Inside Gautam Adani's $200 billion succession plan, power and controversies

In early 2018, Gautam Adani — Asia’s second richest man, with a fortune of more than $100 billion — invited his sons and nephews to his home in the western Indian city of Ahmedabad. Over lunch, the patriarch asked the four younger men an unexpected question: Did they want to carve up the Adani Group’s sprawling businesses between themselves and part ways? He gave them three months to decide.

That family confab kicked off what’s poised to become one of the world’s largest and most challenging transfers of wealth. The 62-year-old plans to step down at 70, he told Bloomberg Television’s Inside Adani, a special package about the conglomerate. That will open the door to a leadership transition in the early 2030s that, if fully realized, is fraught with risks for the billionaire clan and may have major ramifications for India’s economy and beyond.

In a rare interview, the tycoon outlined his retirement and succession plans for the first time. The interview, which was limited to his leadership transition arrangements, did not address controversies swirling around his conglomerate, from investor concerns about business and accounting practices to a US Department of Justice bribery investigation. His heirs discussed issues including the various investigations and their vision for the group.

When Gautam’s sons, Karan (37) and Jeet (26), and their cousins, Pranav (45) and Sagar (30), came back to the patriarch, they told him they wanted to run the conglomerate together as a family, even after Gautam’s departure.

That answer set in motion a series of moves, many of which have escaped public attention, such as the creation of a four-way leadership structure that splits management of the businesses but requires the heirs to work together. Their areas of responsibility do not neatly align with specific units or listed entities. Even common services across the group — such as human resources, finance and IT support — have been carved up among the four.

The Big Take Asia, host K. Oanh Ha talks to Bloomberg editor Anto Antony about the Adanis' ambitious succession plan, in the wake of regulatory probes and a daring short-seller attack. We also hear from the Adanis themselves on their vision of an Adani Group without Gautam at the helm, how they'll make decisions to manage an empire "" which spans everything from airports to solar farms "" and what's at stake for India's $3.5 trillion economy.

Oanh Ha: In 2018, Asia's second-richest man, Gautam Adani invited his brothers, sons and nephews to his home for a meal.

Anto Antony: All seven of them were sitting around the dining table, having lunch. And very unexpectedly"

Ha: Gautam Adani popped the question: how do you see the future?

Antony: Do you guys want to carve up the business between you or do you want to run the entire business as a single family?

Ha: The business Gautam was asking them about is the Adani Group - a sprawling conglomerate which started with a company set up by Gautam and his brothers back in 1988. Today the Adani Group is worth more than 210 billion US dollars and touches almost every facet of daily life in India.

Antony: When you switch on the electric bulb at home, his business is touching your life. When you are buying groceries from the shop, his business is touching your life. When you are looking to buy a house, His business is touching your life.

Ha: Anto Antony is an editor at Bloomberg News based in Mumbai, covering South Asia. And he says, for years - Gautam has been essentially the super CEO of the Adani Group, making all the decisions for the entire conglomerate. But now, he was asking the family members before him, his only two sons and two nephews, how they want to run the company when he, the patriarch, steps down.

The question surprised the younger Adanis -

Antony: Because Gautam Adani was still in his 50s. None of them thought that he's thinking about succession or transition.

Ha: He gave them three months to work it out. And when they came back, it was a united front ""

Antony: They said that we have seen my father and his brothers working together to build up this legacy. And we always worked together, grew together. So there was no doubt in their mind that they should stay together.

Ha: It's a bold move for a wide-ranging group whose units span everything from airports to solar farms. And this succession is poised to be one of the world's largest and most challenging transfers of wealth. Bloomberg sat down with Gautam and his four heirs for a series of exclusive interviews about what this transfer will look like ""

Gautam Adani: Succession is very, very important for the business sustainability. And it must be organic, gradual and very systematic.

Ha: Welcome to the Big Take Asia from Bloomberg News. I'm Oanh Ha. Every week, we take you inside some of the world's biggest and most powerful economies, and the markets, tycoons and businesses that drive this ever-shifting region.

Today on the show, Bloomberg's exclusive interviews with the Adanis " how the family envisions an Adani Group without their patriarch at the helm " and what's at stake for India's economy.

Gautam Adani's first big break came when he decided to help his brother with his plastics factory. That's when he got into global trading by importing polyvinyl chloride, or PVC, for his brother's business. And it led him to set up his flagship company "" what would become Adani Enterprises, in 1988.

Antony: That's where he got his first real break. From there, he started exploring projects in the port sector. He set up Mundra port, which is, as of now, one of the largest ports in India. After that, we are seeing a meteoric growth, which really gathered pace after 2010. Many people say that it is very closely associated to Prime Minister Narendra Modi's ascent.

Ha: Adani's businesses have often been closely aligned with Prime Minister Narendra Modi's priorities, and the Adani group has stepped in where the nation lacked resources, like in infrastructure and green energy.

