by Andy Mukherjee

A beleaguered Indian billionaire is reshaping his empire in a way that minimizes conflicts with his bigger rival. This can be a wise strategy.

Gautam Adani cannot afford to make costly distractions. While his core infrastructure business is booming, there has been little respite from the governance issues plaguing the Adani group since New York-based Hindenburg Research’s allegations of stock-price manipulation and undisclosed related-party transactions earlier this year Is. Despite vehemently denying reports of short-sellers, the group’s market value has declined by more than $100 billion since January.

In a fresh blow on Saturday, Deloitte Haskins & Sells LLP, the auditor of Adani’s ports unit, abruptly resigned in the same week that June quarter results showed record revenue and operating profit. In its full-year audit dated May 30, Deloitte had said that the legal opinion provided by the group on the veracity of Hindenburg’s allegations was insufficient and that an independent external examination was needed. The accounting firm’s August 8 quarterly review reiterated those concerns.

The auditor’s exit is a timely reminder that although development will quell governance concerns, it will not make them go away. India’s market watchdog on Monday asked the Supreme Court in New Delhi for another 15 days to close its probe against the group. The Securities and Exchange Board of India is probing possible violations of rules related to minimum public shareholding, related-party transactions and manipulation of stock prices. The Adani family has raised billions of dollars to boost investor confidence. The group doubled down on expansion by acquiring a cement company and announced a $3.7 billion capital-expenditure plan for the current fiscal.

But perhaps most importantly, Adani has indicated to Ambani that he is no longer inclined to a direct confrontation.

This time last year, it looked like the two giants were poised to compete in everything from petrochemicals and renewable energy to telecommunications, media, consumer staples and finance. That danger is receding. Adani’s consumer finance franchise, which it was preparing for a public float last year, is being sold to Bain Capital. This is an area where Ambani recently made a splash by spinning off Jio Financial Services Ltd from its flagship Reliance Industries Ltd and announcing an asset-management tie-up with BlackRock Inc.

By stepping back from consumer finance, Adani could also downplay its super-app ambition, which threatened to set up another potential conflict with Ambani’s digital unit, Jio Platforms Ltd.

Separately, Bloomberg News has reported that Adani is exploring the possibility of selling its $2.6. Billion stake in Adani Wilmar Ltd, which owns the largest selling cooking oil brand. Any such move, on which the group declined to comment, could serve a dual purpose. This will raise funds that can be put to better use in core infrastructure – for example, a fast-growing power transmission unit in need of fresh equity. Furthermore, by exiting the consumer-oriented business, Adani would demonstrate a willingness to leave the field to its rival. Ambani, who is also India’s largest retailer, is looking to expand aggressively into branded consumer goods.

Finally, the strongest evidence that Asia’s two richest men are heading for at least a separation came from a recent post-earnings conference call from Adani Enterprises Ltd., the group’s latest foray into new sectors. There is a beach. Chief Financial Officer details capital spending plan for this year: $1.7 billion in roads; $1.1 billion for airports; $300 million for green hydrogen; $200 million for data centers; $200 million to complete a new copper smelter, and a little less than $100 million for water.

The coal-to-plastics enterprise was missing from this list. At the peak of a slump in Adani’s share prices following Hindenburg, the group denied media speculation that it had stalled the factory, which was seen as a direct challenge to the legacy petrochemical business of the Ambani group. The group said in March that it expected financial closure in the next six months, following which full procurement and construction would begin. Since then, there hasn’t been much progress on the $4 billion project, though the group says it’s still ongoing. “We are working on the preparation of various reports, site work etc,” CFO Jugeshinder Singh said on the August 3 conference call. He promised an update after this quarter’s results.

As Ambani, 66, and Adani, 61, move into their non-overlapping orbits, clean energy could still be an area where both will have significant interests. But even here, Adani’s focus may be on using its planned 45 gigawatts of renewable energy capacity by the end of the decade to produce ammonia, urea and methanol – and low-cost green hydrogen for use in steel plants. The company, which will soon begin work on manufacturing electrolyzers to split water into hydrogen and oxygen, is set to go it alone on a total of $50 billion of green H2 investment after France’s TotalEnergies SE halted its participation following Hindenburg’s allegations. ready for.

Ambani’s path may be different. Reliance’s oil-to-chemicals unit is one of the world’s biggest consumers of dirty or brown hydrogen extracted from refinery heavy residue petcoke. Ambani’s biggest challenge will be to switch to non-polluting feedstock without compromising on profitability. He will also look at decarbonizing some of India’s auto-fuel demand. While it is linked to Reliance’s fuel-retailing joint venture with BP Plc, industry analysts say it will take years for India’s long-distance trucks and inter-city buses to run on green H2.

The risk of a head-to-head collision has waned significantly compared to last year, when the young entrepreneur overtook his older rival in the global wealth rankings. Adani is still India’s second-richest corporate mogul, but behind Hindenburg, with a net worth of $62 billion, a third behind Ambani. That’s as good as that, at least for their investors. Given the ample room for Adani in infrastructure and Ambani in India’s consumer economy, it might not be a bad thing for billionaires to avoid touching each other’s feet.


Disclaimer: This is a Bloomberg Opinion article, and the views expressed are personal. they do not reflect the views of www.business-standard.com or business standard newspaper

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