cover story AMBANI SETTLEMENT

Anil Ambani “I’m most fortunate having been born twice from the same mother. My father THE COMEBACK has truly blessed me from heaven.”

ANIL AMBANI FOUGHT A LONE BUT DIGNIFIED BATTLE USING STRATEGY, EMOTION AND TENACITY TO CLAW BACK INTO THE RECKONING. HIS CHALLENGE NOW IS TO NURTURE HIS EMPIRE EVEN AS HE FIGHTS OFF THE RANCOUR OF A BITTER BATTLE.

By Prabhu Chawla and Shankkar Aiyar KIDt is one of those mysteries that may never be solved. Did Using every tool and drawing on years of contacts in the admit of his own volition to “ownership media and government, Anil meticulously used shots of issues that are in the private domain”? Or was he information and innuendo to nudge the brother back cornered by some very skilful media management? to the negotiating table. The weapons of mass perception While the truth may just make an appearance in one of used included emails, letters, bits and soundbites. Ithe brothers’ biographies, the fact is Anil Ambani has done The unstated threat was that he could do what his war guru Sun Tzu proud. Sun Tzu says the victorious S. Gurumurthy and The Indian Express could not. Every seeks the battle only after it has been won in the mind, rather exposé was timed and targeted. strategised. Anil’s battle was skilfully strategised, carefully The exposé on investments in Infocomm were tailored to calibrated and finished with finesse. Almost guerrilla draw the attention of foreign financial institutions, in style Anil used a combination of facts, emotion and shareholders and, of course, regulators. The spectre of vio- timing to get his brother to the table. Most importantly, lations in corporate governance brought regulators SEBI and almost as in the marathons he runs, 46-year-old Anil the Department of Company Affairs into the picture. When held on tenaciously. the coterie ganged up against him Anil unleashed a series of His focus was single: the mother’s commandment must attacks to keep the outsiders out. Raising issues of prevail. On December 28, 2004 Kokilaben Ambani delivered questionable transactions he spared none, including a four-point peace charter. The Reliance brand shall not be Mukesh’s buddies, Manoj Modi and Anand Jain. He tackled split; neither brother will walk away with cash, no competi- meddlesome directors by raising questions about their tion with each other in businesses created by Dhirubhai and independence and fiduciary responsibilities. total exclusion of outsiders in the family affair. She wanted MUM’S WORD: Anil was certain that without his mother’s the matter resolved in three months but Mukesh vacillated. support, the ownership issue would not be resolved

of six directors. ship obviated the need for a Rs 12,000 cr questioned as he was not actions in the RIL scrip. set up. 6 Jan RIL corporate gover- Association has been 14 Dec SEBI asks bourses to will by Dhirubhai. 17 Dec RIC said to have initial promoter of RIC. 28 Dec ADA questions RIL Trivedi and Modi join RIC nance panel seeks status re- amended by postal ballot look into the listing agree- ADA calls for RIL Board parked close to Rs 3,500 cr 23 Dec Bhakta withdraws buyback: “There is more Board. port on implementation of empowering RIL as long as it ment provisions of Reliance meeting raising three issues: in receivables in an off-bal- resignation. than what meets the eye.” 2005 corporate governance prac- holds 26% or more in REL, Group companies. Resignation of M.L. Bhakta ance sheet deal with Smart MDA annuls sweat equity. Corporate Governance 4 Jan ADA resigns from IPCL tices in RIL. the right to appoint directors.

