Not unlike some of their global peers, Indian business people are renowned for their financial prudence. Investments are made after careful deliberation in a step-by-step fashion, often after exhausting existing capacities to the fullest. Adani Ports is the antithesis to this behavior. Massive investments were made early on in anticipation of substantial demand as well as with the determination to become one of the leading port operators globally in terms of efficiency.
Adani Ports & Special Economic Zone Ltd (APSEZL) is one of the key businesses of the Adani Group and uniquely positioned to take advantage of the favourable environment for non-major ports in India. Mundra, APSEZL’s main port, has the fastest turnaround time for ships among Indian ports of 18-20 hours. It was also the first Indian port to cross the 100 million metric tonnes mark in cargo handling in FY14.
APSEZL's financial performance is outstanding. Revenue growth from FY10 to FY15 was at a CAGR of 34 percent with FY15 revenue of Rs 6,152 crore. Close to 90 percent of the revenues comes from Adani Ports & SEZ Ltd. The company's EBIT margin stands close to an exceptional 60 percent with a ROCE margin of 13-15 percent over the last two years. APSEZL stands out, both in terms of India and international comparisons.
So what drives the spectacular success of Adani Ports vs both national and international competitors? A capital-intensive business such as ports required volume to break even within a reasonable time frame. Volume required mechanisation to ensure fast and efficient handling of containers, coal, fertilisers, and other cargo. Mechanisation in turn required the right planning and master plan of the port as well as the perfect location for the same.
The right location was found in the port of Mundra. Protected by the Saurashtra landmass, the port did not require heavy investment in the building of breakwaters. Its location near a creek allowed it to be a deep draft port with 365 days of operation.
Adani decided to develop this infrastructure himself rather than waiting for government support as speed and scale were essential for his project to succeed. Guided by the principle that berths should wait for ships rather than the other way around, the port was constructed with a targeted berth productivity of 65 percent maximum. In addition, an inverted funnel at a factor of ten between maritime and evacuation capacity was built, ie, the capacity to discharge any cargo from ships to the hinterland was ten times larger than the berth capacity.
Global benchmarking is key for Mundra. Malay Mahadevia, director Adani Ports, says, "It would be easy to benchmark ourselves against Indian ports, but that is not our competition. We want to be among the best globally and hence we compare our performance in coal, steel, containers, etc. against the leading ports globally whether they are from China or Europe or wherever. We also continuously work with consultants to ensure that we are abreast of the latest thinking and innovation. We can't stop innovating in this game as we would fall immediately behind.”
With the clear ambition to continue to drive the port sector in India, Mundra's future development is bright.