Mumbai: Sometime in the 1980s, when his commodity trading business—it was the one that set off his entrepreneurial journey—was doing well, very well, billionaire Gautam Adani toyed with the idea of buying land overseas for farming.

It would reasonably enable the perfect backward integration—a term that refers to the process of a manufacturer diversifying into making its key raw materials.

That wasn’t to be, and Adani moved on to other, bigger things.

He started importing coal, and built ports and power plants.

The original commodities business continued to grow, though—slowly, but steadily.

Over the years, the Adani group has made bite-sized investments to create an infrastructure and logistics backbone.

The idea was to scale it up the minute India embarked on agriculture reforms.

Though investments in these commodity businesses—the listed Adani Enterprises Ltd and the unlisted joint venture Adani Wilmar Ltd pale in comparison with the recently announced mega investments— analysts say they are vital businesses that can be integrated with the groups mainstay: infrastructure.

“The agri business is all about infrastructure," says Atul Chaturvedi, chief executive officer, agriculture business at Adani Group. “We are expecting the agri infrastructure space to become relevant in the future."

The group that is in the spotlight for its reported proximity to Prime Minister Narendra Modi, announced a ₹ 20,000 crore investment to expand the capacity of its Gujarat ports to 100 million tonnes per annum by 2020 this week.

In contrast, Adani will spend ₹ 250 crore on Adani Enterprises unit Adani Agri Logistics Ltd this year for building grain storage infrastructure which will take the total investments in the grain storage-handling-transportation network to less than ₹ 1,000 crore since inception in 2007.

Other agri and commodities businesses are growing, too; Adani Agrifresh Ltd, another unit of Adani Enterprises and Adani Wilmar also have growth plans lined up that are taking the company deeper into the agri sector.

Behind these investments is the belief that the government will, one day soon, allow companies a bigger role in the agri commodities business.

That is bound to happen, said an analyst.

“This government is focused on sustainable growth and for this it needs moderate inflation for which it likely to address infrastructure and productivity bottlenecks," said Jignesh Shah, proprietor of Capital Advisors.

“This is where large organized players such as Adani with the focus and resources in agriculture and infrastructure can help."

Number one

Overseas farmlands apart, Adani has toyed with several other ventures including ship breaking and oil refining, but he has only picked those in which he has the potential to be number one.

“He looks at various options and pursues whatever he thinks will make him biggest in that sector," says an executive working for the Adani group who asked not to be identified. “There might even be a strategic reason for getting into it."

In the agriculture sector also Adani is number one, in a way. It is the largest edible oil brand of India and perhaps the only large firm with a logistics chain for grains and fresh fruits.

Adani Agri Logistics set up the first of modern grain storage infrastructure in 2007 for the Food Corporation of India and is now setting up a similar facility for the Madhya Pradesh government.

It has built grain silos in Moga in Punjab and Kaithal in Haryana to store grains and corresponding receiving silos in Mumbai, Chennai, Bengaluru, Kolkata and Coimbatore, with Adani’s own railway rakes plying in between.

Adani Agrifresh has built controlled atmosphere storage for apples in Himachal Pradesh and supplies to the Indian and overseas markets. It is expanding both the grain and the fruit businesses—silos can be built in other places if Adani wins state government tenders and there could be a line extension for fruits.

Meanwhile, Adani Wilmar, the 15-year-old edible oil refining business Adani runs in partnership with the Singapore-based Wilmar International Ltd, is launching extensions springing from its well-known edible oil brand.

“At Adani, we want to be known as the big agri infrastructure player and Adani Wilmar to be a big food company in the country," says Chaturvedi, declining to give any investment figures for Agrifresh and Adani Wilmar.

“We certainly want to be big as far as agri infrastructure is concerned. Because that is what we think India needs."

All about infrastructure

There are obvious links between Adani’s agriculture businesses and its infrastructure ones.

Adani’s agriculture business is all about infrastructure and logistics with its integration with port and transport network to make easier and faster links between producer and consumer.

Gautam Adani believes commodities can move to consuming markets irrespective of which country they are produced in with the help of modern infrastructure, says the Adani executive cited above.

Still, making a mark in the agri commodities business will not be easy.

Analysts say there are several deterrents to agriculture such as low margins, low growth, regulatory issues and the risk of natural calamities.

They add that these also end up giving an early entrant an edge.

“There is no doubt in agri infrastructure, a lot needs to be done… there are many start-ups coming into the sector, but no big player like Adani," says Sukhpal Singh, faculty member at the Centre for Management in Agriculture at the Indian Institute of Management in Ahmedabad.

Singh believes the restructuring of the Food Corporation of India is on the cards with a possible reduction in the role the state-owned entity plays in procuring grain.

“This is where Adani could come in as it has the first mover advantage. This must be one of their targets," Singh added.

Indeed, Adani’s strategy may be to get the backbone infrastructure in place to move grains and fruits, and act as a wholesaler to retailers, say analysts.

So far, Adani has shied away from front-end retail, having got out of a retail chain in Gujarat some years ago just at the time many companies entered the fray and faced losses.

Policy shift

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