Chairman, Adani Group
The Webster definition of resilience is “the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress”. It's hard to believe that it was less than 3 months ago, on 11th March 2020 that the World Health Organization declared the outbreak of COVID-19 as a pandemic, meaning COVID-19 has spread worldwide. If there ever has been a time when the need for global resilience has been critical, it is now.
The Power to Overcome:
At times like this one looks for inspiration. In this context Wayne Muller, a well-known author, writes that for thousands of years humankind has suffered famine, war, plague, hunger, and countless injustices; it has experienced numberless births and deaths. Each community of people has had to find some way to speak about what sustained them or brought them grace—even in the midst of terrible sorrow. We have struggled to name this human trait, the universal force that makes the grass improbably push its way through concrete, the force that turns the earth, the energy that we seem to possess and blesses all life, the essential presence in our deepest nature that can never be spoken of with perfect accuracy but yet make us what we are. History is one big story of human overcoming. It’s what we are born to do.
What we must realize is that there are no absolute right or wrong ideas. What is required during an unprecedented, hard to model, crisis like Covid-19, is a Government that is willing to make decisions based on best available information at a given point of time and constantly adapting as new information becomes available. For this, the Indian Government and bureaucracy must be complimented. Countries with greater resources than ours have struggled and while our battle with the virus is far from over, I have no hesitation in stating that had the decisions that got made been delayed we could have been facing an unmitigated disaster that would not just impact India but have global ramifications. Yes, business has suffered immensely, lives and jobs have been lost, and the migrant worker crisis saddened the entire nation, but the consequences of the unknown alternates would be far grimmer. What the leaders of our nation, the doctors, the healthcare workers, the police, the army, the small street side vendors, and the citizens have done to support each other is truly what defines India and its resiliency. Add to this the fact that the Government is are now able to do direct benefits transfer as a result of the integrated approach it has built through the Jan Dhan, Aadhaar and Mobile linking systems and we start seeing the benefits of a Government that had the vision to put in place the infrastructure we need to be able to handle a crisis.
Sitting where we are today, I can say that history is in process of being scripted. I will be the first to admit that I have no way of predicting the short or mid-term possible economic outcomes as a result of Covid-19. However, there cannot be any denying the fact that India over the next several decades will be a market continuously on the up and one that simply cannot be ignored. It will be one of the world’s top consumption centers, manufacturing and service hubs and a beacon of stable democratic governance. If there was a time to make a bet on India, there may not be a better time than now. What I can predict is that on the other side of this crisis will emerge massive new opportunities, will emerge great new leaders, will emerge terrific businesses, and will emerge a few stronger nations. Those that succeed will be the ones that understand that resilience is built on the other side of the tunnel of crisis and we are already getting ready for this.
Resilient Group Performance
I am pleased to report that each one of our six publicly traded companies has performed well even as we started to confront the trying circumstances following the first few weeks of 2020. While we may have to do need-based course correction in our strategies in the wake of the challenge that we are facing, the roadmap remains clear. Our businesses are closely aligned to the lifeline of the economy, providing essential services to enhance the quality of life of citizens and addressing critical national infrastructure priorities. We look at our Group companies as individual growth drivers that complement each other’s strengths.
Any shock to a system always helps drive home some key points and what the Indian businesses have learnt over the past few years and most certainly post Covid 19 is the value of an optimal and perhaps for some sectors a conservative capital structure as well as the criticality to have systematic risk mitigation plans in place. Both optimal capital structures, and risk mitigation is a part of the maturing of the business philosophies as they grow in size and lays the foundation for stability as well as consistent value creation.
At the Group level, our focus is on optimising capital utilisation, redesigning the organisational structure to minimise risk in our businesses and funding operations in phases. I am happy to share that during the year, the Group has been able to bring strategic global equity partners in Adani Gas, Adani Green Energy Ltd and Adani Mumbai Electricity Ltd. The total investment is USD 1.6 bn; and will help drive future growth of our businesses. It is also pertinent to mention that AEML (part of Adani Transmission) recently completed an investment grade, USD 1 billion bond issuance, the first by a private integrated utility from India. The issue generated significant interest from international investors and was oversubscribed by 5.9 times. I must also mention here that APSEZ raised $750 million by selling overseas bonds, the proceeds from which would be used for fund expansion and further reduce the cost of debt and progressively further deleverage the balance sheet. In the preceding 12 months, the Group has successfully placed seven bonds in the international markets, totaling to 4.26 bn USD.
