Sucheta Dalal :The Reliance Saga: Who is with them who is not
Sucheta Dalal

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The Reliance Saga: Who is with them, who is not  

Dec 20, 2004

It is a month since the ‘‘ownership issues’’ in the Ambani family hit the public domain, and the excitement over the first free-and-frank discussion in two decades about India’s largest private sector company is beginning to wane. The deluge of dirt from brother A continues, and many of his allegations are serious and significant. But they are losing their sting because lenders and government regulators are either studiously ignoring a war played out through the media or are not competent to intervene.

The Securities and Exchange Board of India (Sebi) has indeed instructed the stock exchanges to keep tabs on the Reliance scrips and check whether the group made appropriate disclosures under Clause 49 of the listing agreement. But this is merely a way to assure investors that Sebi is on the job. Really speaking, there is very little that Sebi can do. Clause 49 merely gives the regulator a backdoor route to force on-going disclosures by listed companies. However, as most allegations pertain to the funding of Reliance Infocomm (Rs 11,000 crore so far) and its subsidiaries, it is only the shareholders and lenders who can ask questions. In fact, Sebi would have a better chance of getting some answers if the Sebi chairman uses moral persuasion to summon the Ambani siblings for questioning.

The stock exchanges can do even less. Most of the controversial information pertains to Reliance Infocomm and its subsidiaries or associates such as Reliance Communications Infrastructure. All these are unlisted and beyond their regulatory purview.

The Ministry of Company Affairs (MCA) can, however, investigate several key issues. The number of investment companies, their shareholding and control structure and the ‘sweat equity’ issued by Reliance Infocomm to Mukesh Ambani. It could also investigate allegations made by the Anil Ambani camp about alleged diversion of funds for IPO investment.

But Minister Prem Chand Gupta said last week that his ministry will not take suo moto cognizance of the alleged flouting of corporate governance norms by the Reliance group. ‘‘There is no point in disturbing such a big industrial house which has created wealth for millions of its shareholders as well as huge infrastructure for the country,’’ he told the media.

That statement succinctly reveals the political stance on the Ambani war. The reluctance to raise uncomfortable questions is evident everywhere. While the global rating agency, Standard & Poor’s said the Reliance group’s credit rating warranted a review, its Indian associate, Crisil (Credit Rating and Information Services India Ltd.) disagreed.

Also, there isn’t a peep out of Reliance’s lending banks, financial institutions or even large investors, including foreign investors. When asked, most of them mumble something about Reliance Industries being a cash-rich company and say they are now worried about their money.

This hands-off attitude suggests that Anil Ambani’s media war may have covered vast quantities of newsprint and hogged television space. But the Mukesh camp, while keeping a low media profile, has been working at getting the political and financial establishment on its side. In fact, when pressed, most bankers admit that they would support the older Ambani in a boardroom battle.

The allegations are bizarre because of the incestuous relationships between the two warring sides. For instance, members of the so-called Anil camp, which is unloading dirt on the group chairman, still draw their salaries from Reliance Industries! Also, the same group has targeted so many journalists, bureaucrats, politicians and fellow industrialists in the past, that there is little sympathy for their tactics.

People are also a little perplexed at the silence of the Anil Ambani camp when the so-called large-scale diversion of funds had occurred, because Amitabh Jhunjhunwala, who is firmly on Anil’s side, still controls the treasury of the flagship Reliance Industries Ltd. (RIL). Shouldn’t he have been responsible for carrying out RIL’s investments?

The latest round of allegations from camp Anil have targeted Mukesh’s close buddies for being dealers and distributors of Reliance, but then it is well known that Anil’s brother-in-law is also distributor.

Clearly, it is a slippery business to separate fact from sleaze in this case. If the media is not biased, it will soon tire out.

Meanwhile, the war of the Ambanis has blasted at least one important myth about the Ambani group. That is about the love and loyalty of Reliance’s family of 30-lakh investors. Old timers would recall how investors thronged football stadia in the mid-1980s to attend annual general meetings to listen to Dhirubhai Ambani’s plans and they were firmly behind him when the group was investigated in the 1980s.

Today, these investors form just over 13 per cent of Reliance’s shareholding and their intense support for the group is either part of Reliance’s spin or a figment of collective media imagination. Few investors are writing in to comment on the Reliance family imbroglio.

Most of the frenzied coverage and advice has come from the media. An economic newspaper makes the ludicrous suggestion that Dhirubhai Ambani’s widow, Kokilaben Ambani should take over as chairman emeritus of the Reliance Group, just because her squabbling sons are set to destroy her husband’s legacy. What is obviously lost on the advocates of such an idea is that appointing a figurehead chairman at a giant group that has muscled its way into a series of nationally-sensitive businesses (oil exploration, refining, oil & gas distribution, telecom, petrochemicals and biotechnology) would undermine all laws of good governance.

That the suggestion comes from the media only shows the poor public understanding of the rationale of corporate governance regulations. Finally, many corporate watchers and activists are getting a little tired of Anil Ambani’s war through the media. They say that the younger Ambani should seek justice through the courts, not through selective leaks, allegations and disclosures that can never be resolved. Otherwise, the two brothers must find a way to sit together at ‘Sea Wind’ — the hotel-sized building, which is the family residence — and resolve all disputes privately and in a dignified manner.

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-- Sucheta Dalal