Karan Adani claimed last week in front of Sri Lankan officials and US diplomats in a five-star hotel in Colombo that a newly inked $553 million US government financing contract for a port facility being developed by his family's conglomerate was a "reaffirmation by the international community."
Following a humiliating short-seller onslaught and a number of corporate fraud claims this year, the announcement was a welcome reprieve for India's Adani Group. It also signaled Washington's support for Karan's father, billionaire Gautam Adani, a close supporter of Prime Minister Narendra Modi, whose port empire would help limit China's maritime power in the Indian Ocean.
More than one-third of the world's bulk freight traffic and two-thirds of oil shipments pass through these waterways. Adani's port ambitions, according to Chakri Lokapriya, chief investment officer at TCG Asset Management Co. in Mumbai, are a "strategic" play that will help India challenge China's own string of ports spanning from Sri Lanka to Pakistan.
Now, Adani Ports and Special Economic Zone Ltd., the conglomerate's crown jewel, is looking for more "opportunities in our neighboring countries," according to Karan Adani, the operator's chief executive officer, in the Sri Lankan capital. These include possible operations in Bangladesh, as well as East African and Southeast Asian nations such as Tanzania and Vietnam, in addition to its existing projects in Sri Lanka and Israel, he said.
In a world that is "looking beyond China - it is indeed a Chinese-styled expansion by Adani," according to Sanjiv Bhasin, director at Mumbai-based IIFL Securities Ltd.
The 'Long Game'
The US finance for the Adani-led West Container Terminal in Colombo via the Intentional Development Finance Corp. was a shot in the arm for the Adani Group's foreign growth plans after a difficult few years.
Following a military takeover, the conglomerate canceled its intentions to build a port in Myanmar. Last year, Adani was met with protests and political criticism in Sri Lanka, which characterized the company's port and energy ambitions as opaque schemes imposed by New Delhi. The country's major opposition party has accused Modi of using the country's diplomatic service to boost the tycoon's interests, something the government and Adani dispute.
While Adani Ports is India's largest operator, with 14 domestic terminals capable of handling 600 million metric tonnes of capacity, it is relatively unknown outside of India. Before it can challenge China's vast sphere of influence, which is built on investments in more than 90 ports outside its borders, 13 of which have majority Chinese control, the US Council on Foreign Relations estimates.
"Given that Beijing is so far ahead, it's difficult for Adani or anyone else to hold a candle to China's infrastructure investments in the foreseeable future," said Michael Kugelman, director of the Wilson Center's South Asia Institute in Washington. "However, Adani and his companies are in it for the long haul." They intend to gradually but steadily expand new investments in South Asia and beyond."
Gautam Adani has previously openly criticized China, but the conglomerate's focus remains firmly rooted at home, where the billionaire is thought to have maintained a long-standing bond with Modi, publicly connecting his business goals to the government's economic objectives.
According to Karan Adani, Adani Ports' domestic business accounts for over 90% of the company's revenue, and "this will continue as we expand in India." Last month, a new Adani transshipment terminal in the southern state of Kerala was launched, with the goal of capturing a larger share of foreign goods.
"Trade is booming, we are just playing catch up," he said. "We are always short of capacity and that is hurting Indian trade."