Antony: India is a country of 1.4 billion people, but it really lacks infrastructure, whether it is roads, ports, airports, power. Energy is a huge issue out here. There are so many millions of households which don't have access to electricity. So that's how when Gautam Adani decides to step in and help build this infrastructure, his priorities and business interest got aligned well with that of the federal or state governments in India. So as he himself puts it, when you align your interest with the government's, it always gives you tailwinds rather than headwinds. And it has really propelled his business forward and along with it, his wealth.

Ha: The Adani Group is India's biggest importer of coal, it's the largest owner of solar farms, and Adani-owned ports carry almost half the country's shipping containers, while more than 90 million people use their airports each year. And for years, the Adani Group appeared to flourish with infrastructure projects like these. Gautam is currently Asia's second richest man and one of the most influential business leaders in the world. He's worth more than 100 billion US dollars.

But last year something happened ". that put the Adani Group's success" at risk.

Annabelle Droulers: Just to give the high-level understanding of who Hindenburg Research is"

Ha: In a daring short-selling attack, a New York-based group called Hindenburg Research accused the Adani Group of "the largest con in corporate history."

Droulers: It did disclose a short position in Adani Group and what it's saying basically is that the conglomerate engaged in market manipulation and accounting fraud as well. Now. Gautam Adani has denied this and he says that the report is baseless"

Ha: Hindenburg alleged that the Adani Group had used a web of companies in tax havens to inflate its revenue and manipulate stock prices. Critics have raised similar questions about the conglomerate for years. The group denied all claims and noted to Bloomberg that they provided a "very long and comprehensive response in just 72 hours on every single point." But the crisis" came at a very tense moment for the Adani Group.

Antony: This came at a time when the group was looking at one of the biggest share sales in its history. That share sale had to be pulled. The group lost a lot in market cap.

Ha: How much market cap did they lose?

Antony: 150 billion dollars in a few months.

Ha: Wow. Huge.

Antony: It took them six months to a year to assuage all these concerns and regain that market cap.

Ha: The Adani group has also faced regulatory probes at home and in the US, where prosecutors were investigating whether an Adani entity, executives linked to the company, or billionaire founder Gautam himself had paid bribes to Indian officials in return for favorable treatment on a green-energy project.

The Adani Group said none of its units has been notified of the probe, and that it's not aware of its chairman being part of the investigation. No Adani unit has been charged with wrongdoing by the US Justice Department, and investigations don't always lead to prosecutions. But the controversies swirling around the conglomerate have prompted some changes there ""

Ha: What are they doing differently after Hindenburg?

Antony: So they are cutting down on leverage in a big way. They are putting a lot of risk mitigation measures in place. They are more measured in their approach towards growth. And above all, they are communicating more.

Ha: And now, Anto says, he's seen a huge change in how the company is trying to be more transparent about their operations.

Antony: Till the Hindenburg report hit, many considered it as an opaque group. Many knew nothing about the group or its inner workings, the kind of processes they have, and so on. Now they are very aggressive about communicating, whether it's to the investors or media.

Ha: And this newfound openness of the Adani family to the media - may have also helped Bloomberg get rare access to the tycoon and his family. Anto and a TV crew spent nearly a dozen days following leaders of the Adani Group. And while Gautam Adani declined to address controversies swirling around his conglomerate "" he did agree to talk about the family conversations around succession ""

Gautam Adani: Succession is not a one-off event but it is a long term journey. And my plan of succession started almost a decade ago.

Ha: After the break, what the Adani family plans might mean for India and the rest of the world.

Bloomberg's Anto Antony was given unprecedented access to the Adani family. He and a TV crew spent nearly two weeks in India, visiting the headquarters, and meeting employees"Antony: Right from the janitor right up to group CEOs.

Ha: And taking field trips to visit their sites".

Antony: We went to a place called Khavda in Gujarat, which is a very arid region. It's a desert ball. So what they are trying to do is they are trying to cover up the area five times the size of Paris with solar panels and wind turbines.

Ha: One thing Anto wanted to talk with Gautam Adani about was "" why"" he was planning for succession now "" when he is still very much engaged in the business. Gautum told him he and his brothers want to be around to help the next generation.

Antony: So what Gautam Adani and his two brothers who are involved in the business are trying to do is transition it into the next generation at a time when they are still around to oversee and correct them when needed. This is a conglomerate which runs from selling apples to running airports. It's a complex set of businesses. Spread across various sectors. So the complexity of this transition is probably the reason why he's thinking of it right now.

Ha: And when is he planning to hand over the reins?

Antony: He's 62 right now, when he's 70 is when the transition happens. That's when he will retire. Gautam Adani is looking at handing over his empire to four successors.

Ha: These four successors are Gautam's sons, Karan and Jeet and their cousins, Pranav and Sagar.

