{"id":130049,"date":"2022-11-02T04:36:44","date_gmt":"2022-11-02T04:36:44","guid":{"rendered":"https:\/\/fin2me.com\/?p=130049"},"modified":"2022-11-02T04:36:44","modified_gmt":"2022-11-02T04:36:44","slug":"the-secret-of-gautam-adanis-success","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/the-secret-of-gautam-adanis-success\/","title":{"rendered":"The Secret of Gautam Adani’s Success"},"content":{"rendered":"

Gautambhai has shown that he has ability to withstand payment delays or vexatious court cases. That is where he is on a more comfortable wicket than many others.<\/strong>
A revealing excerpt from R N Bhaskar’s Gautam Adani: Reimagining Business in India and the World<\/em>.<\/strong><\/p>\n

It is true that many of the businesses that Gautambhai is into are regulated businesses, where he may enjoy a natural monopoly.<\/p>\n

This is true of power generation, transmission and distribution. It is true of roadways. Gas distribution too would also fall into the same basket.<\/p>\n

But the big advantage about being in these businesses is that — as mentioned earlier — if your legal documentation is watertight, and the price purchase agreements are carefully structured, if you have the skills required for speedy implementation of projects (time is money) and the deal is signed, it becomes a bankable proposition.<\/p>\n

The entrepreneur can now predict the rate of revenue flows into his coffers. The cash flows become long-term annuities.<\/p>\n

The rates of return can increase if better efficiencies kick in.<\/p>\n

He can use these cash flow projections to get money from the banks and also plan further diversifications.<\/p>\n

And if he is Teflon-coated, most of the irritants of payment delays and court cases will just bounce off him.<\/p>\n

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This is important because governments are known to try renege on payments. It may take some time.<\/p>\n

Many an entrepreneur has fallen by the wayside on account of such roadblocks.<\/p>\n

But it is possible to make governments pay up eventually — as has been the case in several disputes relating to power generation and power evacuation.<\/p>\n

Government have also tried to renegotiate tariffs for solar power.<\/p>\n

Eventually, no government can go against a well structured PPA.<\/p>\n

It is worth recalling that even the much-maligned Enron project could not be cancelled because of the way the legal documents were structured.<\/p>\n

Eventually, it was Enron’s fall in the US that allowed the Government of India to enter into a negotiated settlement, for which too a very high price had to be paid.<\/p>\n

An entrepreneur who has the ability to fight it out in courts, and also wait till there is a resolution, has a better chance of succeeding than one who has the right documentation, but does not have the financial strength to cope with delayed payments.<\/p>\n

It is this kind of fragility that has done many politician-backed entrepreneurs in.<\/p>\n

They may have had the right ideas and the right drive, but did not have the ability to withstand payment delays or vexatious court cases.<\/p>\n

Good profits<\/strong><\/p>\n

<\/p>\n

Gautambhai has shown that he has both. That is where he is on a more comfortable wicket than many others.<\/p>\n

This is where a study of the financials of both the ‘stigmatized capital’ beneficiaries become important.<\/p>\n

<\/p>\n

Look at the Adani and Ambani charts above. You will notice the following points:<\/p>\n