Sucheta Dalal :It's time Anil Ambani shed histrionics
Sucheta Dalal

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It's time Anil Ambani shed histrionics  

Aug 8, 2005


Anger, hurt, betrayal, drama and histrionics are great ingredients for a Bollywood hit, but only raise eyebrows in the boardroom, or at an annual general meeting (AGM).


The spectacle of ‘ordinary shareholder’ Anil Ambani’s extraordinary farewell to shareholders of Reliance Industries Ltd (RIL) raised some questions that must be answered. It was clear that he hadn’t made an appearance for old times’ sake and the downward descent of RIL shares seemed to reflect a fear that he could spook the de-merger process. Nervousness was further enhanced since RIL declined to announce details of the separation, on the plea that it needed board approval. Especially since Anil Ambani had convened a press conference the same evening after storming out of the AGM earlier this year.


Market sources claimed one crore shares were sold on Wednesday, leading to the 25 point drop in RIL’s share price. On checking with Anil Ambani confidantes, we were told a reputed foreign fund, called T Rowe Price, had sold several lakh RIL shares, while the rest of the selling was attributed to dubious market operators.


Official sources, however, say that T Rowe Price wasn’t a seller at all. In fact, it had bought RIL shares earlier in the week. Instead, we learn that Kopthal Mauritius India Fund, which is fairly well known to the regulator, had unloaded its entire holding of 4.7 lakh shares that day. The bigger surprise was that Reliance Growth Fund sold over a lakh shares and Reliance Equity Opportunities Fund sold a couple of lakh shares. Apart from this, an ABN Amro account was steadily buying GDR converted shares sold by certain foreign institutional investors. The Anil Dhirubhai Ambani Enterprises camp, however, stuck to its version when we checked again on Friday.


• Anil Ambani’s public allegiance to good governance is of recent origin

• There is a clear case for looking into Wednesday’s fall in RIL shares


Details of FII sales and purchases are only known to the regulator and there is a clear case here to find out if there is more to Wednesday’s fall in RIL shares than meets the eye. Controversy and speculation always seem to surround the movement of Reliance share prices. Anil Ambani himself brought this into the open, while he was battling brother Mukesh for control over the business empire. His public allegiance to good governance principles, however, is of relatively recent vintage. This is probably why Anil bypassed the governance angle while revealing details of the de-merger, even before the RIL board had approved the plans.


The same process would apply to Reliance Energy Limited (REL) and Reliance Capital (RCL). An RIL press release announced plans to de-merge its assets and liabilities into four entities covering telecom, coal-based energy, financial services and gas-based energy. All RIL shareholders will be issued shares in each of the new undertakings in a 1:1 ratio, while a chunk of shares held in a trust account during a previous group merger will be extinguished. These four holding companies could then merge with corresponding operating entities in the proportion revealed by Anil Ambani at his press conference last week.


The question is, if RIL’s board of directors had to approve the demerger plans, didn’t the board of REL and Reliance Capital have to formally approve these, too? It is no secret that despite the copious lip-service to corporate governance norms, the independence of board directors remains a myth. Yet, most companies at least go through the motions of having major decisions, such as a mega de-merger, approved by their board of directors.


Did Anil Ambani forget this in his haste to upstage brother Mukesh? What makes this gaffe all the more incongruous is that the barrage of complaints sent by Anil Ambani to various regulators in the past 10 months have revolved around corporate governance and price manipulation.


In retrospect, he appears so distraught at the separation from RIL that he is unable to focus on serious issues pertaining to the ADAE companies. For instance, the man who revels in the media’s limelight was not seen for an entire week when consumers of REL were reeling from a prolonged power cut. He only surfaced to make a perfunctory public apology on the eve of the RIL AGM, after the state government threatened senior executives with arrest if they failed to restore power immediately.


Anil Ambani has inherited a group of companies with good growth potential, and it will be a pity, indeed, if he cannot put aside his anger and penchant for drama to focus on their development.


-- Sucheta Dalal