Pranav is the eldest among the four and has been in the business for the longest. He now oversees most of the Adani Group's consumer businesses, including consumer goods, media and real estate. He's also responsible for redeveloping the Dharavi slum - one of Asia's largest and the size of Monaco. It involves relocating a million people at the heart of Mumbai who call the slum their home. Bloomberg followed Pranav on a visit to the area.

Antony: We saw many of the residents walking up to him, one of the key concerns which they had was "will we get a home right here?" They walked up to Pranav, they shared this concern. And when they raised these questions with him, he's a smooth talker with an easy smile and cool demeanor, so he will pat them on their back, hold their hands.

Ha: Sounds like he's also very much of a politician too.

Antony: If I had to pick one among the four who will be able to talk to the people who are staying in the slum and top executives or dignitaries in the same manner, that would be Pranav.

Ha: Next, we have Karan Adani, Gautam Adani's eldest son. Anto says he's a huge Formula 1 fan ""

Antony: If you walk into his office, you will see a lot of replicas of Ferrari cars, scale models of Ferrari cars, all over the place.

Ha: And he manages all the ports for the Adani Group

Antony: He's a no nonsense, driven, passionate guy when it comes to business.

Ha: Then we have Jeet Adani, Gautum's youngest son. He's the family's only trained engineer and looks after the group's airports. He is also in charge of the digital businesses as well as the defense unit, which makes equipment ranging from small arms to missiles.

Antony: He's the one who has got most of the mannerisms of Gautam Adani. Like he's a very affable guy, but I saw that when an executive tell him that something is not doable. He just lost his cool and raised his voice. So I asked him why and he said that it's because his pet peeve is that somebody telling him that something is not doable without trying it out and giving the rationale after trying it out.

Ha: Then we have Sagar Adani, the younger nephew of Gautam, who oversees the group's energy business, as well as finance.

Antony: He's the face to the investors like he's mostly traveling like 20 days a month he's traveling.

Ha: And how this succession plan will come together? Well, the businesses have been split between the four younger Adanis "" with each heading their own units, but when it comes to the decisions that affect the entire group - the four have agreed to make the call together.

Anto, how is this gonna work in reality? Because you've essentially got four heirs, who calls the shot if there's a disagreement?

Antony: So they are very clear that there is not going to be a first among the equals. All four will have equal say in management. So now if you have to take a major strategy decision, then all four has to be on board. It is going to be a joint decision making between them"

Ha: That sounds too good to be true.

Antony: That is what everybody is telling me. Most of the succession experts I talked to made that point. Some of them even said that you have to work against basic instincts of human beings to make this work. Because at some point, meritocracy will come up. Some people will be more committed to the businesses and will build their businesses up in a better way.

Ha: Anto did press Pranav, the eldest heir, on how realistic this new joint management structure actually is.

Antony: Transition plans with various large conglomerates had failed due to internal fissures within the next generation? What plans the group is putting in place to make sure that that doesn't happen?

Pranav Adani: I don't know if you're aware, but, we as a family are, uh, we have lunch every day together. Chairman, my uncle, my father, when he's there, and the whole second generation, we all actually have lunch together. We discuss issues, so there's a lot of communication happening.

Having said that, everyone is, of course, looking at different businesses. And though we are looking at different businesses, we are like one team, when it comes to discussions like talent management, how we look at the future of the company.

Ha: And when it comes to Gautam's personal fortunes "" some 100 billion dollars of it "" Anto's sources told him it would also be split equally among the four.

Antony: All this is held through a trust, the Adani family trust. And 8 years down the line, when Gautam Adani turns 70, each of the second generation will become an equal beneficiary of that trust. If we were doing it today each of them could have got about 25 billion dollars. But then we have to keep in mind the meteoric rise in wealth of the group. So seven years down the line it is anybody's guess what they will be.

Ha: Yep, centibillionaires for sure.

And Anto says this humongous wealth transfer and leadership transition doesn't just concern this single family. There's far-reaching ramifications for India's $3.5 trillion dollar economy, and its future development. One reason for that is that the Adani Group has played such a key role in helping India shore up its infrastructure ""

Antony: There is a lot of deficiencies in the infrastructure. So Adani is somebody who has come up and has been trying to plug that gap. We haven't seen anybody trying to do it at this scale ever in independent India's history.

So his success is very important because if he succeeds, then India will be able to grow at a faster pace. And India growing at a faster pace and living up to its potential is quite important for the global economy also because as the powerhouses like China to Germany are facing their own issues. And brokerage houses have been pointing out that India is among the countries which has to contribute most. to pull up the slack. So not only for India, but even for the global economy, it is quite important that this succession plan succeeds.

Ha: And what about Gautam if this all goes well?

Antony: Once the transition is complete and once you have more time at hand, what would be your plans?

Gautam Adani: Oh, ultimately I will retire and be more relaxed.