Sucheta Dalal :What this means: Anil's won a kingdom now he needs to build fences and bridges
Sucheta Dalal

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What this means: Anil's won a kingdom, now he needs to build fences and bridges  

June 20, 2005


The Ambani brothers have declared peace and India’s largest business house with revenues exceeding a phenomenal Rs 99,000 crore has been split right down the middle.


It was a day of high drama at the Reliance Group headquarters but none of the revelations were either new or substantive. In true Bollywood style, the brothers asked their mother Kokilaben Ambani to formally announce the split through a brief and vaguely worded press release.


Mrs Ambani is also credited with deciding the settlement (remember how both brothers have claimed that they would abide by their mother’s decision) and the release makes it sound absurdly simple.


She also uses the word “responsibility” while outlining the share of Anil and Mukesh, leading to speculation that there may still be a twist in the settlement tale.


Her announcement was followed by Anil Ambani’s resignation from Reliance Industries Ltd (RIL) board, which took note of Mrs Ambani’s announcement. And thus ended a bloody war that had once threatened to destroy India’s fastest-growing business empire.


At the end of the day, the group revealed nothing about the formal contours of the complex settlement. Instead, it chose to hide behind yet another committee (the Corporate Governance and Stakeholders’ Interface Committee), which was empowered to work out the ‘‘reorganisation.’’ Consequently, it is still unclear whether there will be a formal demerger of the group.


The reason for this confusion is unclear, Reliance executives have repeatedly insisted that all settlement-related work was complete and even the accounts of Reliance Infocomm had been readied for a handover. The structure of the split had also been widely reported by the media.


Moreover, some obvious moves, such as the resignation of Mukesh Ambani from Reliance Infocomm, which ought to have followed after Anil’s exit from RIL have either not happened or were not announced.


Mrs Ambani’s statement has only acknowledged the fact that India’s fastest growing business group couldn’t remain intact for even two years after the death of its visionary but controversial founder Dhirubhai Ambani.


Reliance investors are relieved and optimistic that the division will not debilitate the group but only create two new powerhouses. This is borne out by the fact that every Reliance release on Saturday was at pains to point out that RIL remains India’s largest private sector company on all major financial parameters with turnover of Rs 73,164 crore, net profit of Rs 7,572 crore and net worth of Rs 40,403 crore. Is this meant to signal that the valuation of RIL will remain more-or-less unchanged after unravelling its substantial investments in Reliance Energy, Reliance Infocomm and in the financial companies?


The Ambanis seem set to drag out this suspense over the next week.


Anil’s share, although divided over three major companies, will be similar. In fact, the younger Ambani has clearly emerged a clear winner in this bloody war. He has not only wangled a gas-supply agreement for his power projects but also wrested control of Mukesh’s beloved infocom project.


But having won himself a kingdom, Anil faces the tougher task of building bridges and mending fences with all those whom he has alienated with the viciousness of his warfare.


Technically, the settlement frees each half of the Reliance group to now power ahead with its growth and investment plans. Media reports say that the Anil Ambani controlled Reliance Energy has already called a board meeting on Sunday to discuss expansion plans and to take advantage of a buoyant capital market.


Meanwhile, sources in the Mukesh Ambani camp say that a merger of IPCL with RIL may be part of the reorganisation plan. And next on the agenda may be a massive pipeline project, probably with a global strategic partner to transport its gas and energy products.


However, most independent analysts say that all the Reliance group company shares are already fully valued after the recent run-up in prices; and any long drawn ambiguity about the details of the division can only hurt the group companies. While the future is impossible to predict, Reliance’s growth plans will have to be tempered by the fact that various official complaints filed with the regulators cannot be just wished away because a truce has been called.


Indeed, Friday, June 17 would have been a very sad day for Dhirubhai Ambani. And RIL’s website tells the story. The group, which meticulously posts all its achievements under the head ‘‘milestones’’, is completely blank in the year 2005.


After all, this year’s milestones would have had to record the depths of the war for succession. It will now have to list the split to mark the end of an era.


-- Sucheta Dalal