandum of understanding with MMC Port Holdings Sdn Bhd, to do a feasibility study on building a greenfield multi-purpose port mainly for handling containers at Carey Island in Malaysia’s Selangor state, about 50 km southwest of capital Kuala Lumpur.

The feasibility of developing a mega container handling port project on Carey Island as an extension of the existing Port Klang, though, didn’t reach anywhere due to the rapid political changes in Malaysia.

For the record, APSEZ has maintained that it “is always looking at good opportunities which are in the market”.

During the worst health crisis to hit the world in decades, when companies preserved cash, Adani splurged Rs 12,458 crore to buy Krishnapatnam, Gangavaram and Dighi ports.

Over the past couple of years, APSEZ has potentially created about Rs 120 per share of value from acquisitions, Kotak Institutional Equities wrote in a March 24 research note. More value may get discovered over time from such acquisitions given the prospects for Adani Ports to scale up presence in these new markets, it noted.

However, others say that the acquisition benefits are much more.

“For every X amount in acquisition cost, APSEZ is able to increase its valuation by eight times”, says Singhal, adding that overseas buy outs would drag down the firm’s valuation and hence undesirable.

“The price earnings multiple in India are double that of overseas markets. If APSEZ acquires foreign assets, its valuation will drop. So, Adani’s strategy would be to expand in ports and logistics in India,” Singhal says.

Kotak Institutional Equities said Adani Ports would be having $1.8 billion of EBITDA and net debt of less than 2X in FY2023. “This clears the way for an all-in bid for Concor. In our assessment, an aggressive bid for Concor may not take away more than Rs 30 per share from our sum of the parts valuation (SoTP) of APSEZ,” it said.

The Rs 30/share of potential value erosion may get compensated from the value creation that APSEZ can do with Concor over time, it added.