The Adani Group’s proposed investment of $11.5 billion (around Rs 1.08 lakh crore) into aluminium production is to be viewed as a foray into a booming commodity space and also a strategy to strengthen its own forward integration play. On Friday, the conglomerate, through a 50:50 joint venture with Abu Dhabi-based investment group, International Holding Company (IHC), announced this big-ticket investment in Odisha.
Overall, this project is meant to create an aluminium value chain in one integrated ecosystem – the official statement outlines “an alumina refinery of nearly four million tonnes per annum, an aluminium smelter of nearly two million tonnes per annum, and a downstream aluminium park of nearly one million tonnes per annum.” All this will be supported by a captive power capacity of about 4,000 megawatts and a green energy component of about 400 megawatts.
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Vinit Bolinjkar, Head (Research) at brokerage Ventura Securities, is clear that the foray into aluminium is another step in the Adani group’s strategy to strengthen its commodity presence. “Having got into copper (this is through a subsidiary, Kutch Copper, through a $1.2 billion greenfield copper smelter and refinery) earlier, aluminium can be viewed as the next step.
All these are high-growth areas and it makes sense to be in them,” he says. More importantly, aluminium reacting with water is a way to produce green hydrogen, which is a big part of the Adani Group’s renewable energy plans. In May 2022, the group made the first big foray into commodities through the acquisition of Holcim’s India businesses. The acquisition of Ambuja Cements and ACC for $10.5 billion gave it a big presence in the cement industry, a decision backed up by more buyouts over time.
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According to Deven R Choksey, Chairman and MD of wealth management and investment advisory firm DRChoksey Finserv, copper is a critical raw material in power transmission. “This is a good example of forward integration. Even the proposed data centre business will need copper and electrical cables,” he says. In many ways, a significant presence in aluminium and copper can be viewed as a strategic advantage in the Adani Group’s power business.
“The greenfield project will be developed in two phases with investments of ₹66,000 crore and ₹44,000 crore, making it Odisha’s largest Foreign Direct Investment (FDI) proposal,” said a company statement. The Indian aluminium industry has been dominated by Hindalco Industries and Vedanta Aluminium Metal. Clearly, the entry of Adani makes the story very interesting.
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