TIME LINE 16 Dec MDA says the archi- Future prospects of REL Entrepreneur Solutions. 25 Dec SEBI to track RIL’s panel comprising Y.P. Trivedi, board and blames Anand 19 Jan REL informs BSE MDA and Nita found to TIME LINE tecture of the group’s owner- Where RIL invested 19 Dec Sweat equity to MDA buyback to investigate trans- D.V. Kapur and M.P. Modi Jain for the rift. that its Articles of own 45.5% in RIC through 4 cover story AMBANI SETTLEMENT

BHASKAR PAUL FEELING BLESSED: on a slippery wicket. While many believed that it was Anil’s Anil offers prayers with entry into the Rajya Sabha that caused the rift, the truth is his family at Tirupati the problems began much earlier. His exclusion from RIL’s after the settlement biggest project, Reliance Infocomm, his absence from the in- Mukesh Ambani augural function and subsequent rumours spread by Mukesh’s groupies were all pointers to a widening gulf. Anil knew his father died intestate and that he could only depend on his mother. He understood that the critical piece of paper was the renunciation of all wealth in favour of Kokilaben by the brothers and sisters Neena and Deepti. But his mother had to be convinced for he couldn’t win the bat- tle without her. Till such time he kept up a brave face and not only was he the obedient son and good brother but also took pains to see that he was seen to be so. Then came the the board meeting of July 27, 2004, when his writ was vir- tually wiped out surreptitiously in a resolution buried in the Supplementary Health Safety and Environment Agenda.

nil’s mother who had long begun to suspect all was not right truly believed the younger son was being done in. And proof of it came in the form of the now famous A“ownership issues in the private domain” statement of November 17. His sisters who were wary of the role that “outsiders were playing in what was essentially a family mat- ter” asked the brothers to bury the hatchet. On December 28, 2004 on the birth anniversary of Dhirubhai, the mother stepped in and announced the 30:30:40 formula. Through the seven-month open battle that began in the first week of January his posture and approach was well cal- culated: be reasonable at home and aggressive outside. For someone who had been reduced to the position of an em- ployee director and who had to openly state that the RIL board was like a cricket match where he was playing against 11, Anil has announced invest- Anil fought a tenacious battle for what was his due. Of course he couldn’t have done it without the support of ment in his firms and HELMSMAN: the mother. On the day of deliverance he said, “I must be the Mukesh gets to bidding for airport projects. most fortunate human being in this world—being born twice keep Reliance from the same mother, first on June 4, 1959 and a second Anil was aware that in a battle with such high stakes time 46 years later. My father has truly blessed me from there was bound to be politicking. While he kept up the heaven.” A day after the settlement he announced plans to By Shankkar Aiyar information update with key members in the Government, invest in his companies, signalling investor confidence and BIG day after the was commissioned including the prime minister, he also was wired on the po- spoke about his plans, including bidding for airport projects in 1999 Mukesh Ambani was on the Net. The site: litical machinations. So when he found the Congress’ neu- and new power plants. Unlike Mukesh whose businesses are www.stanford.edu. The idea: look at the syllabi, trality faltering he exposed the cosy sweat equity deal struck less exposed to retail consumers and where pricing is still course material and papers on communications en- between the kin of a Pramod Mahajan confidant and government administered, Anil’s businesses are retail cus- BROTHER gineering and information technology to order and Infocomm. Not only were Congressmen baying for Mahajan tomer-centric. In telecom he will face price competition, in MUKESH RETAINS THE BEHEMOTH RELIANCE Aread up. No he wasn’t intending to enrol again. Mukesh was thereafter but even those within the BJP who may have sided Energy he will need to navigate politics and policy logjams. simply getting ready for his next foray. Around day 100 after with Mukesh stayed out of the firing line. Three days after the accord, last week, Anil was in Delhi WHICH IS POISED TO BE A TRILLION-RUPEE the commissioning of the RIL refinery Mukesh called in a core The first tremors of the battle began as early as July 2002 meeting everyone from the President, the prime minister, the COMPANY WITH ITS STRONG FOOTHOLD IN group meeting. That was the beginning of the launch of when died intestate. Anil who proposed finance minister down to the minister of company affairs. Reliance Infocomm which he has had to sacrifice at the com- Mukesh’s name for the post of chairman in the first board You could call it part of the thanksgiving, you could also call PETROCHEMICALS, OIL AND GAS, AND mand of his mother and in the interest of peace at home. meeting after Dhirubhai’s death realised that legally he was what he famously termed as the “new dawn”. AMBITIONS IN RETAIL AND LIFE SCIENCE Without doubt even as he boarded the aircraft a day