APSEZ Continues to Execute on its Strategy:
APSEZ as the country’s largest port player continued its steady journey in enhancing market share. Notwithstanding macro challenges and a rather sluggish demand environment for the entire reporting year, we accomplished a year-on-year cargo volume of 223 MMT, a growth of 7%. Our container volume grew by 8%, coal by 5% and liquid by 16%. The broad strategy of making our cargo mix more balanced continues to be executed effectively.
The Company’s resilience to withstand headwinds is vindicated by its long-term contracts that extend up to five years or more to provide adequate cargo visibility. I am happy to state that during the year, the volume of such contracts constituted 60% of total volumes at Adani Ports thereby making us significantly less susceptible to short-term demand volatility.
APSEZ has also continued to strengthen its capital management programme and the focus is on reducing interest costs, elongating maturities and optimising capital structure. This ensures highest growth adjusted return on capital employed (ROCE) amongst global peers. Maintaining investment grade (IG) rating is paramount and forms the guiding principle, while leveraging our balance sheet.
Acquisitions and Diversification:
Our targeted acquisition strategy continues as we expand geographically as well as integrate vertically. We expect to complete the planned acquisitions of Dighi and Krishnapatnam Port by the third quarter of FY21. Our acquisitions will help accelerate our stride towards our FY25 vision of handling 400 MMT of cargo. We are also taking every feasible strategy to diversify our portfolio in these uncertain times and our commissioning of India’s Mundra LNG terminal and LPG terminal validate this reality. When the economy gradually picks up momentum, we will steadily ramp up volumes, rationalise our cost structure and sharpen our focus on addressing customer needs. APSEZ expects to continue to enhance shareholder return through better capital allocation, cost rationalization and going from being a dedicated ports player to an end-to-end logistics player.
APSEZ also continues to diversify, invest and grow its logistics business to provide comprehensive end-to-end solutions to its customers and bringing the port gate and customer gate closer. During the year, APSEZ has acquired B2B logistics, bought new rakes and invested in warehouses to work closer with the customers and become an intrinsic and important part of their supply chain. The continuous and rapid investment in the logistics space will transform APSEZ from a port centric business to a transport and logistics platform.
APSEZ’s Environmental, Social, and Governance Approach:
Along with focus on the financial and operational performance, APSEZ is equally committed to strengthening its ESG performance across the operational ecosystem. We have embedded the ESG framework to our core philosophy of value creation – keeping the interests of investors, community, and the environment in focus. Our sustainability roadmap is based on formulating appropriate policies, conforming to regulatory norms, making regular disclosures, setting targets for minimising our environment footprint and strengthening corporate governance to meet those targets. Our business model is closely attuned to three primary focus areas, which are carbon emission, resource management and waste management. Our integrated waste management encompasses the 5R (Reduce, Reuse, Reprocess, Recycle, Recover) Principle. Efficient use of water and energy from cleaner sources, reduction of emission levels and ensuring zero tolerance for fatalities at our ports continue to be our top priorities.
Growth with Goodness
We, at the Adani Parivar, are fighting the Covid-19 battle unitedly. Our Foundation has contributed Rs. 100 crore to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund). I am equally grateful to our workforce in India for contributing Rs. 4 crore for the battle against COVID-19. It is because of the solidarity demonstrated by this workforce of over 17,000 people that our Foundation could add another Rs. 4 crore, collectively contributing another Rs. 8 crore towards COVID-19 relief projects in India. As a responsible corporate, we will continue to stand by the nation in various capacities in this hour of need. On that note, I must also take this opportunity to thank our teams for the following measures:
- Adani Foundation contributed Rs. 5 crore to the Gujarat CM-Relief Fund and Rs. 1 crore to the Maharashtra CM Relief Fund; we have also contributed to Kattupalli District Collector COVID-19 Fund and the Bhadra District Administration.
- The Foundation is also contributing to the CM-Relief Funds of many other states such as Kerala, Jharkhand, Andhra Pradesh.
- Women cooperatives aided by Adani Saksham produced more than 1.2 lakh masks to help economically disadvantaged sections of the population.
- Gujarat Adani Institute of Medical Sciences (GAIMS) is the only hospital equipped for handling COVID-19 cases in Kutch, India's largest district.
In times such as this the spirit and compassion of our people reinstates my belief in our core philosophy of Growth with Goodness. Let all of us contribute to help our nation rise above this crisis. It may take time but there is ample optimism to show that it is possible.
Together, we will stay resilient and hopeful in these testing times.