What kind of pact are Adani and Aramco making?

Adani forays into Sri Lanka’s renewable energy sector, races 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, to make Has tied up with a Canadian firm. hydrogen fuel cell, and expanded its investments in electricity and airports.

Adani is among the world’s billionaires who have seen their fortunes rise despite the collapse of global economies in the wake of the pandemic. Ultra-loose monetary policy adopted by the US, Europe and Japan to protect their economies from the economic crisis induced by the pandemic has pushed liquidity into the world’s stock markets. Well-performing companies have seen their valuations on the markets rise sharply, with even mediocre companies seeing their stock prices boom from the trillions of dollars in excess liquidity that the developed world has provided by central banks. Made through financial assistance and property purchases. As a result of this process, Gautam Adani, the head of the Adani Group, has increased personal wealth by $49 billion in the past year.

The US Fed has announced that it will raise rates six times, up from the 25 basis-point increase it made last week. Other central banks are also expected to follow suit. Stock prices are expected to come down and yields to rise.

When stock prices are at their peak, it’s the best time for companies to go on a global buying spree for other companies. Since both the acquirer’s share price and the acquirer’s share price are set to come down, it may, at first, seem like there is no major advantage at the time of the transaction. However, it will sharply discount the previous run-up in emerging market stocks, especially India stocks, and is also likely to lead to a sharp decline in the prices of these stocks. Therefore, it makes sense for Gautam Adani to go on an acquisition spree before the stock prices plummet. What’s the point of meeting its acquisition targets and finalizing deals at a time when Adani’s shares are potentially on the verge of decline?

To partner with Adani is to be a partner in the growth story of India, one of the strongest in the emerging world. Adani has proven execution capability and is widely considered to be in the good books of the Government of India. It makes sense for foreign companies seeking diversification and growth to partner with Adani.

For sovereign wealth funds such as Saudi Arabia’s PIF, freezing Russia’s external reserves and the assets of its sovereign wealth fund clearly indicate that investing surplus cash in real assets is far more prudent in fast-growing economies. Have bank accounts or government bonds in rich countries.

Such factors offset the possibility of Adani’s shares falling faster than those of its partners from economies with less buoyant stock markets than India.

It is tempting to read Adani’s willingness to compete with Mukesh Ambani in the tie-up with Saudi Aramco, whose proposed partnership with Aramco failed to materialize. Adani and Ambani have DNA: their strength does not come from sticking to weaving while reciting mantras about core competency, but from seizing the opportunities that present themselves in different fields and their execution. perform well on these with the ability to obtain government support. a major component.

PIF is interested in India’s infrastructure sectors, which can only grow if India continues to grow and urbanise. Adani is a major player in infrastructure and renewable energy with its green hydrogen plans. Their partnership makes sense for both parties thanks to the kind of diversification that each seeks to achieve.