Karan Adani, CEO, Adani Ports, says “we are transforming the company. We are not just going to be a port company, but more of a solution company to our customers and give them a solution for their logistics needs all the way to their factory gate and hence develop whatever infrastructure we need to do in the hinterland – be it rail, be it ICDs, warehousing, trucking solution, rail solution. That is what we would be going towards and it is going to be more of a solution-based approach with infrastructure embedded into it and also technology embedded into it.”
On Adani Ports & Sri Lanka venture
We are predominantly an India-focussed company with infrastructure in India. We entered Colombo two years back in partnership with John Keells and Sri Lankan Port Authority. We were always looking for a footprint in this part of the country because today almost 50% of India’s container movement gets transshipped out of Colombo and so we thought it was extremely important that for a company like us to have a presence over here in order to give a more surety on the supply chain for the Indian importer-exporter and also to give the same level of visibility, transparency, as well as the same operational predictability as what we give in India and the idea is that how do we help them to reduce that cost of overall logistics cost for them to do… for any importer or an exporter.
We were also discussing earlier in the day that this is a step in the logistics space here, but you eventually also have an eye on probably doing something around the power space, renewables over here. What are the possibilities?
As we have done with Bangladesh, we have set up a power plant in India in Jharkhand and then we are supplying electricity through a transmission line in Bangladesh. We do see that there is a great opportunity to have wind farms set up in the northern part of Sri Lanka and then to set up a transmission line into India and export that power from Sri Lanka into India, renewable power and that is what we are looking at.
I think it is a great opportunity because the renewable PLFs that we get over here, especially in the northern part on the onshore, is the same as an offshore wind farm. We do see a lot of possibility and the idea is how do we start working towards integration of both the economy so that it helps, interdependency always helps. End of the day, it helps in terms of the overall economics and making sure that your neighbours also grow along with you. So, to bring that overall stability, it is always good that we work with our neighbours and we try to integrate as much as possible.
I was just going through your annual report of the Adani Ports. It is outstandingly written, with a lot of detailed research. Two things I want to talk about. One is vision 2025, which is more near-term and medium-term vision and then you talk about 2030. So, it has more strategic initiatives which you aim to take out there. If you could just throw some light on that.
So, by 2025, we are achieving two large immediate objectives. By 2025, we would be hitting 500 million tonnes of handling as APSEZ and second, we would be a carbon-neutral company by 2025. By 2030, we are targeting to be the largest port company globally and also from an India perspective to be the largest transport utility. What does it mean by transport utility?
We are transforming the company. We are not just going to be a port company, but more of a solution company to our customers and give them a solution for their logistics needs all the way to their factory gate and hence develop whatever infrastructure we need to do in the hinterland – be it rail, be it ICDs, warehousing, trucking solution, rail solution. That is what we would be going towards and it is going to be more of a solution-based approach with infrastructure embedded into it and also technology embedded into it.
I can understand clearly, it talks a lot about how you are going to integrate customers, what they want, engage with them closely and become more solution-oriented than just a port company.
How are you using the ports as a very key strategic logistic play because up till now, logistics only meant road. When I see the map of India and how you are expanding, it appears that there is a pearl kind of a strategy at play. Can you talk more about it?
From India’s perspective, when you rank them, coastal is the cheapest mode of transport, whether it is coastal shipping or inland waterways, followed by rail and then followed by road. Unfortunately, for a country of our size, still 80% of cargo moves by road and that is why our cost of logistics is so high.
In order to bring our cost of logistics down, we have to shift as much as possible to rail as well as inland waterways and coastal and obviously port is an entry and exit for any importer or an exporter and that is what we were looking at when one looks at the whole value chain port is a very small component but that component gives us the visibility of the whole value chain and what we have seen, noticed is because there are multiple players delivering all the way up to the plant, there is a lot of inefficiency in the system and the idea is using that information. How do we break down and how do we give a seamless solution so that we reduce the inefficiencies in the system?
I also observed that you are adopting all the best practices of new age India, higher contribution of representation from women workers, much more technology imprint and automation. Can you talk more about that?
So at the end of the day, from ports, we collect a lot of data. What do we do with that data to make better decisions in terms of operations and customer engagement? A lot of work is getting done over there. As I said, we want to create the technology layer from which an importer and exporter or as a customer you get a full visibility, live visibility of where exactly your product is, you do not need to call the port, you do not need to call any of our team members but the idea is that how do you get full visibility, transparency into the system. That is what we are working towards.
From our strategic objective we want to go greener and more efficient and obviously we want to have more diversity into our workforce. These are the three large objectives that we have.
One last question from the stock market perspective because your stock over the period has created a lot of value for long-term investors and I saw a very high degree of focus in your report about efficiencies. The word efficiency was repeated and there was a very clear focus on ROCE and asset light. What is the transformation of the business model that you are adopting?
As you would have seen we have given a five-year roadmap. At the end of five years we want our ROCE to be in the range of 19 to 22% and we are at 12% right now. The reason why we have given that is because we have used the last 10 years to develop and create infrastructure. We believe that now is the time to optimize, to sweat the assets and to squeeze and to get more efficiency and more and more operations out of it. That is why we believe there is going to be a hockey stick in terms of ROCE perspective.
Efficiency is important because at the end of the day if we are not efficient, we would not be able to help our customers derive better value and be more competitive in the global market. So that is why there is a huge amount of focus in terms of efficiency of product whether it is operations, whether it is turnaround time or whether it is business mix or whether it is even cargo loss.
So what we have looked at is how do we help our customers reduce their cost of logistics so that they are more competitive in the global market and that indirectly benefit us because there will be more volume for us.