Dhirubhai Ambani and Reliance “Our dreams have to be bigger. Our ambition higher. Our commitment deeper. And our efforts greater. This is my dream for Reliance and for India.” - Dhirubhai Ambani. "The country has lost an iconic proof of what an ordinary Indian fired by the spirit of enterprise and driven by determination, can achieve in his own lifetime. Not only did Ambani build a large and diversified business conglomerate but also inspired many first generation entrepreneurs with his success."” - Atal Bihari Vajpayee, Prime Minister, Republic of India. "Dhirubhai built an empire that is rock solid and he will always remain an icon." - Kumar Mangalam Birla, Chairman, Aditya Vikram Birla Group. THE DEATH OF AN ICON The 6th of July 2002 was a black day in the Indian corporate history. The Founder and Chairman of the Reliance group of Industries (Reliance), Dhirajlal Hirachand Ambani (Dhirubhai) died after a 13 day battle for survival. A perfect combination of entrepreneurship and leadership, Dhirubhai transformed Reliance from a company with a turnover of Rs 640 million in 1976, to one with a turnover of Rs 620 billion in 2002. Starting with a small textile mill in Naroda, in 1966,Dhirubhai took Reliance into various areas like petrochemicals, polyester filament yarn, oil and gas exploration and production, refining and marketing of petroleum, textiles, power, telecom services, information management and financial services (Refer Exhibit I for Reliance Group of Companies). Dhirubhai never followed the textbook style of management. Instead, he evolved a unique style, which combined the American style of entrepreneurship, with the Japanese focus on the latest technology. And to this, he added the innate shrewdness of a Gujarati businessman. Analysts feel that he was a perfect manager of time, money and men and exhibited a passion to find solutions to problems. Dhirubhai started Reliance at a time when most companies in India were owned by the government, and the private players were given step-motherly treatment by the government while offering licenses and permits. Similarly, when most Indian business houses depended on government – owned financial institutions for funds, Dhirubhai raised capital from the public by offering shares of his companies. BUILDING RELIANCE Dhirubhai was born on December 28, 1932, to Hirachand Govardhandas Ambani and Jamunaben Hirachand Ambani. He was the middle of five children, three boys and two girls (Refer Exhibit II for the Dhirubhai family tree). His father was a local school teacher in a village called Chorwad in the Junagadh district of Gujarat. After his matriculation in 1949, Dhirubhai left for Aden, (now in Yemen) at the young age of 17. His first job was to fill gas and collect money at a Shell petrol station, earning Rs 300 a month. Within a few years, he rose to the position of a sales manager (Refer Exhibit III for Chronology of Events) in the same company. After working for eight years in Aden, Dhirubhai decided to come back to India and start something on his own. On December 31, 1958, he came back to Mumbai and started the Reliance Commercial Corporation (RCC) with a borrowed capital of Rs.15,000. RCC was mainly involved in exporting commodities like ginger, cardamom, pepper, turmeric, and cashewnut. Using his connections in Aden, he exported a wide range of commodities to Aden. Aden, being a free port attracted lot of exports. In the mid 1960s, the Government of India (GoI) introduced an export promotion scheme under which the earnings from the export of rayon fabrics could be used for the import of nylon fiber. This attracted Dhirubhai's attention and he decided to switch from spices to textiles. In 1966, he set up a spinning mill at Naroda 20 kms from Ahmedabad with borrowed funds of Rs 2,80,000 and registered it (Reliance Textile Industries) as a powerloom unit with a paid up capital of Rs 150,000. Another program, the High Unit Value Scheme introduced by the GoI in 1971 gave tremendous boost to Reliance textiles. The scheme allowed the import of polyester filament yarn against the export of nylon fabrics. RCC was benefited the most from this scheme and its exports constituted more than 60% of exports under this scheme. There were rumors that the scheme was solely devised for Dhirubhai.Dhirubhai strongly denied the allegations saying that Reliance cannot be blamed for taking advantage of the scheme „when others kept their eyes shut.