AEL: A Successful Incubation Story

Incubators are more than just a buzzword. They play a significant role in a startup’s rise to success. They are a kind of launchpad for startups and enterprises in their early stages, offering them resources they need to develop and expand.

The Adani Group’s incubation continues to be a success story with airports, green hydrogen and other assets emerging strongly and now contributing near 8% of the portfolio EBITDA, said Jugeshinder (Robbie) Singh, Group CFO, while releasing the Adani Portfolio’s half yearly financial performance update. He said the Portfolio had withstood the test of time and had a track record of tremendous growth despite macroeconomic and other challenges.

The Group’s business model is unique. The organization keeps building one business after another and expanding – this is called adjacencies of the business models. AEL is considered the largest listed business incubator of India with a focus on four core sectors: energy and utility, transportation and logistics, consumer goods, and primary industry. These businesses are a balanced combination of well-established ventures and emerging enterprises, all dedicated to meeting the evolving needs of India.

Within the Adani portfolio, AEL has a track record of establishing new business ventures, growing them into substantial, self-sufficient entities, and then spinning them off into separately listed, scalable companies. Since its inception in 1993, AEL has proven its ability to create sustainable infrastructure enterprises by continuously generating value for shareholders by using this strategic approach.

Incubators help businesses get their ideas off the ground and give them a leg up. In its report, Jefferies Equity Research said AEL had incubated six industry leading infra businesses and listed them, including by way of demergers. Over the years, the group has also demonstrated that it is ready to forge necessary strategic alliances (for example, with CMA-CGM, TotalEnergies, EdgeConnex and Wilmar) to support business growth. Over a 25-year period, these ventures have given stockholders significant returns.

The report said that investments in airports, green hydrogen, data centers and roads are likely to be ramped up over next decade and they are expected to be next growth driver for business. AEL classifies its current portfolio into established businesses (like IRM coal trading, mining services and solar manufacturing) and developing businesses, which include airports, roads, new industries (green hydrogen). There are several businesses (such as copper, PVC, water infrastructure, defence and aerospace) that are still in the early stages of development and aren’t contributing to revenues/profitability currently. With a new set of businesses, the company is also extending its focus to B2C businesses through airports, digital (super app) and FMCG.

Using financial flows from established businesses, AEL’s business model focuses on growing emerging or next generation businesses.