Gautam Adani Tie-up With Saudi Aramco

Table of Contents

What has happened?

Indian conglomerate Adani Group is exploring potential partnerships in Saudi Arabia, including the possibility of buying a stake in the world’s largest oil exporter, people with knowledge of the matter said.
The group, led by Indian tycoon Gautam Adani, has held preliminary talks on a range of potential cooperation and joint investment opportunities with Saudi Aramco and the country’s Public Investment Fund, according to the people.

Adani Group has discussed the idea of buying part of the PIF’s stake in Aramco, the people said.
While Adani is unlikely to shell out billions of dollars in cash for Aramco stock, at least in the short term, It could seek to link an investment to a broader tie-up or asset swap deal, the people said.
The Indian firm could team up with Aramco or subsidiaries like Sabic in areas such as renewable energy, crop nutrients or chemicals, one of the people said.
Adani may also offer the PIF, which is Saudi Arabia’s sovereign wealth fund, the opportunity to invest in infrastructure in India, another person said.

Bloomberg suggests that rather than investing cash, Gautam Adani seeks to invest with his shares, offering potential partners a stake in his group.
It makes sense for companies like Adani to strike share-swapping deals before the switch by the world’s major central banks from ultra-loose monetary policy to inflation-killing hawkishness.

Adani is among the world’s billionaires who have seen their fortunes soar even as global economies declined in the wake of the pandemic.
The ultra-loose monetary policy pursued by the US, Europe and Japan to insulate their economies from pandemic-induced economic woes has pushed liquidity into the world’s stock markets.
Well-performing companies have seen sharp rises in their valuation on the markets, even as mediocre companies too saw their stock prices buoyed by the trillions of dollars of additional liquidity.

Gautam Adani, the head of the Adani group, is reported to have gained $49 billion in personal wealth over the last one year, as a result of this process.
The US Fed has announced that it would raise rates six times, starting with the 25 basis-point increase it put in place last week.
Other central banks are expected to follow suit. Stock prices are slated to come down and yields to go up.
When stock prices are at their peak is the best time for companies to go on a global shopping spree for other companies.
So, it makes sense for Gautam Adani to go on an acquisition spree before stock prices dip.
How does it make sense for his acquisition targets to go along and finalize the deals at a time when Adani shares are potentially on the verge of decline?

To partner Adani is to partner India’s growth story, one of the more robust ones in the emerging world.
The Saudi petroleum giant spent more than two years negotiating a potential $15 billion investment in the oil-to-chemicals unit of Indian billionaire Mukesh Ambani’s Reliance Industries Ltd., only for talks to be scrapped in November.
Aramco said at the time it would continue to look at investing in India.
Adani has proven execution capability and is widely perceived to be in the good books of the Indian government.
It makes sense for foreign companies seeking diversification and growth to partner with Adani.

Last month, the Saudi government transferred a 4% stake to PIF.
The shares are now valued at about $89 billion.
PIF recently has kicked off discussions about how to monetize that holding as it seeks to raise funds for its ambitious investment goals, Bloomberg News has reported.
For sovereign wealth funds such as Saudi Arabia’s PIF, the freezing of Russia’s external reserves and the assets of its sovereign wealth fund send out the clear signal that,
It is far more prudent to invest surplus cash in real assets in fast-growing economies than to hold bank accounts or government bonds in rich countries.

The Indian billionaire is on the look-out for a number of acquisitions, not just this one deal with Saudi outfits.
Adani is entering Sri Lanka’s renewable energy sector, is in the race to buy a renewable energy company in India, is bidding for a bankrupt non-banking finance company,
Has bought into a media business in India, tied up with a Canadian firm to make hydrogen fuel cells, and expanded its investments in power and airports.
In January, Adani signed a pact with South Korea’s Posco to explore business opportunities in India.
The agreement includes the setting up a green steel mill in Gujarat, with a potential investment of as much as $5 billion over the coming years.

Q) Which of the following is correct regarding National Investment and Infrastructure Fund (NIIF)?