New Delhi- Gautam Adani and Mukesh Ambani, both billionaires, have become the best-known faces of Indian business in recent years. To supporters, they are patriotic nation builders, using their influence and resources to advance India’s economic progress. For critics, they are there only for themselves, reported The Economist.
Their motivation seems to lie somewhere in between, according to the report.
“The duo’s growing influence on Indian affairs is undisputed. Many observers today speak of an “aa economy”. This is an exaggeration, but the combined revenues of the companies controlled by Messrs. Adani and Ambani equal 4% of India’s GDP,” The Economist reported.
They are also responsible for 25 percent of capital spending by listed non-financial companies at a time when overall investment has been subdued.
“We have never given up investing in India, we have never slowed down our investments,” Adani said at his group’s annual meeting on July 26.
Not to be outdone, Ambani, at his own annual meeting on August 29, pledged to double the size of Reliance, the conglomerate he heads, adding that “patriotism inspires and energizes everything we do. “.
They play such an important role in India’s economic development because they have succeeded where others in the country have too often failed, by building businesses that are both large and fast growing.
Under Ambani’s leadership, Reliance, founded by his father Dhirubhai Ambani, has grown from trading petrochemicals and refining to retail, telecommunications and renewable energy.
Adani’s operation is more speculative and generates modest cash flow, but it has grown in a decade from a small office in Mumbai to an empire of ports, airports and energy services spread across seven state-owned companies and various private companies.
The two men’s publicly traded companies are worth a combined $452 billion, down from a collective valuation of $112 billion four years ago, The Economist reported.
“Much can be attributed to the fact that their broad ambitions dovetail with those of Indian Prime Minister Narendra Modi for the economic development of the country. The government still oversees hundreds of state-controlled companies, but confidence has long since disappeared in their ability to drive growth,” The Economist reported.
Instead, for the commanding heights of the economy, heavy industry and infrastructure, the government’s hopes increasingly rest on a handful of private companies that seem capable of handling India’s debilitating bureaucracy. and the erratic allocation of projects. Both men have so far successfully navigated the country’s treacherous legal and political undercurrents.
“Yet there are strong arguments that they are not just favored industrialists collecting rent. Their desire to invest seems unconcerned with profits. Reliance has not generated a return on capital greater than 10% in a decade. Only two of Adani’s listed companies are doing better and both are joint ventures with foreign companies,” The Economist reported.
“This desire to invest brings companies closer to the competition. This is perhaps not surprising. Reliance and the Adani Group share many characteristics. The founders of each were born in Gujarat, as was Modi, whose own rise was linked to the state’s impressive record of economic growth during his tenure as chief minister. Both companies grew largely by building dominant positions in existing industries and then moving into related fields. Thus, they have become intertwined and vital to India’s economy – and Modi’s vision,” reported The Economist.
“Inevitably, the frantic activities of these two business groups must have collided,” the report said.
In August, Adani launched a hostile takeover of NDTV, a broadcaster, a move that followed the purchase of a 49% stake in Quintillion Business Media, another company.
Each of these entities will compete with Reliance’s media businesses. Adani and Ambani announced plans to spend more than $70 billion on energy projects including batteries, hydrogen and solar power.
To weave together his expanding empire, Adani in August became a surprise bidder at the government’s 5G bandwidth auction, a possible prelude to competition from Reliance in the telecom space. Among Adani’s industrial projects in Mundra is a refinery that will give nearby Ambani’s operations some competition.
That kind of competition “could lead to reckless financial decisions on both sides,” warned CreditSights, a research firm, hoping one of the men might listen.
“As often with Indian industrial giants, there is already cause for concern. One consequence of Adani’s frantic expansion is that its operations are “deeply over-leveraged”, CreditSights said, The Economist reported.
“Yet the rivalry between the two may prove fleeting. Adani, 60, has become an elevated presence in India’s business firmament; Ambani withdrew. Many suspect Ambani, five years older than Adani, of not feeling well (a rumor the company has denied).
“Reliance’s annual meeting was held online, although many such meetings are now held in person as pandemic precautions have eased. Perhaps sensing the questions this raised, Ambani noted that he had attended Reliance’s 45 annual meetings, the first held when the company occupied a room with two tables and a shared phone,” reported The Economist.
But the role played by Ambani’s three children on the occasion has been widely interpreted as an ongoing succession plan. This leaves the possibility that even if the importance of the “aa economy” grows, its days under current leadership could be numbered.
Given India’s needs, it would appear there is abundant space in the country for the two men’s efforts, The Economist reported.
Finding two new bosses more suited to this environment might be impossible, he added. (IANS)
