Adani has room to increase its footprint even more as the Indian ports sector is consolidating.
“There is visibly low interest in bidding for new assets and capacity addition at both major and minor ports is slowing (estimate 3% for major ports over FY19-24),” Centrum Institutional research said in a report.
Players such as Balaji Infrastructure Ltd., Navayuga Group, have exited, having sold their stakes to Adani Ports, according to data shared by Centrum Research. “There has been a consolidation in the ports industry over the last five years. Several prominent private players have either exited their investments or are at least not investing any further due to financial stress or owing to change in business strategy.”
The ones that still focus on the port business include APM Terminals, DP World, JSW Infrastructure Ltd., Shapoorji Pallonji Group and PSA.
“There is no competition for Adani in the ports business, and there is no body even second close to Adani in terms of ports operation,” Ramesh Singhal, director at i-maritime Consultancy Pvt. said over the phone.
Mundra is at the centre of Adani’s port empire.
Geographic placement gives it a key edge, helping it tap the North India market that accounts for 40% of the container volume, Tarwadi of India Ratings said.
Adani also struck strategic partnerships with global shipping liners and port operators during its early days. That included tie-ups with MCS and CMA-CGM, second and fourth largest ship liners in the world, respectively.
The port’s dwell time (how long cargo ships spend within a port) and transit time (how long it takes to deliver a shipment to its final destination) was lower compared with Mumbai’s Jawahar Lal Nehru Port Terminal, the largest container port at the time. As of December 2020, India Ratings data showed, JNPT had a dwell time of 21 hours as against two hours for Mundra.
“Due to Adani’s efficient and agile operations, state of the art infrastructure and competitive tariffs advantage, the company was able to pull demand with Mundra,” said Ankit Patel, vice president and co-head at ICRA Ltd. If the industry gets an alternate which not only saves them time, cost, reduce shipping time, automatically people will start to shift, and that’s what happened with Mundra, he said.
And Adani Ports’ ability to strike partnerships not only helped it increase cargo volumes but also gave it sticky business. More than 60% of Adani’s cargo is being backed either by long-term pacts or strategic partnerships, Centrum Research said.
For example, Mundra has long-term agreements with Indian Oil Corp. and Hindustan Petroleum Corp. for crude oil, while it has a long-term ‘take or pay’ agreement with Tata Power Ltd. and Adani Power Ltd. for handling coal, the report said.
Adani Ports continues to outperform industry’s cargo growth because of capacity expansions, cargo diversification and investments in evacuation infrastructure, it said.
The firm capitalises on opportunities ahead of time investment, like investing in modern and efficient marine, cargo handling, storage and evacuation infrastructure, Centrum said. “This has helped APSEZ attract cargo away from legacy ports as well as from ports operating on a sub-optimal scale.”
The company is duplicating the Mundra playbook across India on operations and financial prudence. The strategy is to gain foothold in established trade routes and attract cargo volumes through efficient and value-added services.
Investors are buying into this strategy. Last year, Adani Ports crossed Rs 1 lakh crore in market capitalisation for the first time after its shares hit a record high—the second group firm to reach the milestone after Adani Green Energy Ltd.