companies which in turn withdraw resignations. mittee gives clean chit. 1/share whereas RIL paid Rs Gupta, Lalit and Sapna Lalit Goyal’s brother-in-law politician or bureaucrat at 19 Feb RIC share scam: own the 8 companies which 21 Jan IPCL Board Meeting: 24 Jan ADA sends RIL board 250/share for stake in RIC. Goyal. They owned Fairever Sudanshu Mittal is a confi- any moment of time has held Probe Mahajan role, says control 45.5% of RIC. IPCL Board asks ADA to 500-page letter on gover- 28 Jan Apart from Modi, six Traders, Softnet Traders & dant of Mahajan. or holds any shares of RIC.” Congress. 20 Jan REL Board meets: reconsider resignation and nance issues at RIL. others also allotted RIC Prerna Auto respectively. 6 Feb Fairever has connec- 16 Feb RIC claims the three 27 Feb PMO wants RIC Amitabh Jhunjhunwala & ignores issues raised by him 26 Jan Manoj Modi, MDA’s shares at Re 1/share. They 4 Feb Prerna Auto found to tions with me, says Mahajan. companies Fairever, Softnet shares to Mahajan kin firms

TIME LINE J.Ramachandran resigna- in his letter. aide, found to have been are Anand and Anita have ties with BJP leader 15 Feb RIC denies political & Prerna Auto returned RIC probed. Sanjay Nirupam of TIME LINE tions accepted. Other four 22 Jan RIL governance com- given 1% stake in RIC at Re Sharma, Amit and Kamini Pramod Mahajan. Owner links in shares flow. “No equity in Dec 2004. Shiv Sena raises Mahajan- cover story AMBANI SETTLEMENT

after the Ambani accord for the wedding of close buddy Typically, Mukesh plans big and the retail push is ex- Anand Jain’s daughter, Mukesh must have been planning pected to cover the entire gamut of retailing—malls and his next move. Conventional wisdom hitherto was that hyper malls catering not just to the affluent and middle class Reliance was best positioned to be in businesses where it but to the bottom of the pyramid too. So as with Infocomm, doesn’t deal directly with the consumer. But with a 10 mil- scale and price will be the cornerstones of his strategy. lion plus subscriber base in Infocomm, Mukesh has learnt Indeed Mukesh aims to make RIL the Wal-Mart of India his lessons. The most obvious one is customer relationship and is already talking about bulk deals with consumer management but what is more important is that even here durables and FMCG majors where RIL will flex its financial the Dhirubhai mantra of cash is king is validated. muscle to gain price points. In fact the game plan will be dovetailed with RIL’s thrust in retail outlets—2,000 this he buzz at Maker Chambers IV, Nariman Point, year—for its petro products where it has focused on hug- Mumbai, is that the Government’s move to liberalise ging the new highways of the NHAI. Of course, there are FDI in retail is one that Mukesh is looking at carefully. rumours that younger brother Anil too may be looking at With cash flows of over Rs 12,000 crore—even if it is retailing and could be talking to Wal-Mart but whether they T RIL affected post settlement, will have enough to wield its will compete with each other is part of the fine print being clout—RIL has the ability to corner the best real-estate deals, charted out by the legal eagles of both sides. top talent, technology and, of course, flex its muscles in big Interestingly, the other buzz is that with Infocomm out tag deals. The recent visit of Wal-Mart International CEO and of the way, Mukesh would have time to focus on his pet President John B. Menzer to India, his meetings with two of the largest corporate houses, the intent of four mega cor- porations to enter the $4 billion retail arena where the Mukesh has big plans in organised sector is growing at 25 per cent—every move is being studied RIL style. retail with scale and price as THE A-TEAM: The spotlight will now also focus on Mukesh’s backroom players Nikhil Meswani (left) and Jain cornerstones of his strategy. BHASKAR PAUL

