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Inside Adani Group’s growing B2C dreams

“How frequently does someone fly? How much gas or electricity does someone consume? What type of real estate does someone prefer? We already have all this data,” Adani said. “Our biggest advantage is we do not have to buy consumers,” he added.

That is how India’s second richest man unveiled a not-so-secret “secret group” called Adani Digital Labs to the world. The digital labs unit, a newly incubated division under AEL, has zoomed from one employee to 78 employees in just six months. Adani’s son Jeet and his nephew Sagar will head Digital Labs. The unit is expected to carry the weight of the group’s burgeoning digital ambitions, which—to put it mildly—are rather lofty.

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Currently, the Adani Group claims to service over 400 million consumers, who engage with the group’s businesses via multiple touchpoints—ranging from Adani Airport, Adani Wilmar and Adani Total Gas to Adani Electricity. The plan is to induce all those existing consumers to interact with the company via one app. If the plan succeeds, it could serve as a lynchpin to transition the group from a B2B-centric (business-to-business) firm to a B2C (business-to-consumer) player.

Interestingly, the Adani Group acquired a significant minority stake in Flipkart-owned travel app Cleartrip late last month—ostensibly, a cog in the unfolding super app strategy. Adani’s competitors, Reliance Industries Ltd and the Tata Group are also engaged in creating their own super apps currently.

“If people are already using their services, ultimately, every company would look at how they can improve the experience. And Adani’s super app will bring all (its) customers onto one platform, tracking their behaviour and offering services accordingly,” said Deven Choksey, managing director of KRChoksey Shares and Securities Pvt. Ltd. For Adani, at the heart of this B2C transition are its consumer-facing businesses mentioned earlier. All the consumer data that will land at the group’s doorstep through its entities will be managed via two subsidiaries—Adani ConneX and Adani Digital Labs, both of which were born only recently.

Adani Digital Labs was formed on 22 September with the aim of transforming the group’s consumer businesses into digital-first businesses by creating an omnichannel, integrated platform. The consumer insights that the group will obtain through the unified platform will help it build the super app.

Analysts, however, are deeply sceptical of the group’s super app plans. “(The) Tatas have consumer brands like BigBasket, 1mg, Taj Hotels, Croma, Titan, Cliq, Starbucks and Air Asia, among others,” said an analyst tracking the Adani Group who requested anonymity. “But Adani does not have any consumer brand other than Fortune. It remains to be seen what value would Adani bring for a user to download their super app,” the analyst added.

What could also dampen the group’s plan is the Indian government’s draft rules on e-commerce, which prevent related parties from selling on an online marketplace or platform. Under the rules, which are yet to be finalized, apps are not allowed to have sellers with the same brand name and companies are not allowed to share customer trends and behaviour in order to cross-sell or target users.

The B2C pivot

But why is Adani, who has built his empire in the B2B segment, suddenly betting on consumer-focused businesses?

“A lot of these large organizations have spent tonnes of money on technology and they are looking for a clear ROI (return on investment),” said Sanchit Vir Gogia, founder and chief executive officer, Greyhound Research. “The idea is to turn this investment into a standalone entity or a separate team that not only supports the conglomerate but also becomes a profitable entity on its own with a clear ROI,” he added. Adani’s investments in data centres via ConneX is a case in point.

Gogia added that going forward, the investments are only bound to grow multi-fold, simply because the demands from the ongoing digital leap are far too many.

Besides, when conglomerates invest large sums in technology, they create heaps of intellectual property (IP). Then, they look for ways to monetize the IP by targeting the industry that they cater to. So, the thought process is that since the companies have created swathes of physical assets, why not marry the offline asset to an online one. Adani who has thus far built one of the most successful infrastructure businesses in the country—spanning seaports, logistics, thermal and renewable power generation, city gas utilities and real estate, among others believes that each of these businesses have adjacencies within themselves. What the group has built over the past three decades in India’s diversified infrastructure business, it says, is now manifesting itself as an integrated “platform of platforms”, moving the group closer to accessing the Indian end consumer.

“I know of no business model akin to ours with access to an unlimited B2B and B2C market over the next several decades,” Gautam Adani wrote in the company’s annual report.

The importance of fortune

Adani founded AEL, the group’s flagship company in 1988. And from there, the company expanded into various businesses. But his businesses especially picked up pace post-2015, when the Modi government introduced a slew of infrastructure reforms. “We were riding on the back of government reforms. There is no other reason for our growth,” said an official from the company on the condition of anonymity. The Adani Group did not respond to queries sent via email.

