Political stability must for investment in ports overseas: Karan Adani

The Adani group is back in acquisition mode after recovering from the US-based short seller’s revelations, which had wiped off $100 billion of the group’s market cap. In August, the group acquired Sanghi Cement for Rs 5,000 crore, and earlier in January, it had acquired Haifa Port in Israel for $1.2 billion.

Apart from pre-paying promoter debt, the group is now looking for more acquisition opportunities in the cement sector in India and the port sector overseas. On Sunday, Adani Ports & SEZ Vizhinjam trans-shipment port project in Kerala was inaugurated by state Chief Minister Pinarayi Vijayan in the presence of Congress leaders, including Shashi Tharoor. Just before the inauguration, Karan Adani, chief executive officer (CEO), Adani Ports & SEZ, and chairman of ACC, talked about the future plans for ports, airports and cement businesses in an interaction with Dev Chatterjee in Vizhinjam (Kerala). Edited excerpts:

Adani Group invested in Haifa Port in Israel in January this year and had also started construction of the port Colombo in Sri Lanka. How has the war affected port operations in Haifa and how will it impact Adani Ports &SEZ’s operations?

We do a lot of due diligence and we take a lot of calculated calls when we enter any new country. For us, political stability is the most important factor for investment, followed by having a strong local partner, and a strong domestic economy. We look at how the port overseas will help us to link with our assets in India. When you look at Haifa, the whole port has been designed keeping in mind such conflicts. This is not the first time that a situation like this has developed there. When we look at our risk parameters and assess whether we can withstand all these risks, then we see that this event does not impact the Israel economy or trade or political stability. We are confident of our investment in Haifa. We have taken a longer-term view because these assets are coming with 30-40 years of concession. When you look at it from a 30-40 year perspective, our conviction has not changed.

Are you looking at other geographies for investment in the port sector?
 

We are evaluating a lot of countries like Vietnam, Kenya, Tanzania and the Mediterranean area but nothing concrete so far. We are not too keen on greenfield development in these countries and would look at more brownfield opportunities. In many of these places, the local governments still run the ports and there is a lot of privatisation taking place. We would look at participating when the privatisation process is initiated. An acquisition like Haifa port is a classic case of privatisation by Israel. 

How do you plan to integrate the Vizhinjam port — a trans-shipment hub — with the remaining Adani ports in India?

The Vizhinjam port is extremely important for us because it gives us a foothold when we look at all our ports across the Indian coast. With this port and our port in Colombo, we can give complete solutions to shipping lines connecting to all our ports in India. So, from Mundra port in Gujarat to the West Coast, and from Dhamra or Haldia ports in the East Coast till Karaikal port in the South, Vizhinjam is an aggregation point for all these ports, especially the smaller ones. Vizhinjam will play a critical role in giving supply chain surety to shipping lines and will also give options not just from container, but also from bulk cargo, bunkering, and other commodities. This port will be giving an integrated solution to our customers. Our vision is to become a 500 million tonne port company by 2025 and we desire to be the largest port in the world with a cargo capacity of 1 billion tonnes by 2030. The Vizhinjam port will play a crucial role in this. We plan to invest Rs 5,000-6,000 crore in expanding capacity each year and our free cash flows of Rs 7,000-8,000 crore are enough to take care of the expansion. We will invest up to Rs 20,000 crore by 2030.

Adani Ports has 25 per cent of Indian cargo traffic in market share and also operates seven major airports. 
Are you looking at any synergy benefits between the ports and airports business?

Airport is predominantly a passenger-driven business. If you see from the airport’s balance sheet, around 80-85 per cent of revenue still comes from the passenger’s side. The only synergy is there from an air cargo perspective. But in India, air cargo is still at a very nascent stage.

Adani had announced plans to double its capacity in the cement sector. What are your plans for the sector? Are you looking at acquisitions?

Our group chairman (Gautam Adani) has laid out a target of 140 million tonnes per annum (mtpa) in five years from 70 mtpa now. We are well on track for that and all of this expansion is through organic development. All our sites at Ambuja Cements and ACC have enough land and limestone to expand for this capacity.