RIC issue in Parliament. the firm by Reliance 8 Apr ADA claims his phones NSE that ADA’s resignation 3 Mar Smart Entrepreneur Industries. are being tapped by Reliance has been considered by the Solutions owned by RIC 2 Apr No favour shown to Infocomm. board on Jan 20. sold its ONGC shares and RIC: Mahajan. “None of my 23 Apr ADA name is missing 26 Apr Jhunjhunwala, direc- earned close to Rs 100 cr. family members own any from Board of Directors on tor on board of Reliance

TIME LINE These shares had been shares in any company in the IPCL website. Capital (RCL), protests RCL’s TIME LINE bought with money loaned to world,” he says. 24 Apr IPCL informs BSE & sale of its 23% stake in cover story AMBANI SETTLEMENT

BHASKAR PAUL RELIANCE AND TRUST: Mukesh with wife Nita

production-sharing contracts that the company recently Mukesh expects the share of signed with the Government for exploration and produc- oil and gas in RIL’s income to tion (E&P) of oil wells, RIL will be India’s biggest private sec- tor E&P company. Mukesh told investors at a Deutsche Bank rise from 2% to 20% soon. conference that oil and gas incomes which now deliver 2 per cent of the income (about Rs 1,500 crore) would con- stitute over 20 per cent of the total turnover. At current rev- project of life science and biotechnology. Notwithstanding enue numbers that would be over Rs 20,000 crore. On the the big plans the numbers and jump will come from the be- anvil are initiatives for new blocks in overseas fields. While hemoth that RIL is emerging as. With a turnover of Rs 73,164 there is the threat of the ups and downs of the commodity crore, India’s only private sector Fortune 500 company pricing cycle what helps RIL is that while the sector is totally earned cash profits of Rs 33 crore a day in 2004-5 while its open, prices are administered by the government. net profit was Rs 20 crore, and exports over Rs 25,000 Not surprisingly, analysts expect RIL to be a trillion-rupee crore. RIL accounts for 3.5 per cent of India’s GDP, 7 per cent company. Split or no split, division or no division, Mukesh of exports, 10 per cent of indirect revenues and 17 per cent Ambani will yet continue to be the big brother. of private sector profits. In its petrochemicals business the The split doesn’t mean the two brothers won’t cross company commands a market share ranging from 100 per paths again. In many ways, their fortunes are still inter- cent in paraxylene to 51 per cent in polyester staple fibre linked and they know that. For instance, it is agreed that RIL and yarn. That, says Mukesh, is just the beginning. In a re- will supply gas that will fuel REL’s ambitious new power cent presentation to investors he pointed out that the de- plants. Such cooperation will benefit both the brothers. As mand pull has just begun. For instance, polymer for potential areas of conflict, an obvious one could be the consumption in India is barely 4 kg per person compared jostling for political patronage—something that had been to the world average of 25 kg per person. very critical for the group in the past. But people close to the The real big tag jump, of course, will come from its family hope that the “mother power” will continue to stave emerging revenue stream—oil and gas exploration. With 14 off conflicts for at least a few years.

IPCL. He also says this sale ADA protests appointment of absence of corporate assuring members that legal was done without informing two directors, flags issues of governance and lack of action would be taken if any the boards of RCL, IPCL and non-transparency, inade- transparency. rule violations were detected. the exchanges and that quate disclosure. 30 Apr The alleged sales of 18 Jun Settlement Reliance Capital lost 29 Apr ADA says Reliance Reliance Infocomm shares at announced between MDA

TIME LINE Rs 1,000 cr in this deal. group companies’ shares are a discounted price comes up and ADA. ADA resigns from TIME LINE 28 Apr RIL Board meets: undervalued because of the in LS with Manmohan Singh RIL board.