The group’s growth has been so rapid that this year alone, the stock surges have added over ₹7.6 trillion to the group’s market capitalization—beating that of Reliance Industries Ltd, according to data from Capitaline and Bloomberg. However, the group’s debt has also ballooned to over ₹1 trillion. For the financial year 2021, the consolidated Ebitda (or earnings before interest, taxes, depreciation and amortization) for Adani’s listed portfolio was over ₹32,000 crore, registering a year-on-year growth of 22%.

Adani Wilmar is currently the only direct consumer-focusing business. A 50:50 joint venture between AEL and Singapore-based Wilmar International, Adani Wilmar will shortly hit the bourses to raise ₹4,500 crore through an initial public offering (IPO). The business sells a range of edible oils and food products under the Fortune brand, commanding an 18.3% share in the edible oil market, putting it at the No.1 position. Apart from its physical retail presence through Fortune Mart, the company also sells through Fortune Online, a one-stop online shop for all the products under the Fortune brand and Fortune Mart. It is estimated that there are around 4.5 million retail outlets present in India and Adani Wilmar covers almost 35% of those, the company said in its DRHP (draft red herring prospectus) filed with the Securities Exchange Board of India (Sebi).

It has also launched Fortune Business, a mobile application to provide business owners one-stop access to a wide selection of the firm’s products.

“Adani Wilmar is key to their B2C plan,” said the analyst quoted above. “It puts the company directly in touch with the consumer, their preferences and, of course, their data, which can be leveraged hugely.”

The airports bet

Adding wings to the B2C ambition will be the airport business. Adani entered the airport business only in 2019 through Adani Airports, a wholly-owned subsidiary of AEL. It is currently active in eight major cities—Lucknow, Jaipur, Thiruvananthapuram, Mangaluru, Guwahati, Mumbai and Ahmedabad. Another airport at Navi Mumbai is under construction via a concession agreement. These airports handle 25% of India’s air traffic consumer base (roughly 300 plus million people). One-third of all the air cargo in the country also leaves from Adani’s airports. And with India expected to become the third-largest aviation market by 2025, according to the International Air Transport Association (IATA), there is a huge customer base waiting to be tapped.

The airports segment will provide it with a business model that assures hybrid revenue (including aero and non-aero revenues), allowing it to capitalize on about 300 million users—of which about 100 million will be passengers and 200 million will be non-passengers.

“We are (specifically) targeting non-aero revenues,” said the Adani official quoted above. “We intend to design futuristic airports, develop entertainment destinations (aerotropolis, airport village, hotels and malls, among others) and enhance domestic airline connectivity with new locations. We aim to create a Changi (Singapore’s premier airport) which has customers across age groups and where people visit not just to travel, but for leisure too,” the official said. Changi Airport has been consistently ranked among the world’s best airports.

Adani Airports plans to combine attractions including hundreds of retail stores, restaurants, gaming zones and hotels, among others, targeting not only passengers but customers in general too. “Our plan is to have a loyalty and rewards program for our customers and passengers. We could also launch a mobile application which will help consumers redeem their points through shopping, dining, flight reservations, etc.,” the official added.

The Changi Airport runs the Changi Rewards loyalty program and customers use the iChangi Mobile Application to redeem their points. The airport connects with passengers worldwide via social media.

“In essence, Adani is exploring to leverage the Adani Group’s access to its wide retail customer base from its gas, electricity and airport businesses to cross-sell products,” the analyst quoted above said, adding that gas and electricity are segments which will give Adani access to the consumption patterns of a wide swathe of the country. He explained that once the company analyses the consumption pattern, it can push or cross-sell products to consumers, bracketing them in the relevant income/ expenditure category.

In addition to its power and transmission business, the Adani Group runs two joint ventures in the city gas distribution business—one with French Energy major Total SA called Adani Total Gas Ltd (where it holds a 62.6% stake). The second is an equal joint venture with Indian Oil Corp. Ltd called Indian Oil-Adani Gas Private Ltd. The joint ventures together hold licenses to sell natural gas in 38 geographical areas.

“Adani has a lot of physical assets—including road, rail and airport—that a consumer would invariably use,” Greyhound Research’s Gogia said. “So, the idea is to stitch your journey across that. The intent is that the more they know about you, they can upsell and cross-sell products to you,” he added.

So, as the Indian consumer’s lifestyle evolves and consumption grows, Adani sees an opportunity to deepen his firm’s relevance far beyond roads, ports and power plants. Whether this leap towards a super app is a wise strategic shift, only time will tell.

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