Adani, JSW Race Ahead With Billion-dollar Projects

After a series of M&As in the past six years, top Indian business houses led by the Tatas, the Birlas, Adani and JSW groups are now taking a pause on M&As and will be focusing on to finish the projects in hand worth billions of dollars.

Bankers said in the past six years, the Tatas acquired companies worth Rs 67,601 crore, JSW group acquired assets worth Rs 36,628 crore (excluding Bhuhan Power) while the Adani group bought twenty assets spending Rs 68,000 crore. The total merger and acquisitions by the Aditya Birla Group – including Vodafone, Idea merger and Aleris acquisition in the US, was worth Rs 2,38,246 crore.

“Conserving cash is the biggest motto for the group this year,” said a Birla group official, which became India’s biggest cement firm following a series of acquisitions, including Binani Cement and Century Textiles’ cement units. The acquisition of Aleris Corp in the US by Novelis, a subsidiary of Hindalco, was cleared by the regulators early this year. "The focus now is to take stock of the situation and complete ongoing projects," said he asking not to be quoted.

Building assets

As economists predict the Indian economy to slow down, companies are going back to the drawing board. Take for example, the Adani group, which has inducted several strategic investors in its city gas distribution, electricity distribution, LNG, fuel retail, renewable energy, and datacentre platforms. It will be focusing on developing its data centre and airport businesses in India. The group bagged six airports in India – carrying almost 10 per cent of India’s total air traffic -- after a global bidding last year.

“All our projects are on track. In addition to earmarking massive capex in these sectors, the key differentiator in our technology parks and airports would be deep leveraging of technology, knowledge and resources from its existing infrastructure,” said a group official. The tie-ups with global investors will help it to get access to latest technology and funds.

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The official said its acquisitions in the port, power and electricity distribution coupled with capital management helped it accelerate and grow even when the economy slowed down. “The strategy has enabled to whip up a combined market cap of more than $20 billion, leverage integrated platforms - largest transportation and energy verticals in India and a shift from business to customers -- with customer base across gas, electricity, airports and consumer products set to touch over 100 million customers,” the official said. This change also ensured conserving cash, a stable cash flows while deleveraging to support the next phase of growth.

The group managed to successfully place seven bonds to raise $4.26 billion from the international market just before the Corona pandemic hit the global markets. “The strategy now is to build on the strong foundation built before Corona and spend on creating new assets as we think economy will bounce back sooner than expected,” the official said asking not to be quoted.

A similar strategy is adopted by the JSW group, which acquired several distressed assets in India including Jaypee group’s power projects, and Monnet Ispat steel mill. The group flagship, JSW Steel has also won the race to buy Bhushan Power and Steel for Rs 19,700 crore before the Corona virus pandemic hit the world.

The expansion of its steel production facilities at Vijaynagar, Karnataka is on track from 12 mtpa to 18 mtpa (million tonnes per annum) though the expansion at much smaller plant in Dolvi in Maharashtra has been delayed by six months. After adding Bhushan Power’s capacity and its own capacity, the company’s total capacity will touch 30 mtpa as it spent almost half of its Rs 49,000 crore expansion capex in the last two years. “We are fully committed to our acquisition of Bhushan Power,” said Seshagiri Rao, MD and CEO, of JSW group. The acquisition of BPSL is not part of Rs 49,000 crore expansion capex.

JSW’s rival, Tata Steel, which acquired Bhushan Steel for Rs 35,200 crore, will be focusing on expanding its capacity in Odisha to eight mtpa with an investment of Rs 23,500 crore. Similarly, the Tata group holding company, Tata Sons, is infusion funds in group companies to make sure that their expansion plans remain on track.