Sucheta Dalal :Kiss and make-up time at Reliance
Sucheta Dalal

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Kiss and make-up time at Reliance  

Jun 20, 2005


Kiss and make-up time at Reliance


While the big settlement to end the messy war between the Ambani brothers was timed for Saturday morning (when the stock market was closed), there was big mischief in the stock price during the dying hours of trading on Friday, causing the scrip to soar in the cash and derivatives segment. The price ramp-up was followed by a half-baked, speculative leak to a television channel that provided a cover of sorts for the day’s hectic trading. Market circles, however, attribute most of the speculative activity to people close to the group. Knowledgeable sources say settlement rumours were spread to trigger a price ramp-up through retail buying, but those connected to the Reliance inner circle were, in fact, selling their shares and booking a neat profit after a price run-up of over two weeks. To use Anil Ambani’s words, there is more to it than meets the eye. This time, however, the Securities and Exchange Board of India (Sebi) may have to conduct its investigation without the benefit of ready data, documents, allegations and counter-allegations from the warring Ambani camps.


Well, the war is over and peace has been declared. Everybody from the finance minister to the Confederation of Indian Industry has expressed happiness. The Reliance board has, however, thanked Kokilaben Ambani for working out an amicable settlement and the beleaguered lady was even made to issue her first-ever press statement.


The settlement process was anything but amicable and only time will tell what the future holds for the brothers. But at the moment, Anil Ambani has emerged a clear winner with regard to the division of group assets. He has bagged Reliance Infocomm, to which he had always ascribed enormous value during the negotiation. He has also wangled a commitment on energy supply from Reliance Industries (RIL) for his power projects, as well as a healthy cash settlement (we hear).


Ten months before, when Anil Ambani went public with his differences, his confi- dants had argued the initial settlement proposal had offered him control over just 5% of group assets. With the transfer of Reliance Info-comm, the balance appears a lot more even and for him, the bloody war has clearly paid off.



• The long and bloody war has clearly paid off for the junior Ambani

• Will the probe into Anil’s charges at Reliance Infocomm be stopped now?

• Anil Ambani has a considerable amount of fence-rebuilding to do



Having said that, Reliance Infocomm is clearly a mixed inheritance. It is a company Anil Ambani had dramatically dissociated himself from, right at the beginning. Remember how his family and he kept away from the grand inauguration by the controversial Pramod Mahajan (then telecom minister) three years ago? That was the first signal the brothers were heading into turbulence. On Friday, Mukesh Ambani would have formally bid good bye to his touted telecom dream. By accepting Reliance Infocomm, Anil inherits an awesome infrastructure, but its service remains awful. The promised rollout lans for broadband and entertainment, through specially designed set-top boxes, has never materialised.


But a bigger problem will be over allegations about dubious practices that Anil Ambani’s camp has levelled against Reliance Infocomm in recent months. Will these investigations be made to disappear, now that the brothers are no longer fighting? Or, will Reliance Infocomm have to bear further monetary penalties if the courts find it guilty of illegal re-routing of international calls and causing a loss to state telecom companies? If the inquiries continue, will it affect the listing and valuation of Reliance Infocomm?


The coming weeks will provide answers to these and many other unanswered questions. But that is hardly good enough. The group talks incessantly about good governance these days. But, although it is an open secret that the contours of the settlement had been negotiated and formalised by the lawyers on both sides at least two weeks before, investors remained clueless about substantive issues until Saturday afternoon. At the time of writing this, there wasn’t even an official announcement about whether there would be a formal split and demerger. Or if each brother will only be responsible for various entities, as stated by Mrs Ambani in her letter. Surely, good governance practices demand a lot more clarity from what was India’s largest private sector group until last week.


What, then, does the future hold for the two brothers? This is a subject of intense speculation in corporate India. Both brothers are said to be preparing major expansion plans. RIL has also been on a furious fund-raising drive all through the 10-month war with Anil Ambani. The younger Ambani has, in turn, announced new projects in Reliance Energy at the recent general body meeting. However, his first job will be to mend fences with all the industrialists, investment bankers, politicians and advisors who he has alienated while fighting his brother. Will they forgive him and trust him in the future? Only time will tell.


Meanwhile, at the time of writing, circles close to the family were speculating that Anil Ambani might even put in an appearance at the wedding of Anand Jain’s daughter in Goa over the weekend. Anand Jain is a close friend of Mukesh Ambani and was such a trusted confidant of Dhirubhai Ambani that he is considered a family member. Anil Ambani had repeatedly targeted Anand Jain, going so far as to resign from IPCL (Indian Petrochemicals Corporation Ltd), saying it was beneath him to be on the same board as Jain.


There is also speculation among political circles that Anil Ambani will soon give up his Rajya Sabha seat to focus on business and to avoid too close an association with any political party. As for the future, it is anybody’s guess whether the fractured relationship will heal and if the two Reliance groups will flourish or flounder, as they mark out their individual destinies.



-- Sucheta Dalal