Sucheta Dalal :Ambanis at war: Patch up camouflages flare up
Sucheta Dalal

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Ambanis at war: Patch up camouflages flare up  

Jan 10, 2005

The battle between the Ambani brothers has moved from the vicious and entertaining to the bizarre. December 28, the birth anniversary of the Reliance group patriarch Dhirubhai Ambani, was a day when the entire family got together to pray, but it did not settle the bitter public war between his two sons.

In fact, the New Year saw Anil Ambani intensifying his attack against Mukesh and extending it to his friends. He stepped down from the board of Indian Petrochemicals Corporation Ltd (IPCL), citing what must surely rank among the most extraordinary reasons in family-owned Indian companies. Anil, a family member, said it was ‘‘beneath his dignity, self-respect and self-esteem to be on the same board’’ as Anand Jain, a close friend of Mukesh.

Before one could digest the IPCL drama, Anil fired another salvo. Media reports attributed to his camp alleged that Reliance gave interest-free funds to four companies to pick up a 4.7 per cent stake in Reliance Industries and that shares acquired on the merger of Reliance Industries and Reliance Petroleum, which were meant for the economic benefit of all shareholders, have been appropriated by the Ambani family, and are controlled by friends of Mukesh Ambani.

These allegations are indeed serious, but a broad-based investigation would reveal that many of the biggest family-controlled corporate groups, have indulged in similar diversion of funds to investment companies, and used pyramiding structures to create a complicated maze of shareholdings that is difficult to unravel. That is why, despite persistent whistle blowing by Anil Ambani, there is pressure on the government to avoid an investigation that could engulf half of corporate India.

Thursday night saw an entirely new twist to the family feud. A well-known editor insisted that the Ambani brothers were close to a settlement. Spokespersons for the Anil and Mukesh camps were both at pains to deny the report. In fact, an explanation by Anil Ambani’s confidant suggests that what was touted as a ‘settlement’ reflected a further hardening of stands and a situation that was even more difficult to resolve.

Six weeks into the battle, my surmise based on interactions with both sides is as follows: Anil Ambani had accepted that there was no question of sharing responsibility in Reliance Industries and a split was inevitable. But without any clarity over how the assets would be carved up, this acceptance is meaningless and could only lead to an escalation of the battle.

Anil’s confidant says Mukesh Ambani’s original offer of ‘‘control over Reliance Energy, Reliance Capital and money value for his stake in Reliance Industries’’ was unacceptable to the younger sibling. We reported this offer over six weeks ago, but it is not clear that it still stands after all the mud-slinging that has occurred since.

Friday evening saw the Anil camp float another trial balloon to the media. This time, Anil’s spokesperson told us that both brothers had left the division of assets to their mother Kokilaben; and she in turn had proposed a one-third split between Anil, Mukesh and herself (some say that Kokilaben’s share will also be managed by Mukesh Ambani, and will give him full control anyway). We were also told that ICICI Bank CEO KV Kamath would help her work out an equitable division.

But remember that both brothers had expressed pious faith in their mother’s mediation a month ago, but the dispute still turned more vicious. Also, KV Kamath was invited to help resolve the dispute nearly 10 months ago, but there is little progress. This time too, the Anil camp insists that Mukesh’s original offer is unfair and the only acceptable division may require a separation of the oil fields or the petrochemical businesses of Reliance.

Was Anil Ambani’s talk of a settlement a tactical attempt to confuse and mislead the media and his brother? Even as journalists were scrambling to figure out the contours of a possible settlement, Anil Ambani was busy filing a formal objection with the Securities and Exchange Board of India (Sebi) to the share buyback offered by Reliance Industries.

Sebi cleared the buyback offer with the rider that Anil’s objections must be disclosed in the offer advertisement. Didn’t the regulator find the objections strange? Here is a director (actually Vice Chairman) who had merely ‘abstained’ from voting on the buyback issue (even while he submitted written dissents on several other issues) complaining to the regulator after being defeated through a majority vote at the board meeting.

Anil Ambani’s legal advisors have clearly advised him to do so, but shareholders are confused about his motives and intent. Maybe Anil Ambani hoped to protect Reliance’s faithful family of shareholders, by persuading them to vote with their feet; but after Monday (when the buyback at up to Rs 570 becomes effective), investors have nothing to lose by holding on.

Friday also saw the younger Ambani issue a curious press release clarifying his corporate responsibilities within the group. It said, ‘‘He has no role in the management or operations of Reliance Capital Ltd, and he is not a Director on the Board of the company.’’ And that ‘‘DN Chaturvedi is the Chairman, and Anand Jain is the Vice Chairman of Reliance Capital Ltd’’. This has fuelled speculation that the next target of Anil Ambani’s attack will be Reliance Capital, especially given his public denouncement of his current bete noire Anand Jain.

All this action suggests that the war has intensified rather than settled and our sources suggest that Anil Ambani is considering legal action against Reliance and his brother. As a tactic, that could be aimed at forcing Mukesh Ambani to offer him a ‘fair settlement’, but could easily end up as a long and debilitating legal battle. All said and done, Ambani versus Ambani continues to fascinate the public because it provides enough twists, turns and drama to rival the best soap opera.

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-- Sucheta Dalal