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Gautam Adani is set to announce trucking business to sharpen logistics

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AHMEDABAD : Billionaire Gautam Adani is set to announce his Group’s entry into the trucking service business along with a potential foray into coastal shipping, mainly running ships that ferry cement along the coast, as the Ahmedabad-based conglomerate stitches up the small gaps in the supply chain after buying Holcim Group’s cement assets in India for $10.5 billion (Rs82,000 crore) that makes it a formidable player in the building materials market.

Adani through Group unit Adani Logistics will soon start trucking services to plug the first and last mile connectivity gap,” said a person briefed on the strategy, asking not to be named, because the plan has not been made public yet.

Starting trucking services will add to the heft of Adani Logistics – which runs container trains, multimodal logistics parks, inland container depots, grain silos and warehouses across the country – and is primed to play a big role in the Group’s cement supply chain. Currently, the logistics units’ trucking needs are outsourced to third party transporters. “Instead, the plan is to do it in-house,” the person said.

The Group, through a Singapore unit, owns and runs Capesize ships, the biggest of the dry bulk cargo vessels, in international waters, for transporting coal belonging to its trading arm. “Entering the coastal shipping business with ships that carry cement, brings cost advantages. It will happen eventually,” the person mentioned earlier said.

Trucking and coastal shipping business will complete the entire logistics chain of the Group that includes 12 ports and terminals at key locations along the country’s long coastline supported by marine services and dredging businesses.

Alongside the Group’s port business, the logistics business is also implementing low carbon solutions to reduce the emission profile of itself and the customers.

Using a combination of ships and trucks has become imperative for the Group to help transport cement doorto-door and “build a uniquely integrated and differentiated business model that will be competitive and hard to match”.

Cement makers also use trains to haul the material in bagged form, which still require first and last mile connectivity – mainly through trucks – to reach customers.

Adani’s bigger rival, UltraTech Cement Ltd, uses cement carriers to ferry the material along the coast and runs captive port jetties that help load cement.

Cement carriers allow movement of the material in large bulk quantities which are bagged at the destination port and despatched to customers on trucks.

Gautam Adani harped on the “synergies” with his exiting businesses as the key driver for buying Holcim.

“Cement is fundamentally a game of supply chain and energy efficiency, and therefore our natural adjacencies look highly attractive to us,” Adani told after announcing the acquisition of Holcim.

“Be it mining, ensuring raw material availability, fuel sourcing, supply of power, or efficient logistic capabilities, all of these are existing synergies. For instance, with the circular economy principles becoming increasingly important, the ability to utilise fly ash from our power plants and consume all of it in cement production is a significant material advantage. Also, with Adani being India’s largest full-fledged logistics player, our understanding of warehousing as well as the economics of moving cement, be it through coastal shipping from our own ports, multi-modal road or rail networks, and thereafter being able to deliver at multiple locations across the country, is a significant factor in our being able to efficiently serve a vast set of pan-India customers. To top it all, our strength as a power generator and increasingly a renewable power producer gives us a significant advantage – not just in terms of energy costs but even more in terms of being able to supply green energy,” Adani said, while enumerating the synergies the Holcim deal brings to his existing businesses.

While Adani has always resorted to acquisitions to scale up businesses quickly, the trucking services business, though, will be built from scratch.

“There is a reason for this. The fleet will be made up of electric trucks compared to existing operators who are saddled with diesel vehicles. This will contribute to improving the Group’s environmental, social and governance (ESG) ratings among investors and lenders as well as help take a bit of a sting out of a business (cement) that does not have much to show on the green factor,” the person added.

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