‟ He said “I do not consider myself cleverer than my colleagues in the industry. If there was a very large margin of profit, why did they not take advantage of it?”[1] When the High Unit Value scheme ended in 1978, Dhirubhai focused his attention on the domestic market. During this time, Reliance Textiles was not a very well known name in the domestic market. His first priority was to establish the Vimal[2] brand, under which Reliance Textiles sold its fabrics in India. An advertising programme was launched to facilitate its entry into the domestic market. Dhirubhai knew that a strong brand image was crucial for winning the consumer's confidence. To achieve this objective, Reliance tried to emphasize the superior quality of its fabric in all its advertisements. Besides this, Dhirubhai also took steps to develop an efficient distribution system for Vimal as he found that the existing marketing channels were inadequate and inefficient. However, things were not that easy. When Reliance entered the domestic market, it faced lot of resistance from the traditional cloth merchants, as their loyalties lay with the older mills. Confronted with this situation, Dhirubhai decided to move away from the traditional wholesale trade and open his showrooms to tap new markets. He appointed several agents from non-textile backgrounds for the same. Dhirubhai adopted the concept of company stores from its main competitor, Bombay Dyeing (Refer Exhibit IV), and pursued it on a grand scale. Dhirubhai toured the entire country intensively, offering franchises to shareholders. Dhirubhai promised that Reliance would provide financial and advertising support. In his search for high volumes, Dhirubhai identified a new market - the non- metro urban segment. By 1980, Reliance fabrics were available all over India through 20 company owned retail outlets, over 1000 franchised outlets, and over 20,000 retail stores. BACKWARD INTEGRATION To strengthen his position further, Dhirubhai decided to integrate backwards and produce fibers. He planned to set up a polyester filament yarn (PFY) manufacturing plant at Patalganga[3] . Dhirubhai started work on the plant in 1981. He wanted to make it a world-class plant equipped with the best machinery and having the best faculties. The technology for the production of PFY was sourced from USA's Du Pont De Nemours[4]. However, Dhirubhai did not want to make Du Pont an equity partner. He felt that when technology was easily available in the international markets, it was not necessary to enter into a 51 % equity partnership with a foreign company. In spite of the demand for PFY being 6000 tons per annum (tpa), Dhirubhai built a 10000 tpa plant with a built-in expansion provision of 15000 tpa. However, the demand for PFY declined considerably after the government‟s decision to reserve PFY for small-scale weavers. As a result, the bigger mills were compelled to use cotton. To overcome the problem and ignite demand, Dhirubhai announced a buyback scheme according to which, Reliance would sell its 'Recron' brand of yarn to small powerlooms. These powerlooms would then sell the grey cloth back to the company for finishing and eventual sale under the Vimal brand name. By 1983, PYF had become a major revenue earner for Reliance. Dhirubhai continued to add new capacities and upgrade technology. All these efforts facilitated at making Reliance the lowest cost polyester producer in the world. In 1984, Dhirubhai got the license to manufacture purified terephthalic acid (PTA), one of the chemicals from which PFY and polyester staple fiber (PSF) can be manufactured. He then integrated sideways manufacturing linear alkyl benzene (LAB) used by detergent manufacturers, thermoplastics like poly vinyl chloride (PVC), high density poly ethylene (HDPE) and low density poly ethylene (LDPE) used by plastic processors. Gradually, Reliance started manufacturing petrochemical intermediaries like paraxylene, n-paraffin and mono ethylene glycol (MEG), and ethylene, the basic raw material for all petrochemical bi-products and intermediaries. And finally it entered into production and extraction of oil (Refer Exhibit V for Backward Integration). In 1991, Dhirubhai embarked on his most cherished project at Hazira (Gujarat)-to build the largest single multi-feed ethylene cracker plant in the world. The plant produces ethylene (imported so far), propylene to make PP, xylene to make PX, benzene to make LAB. The Jamnagar plant commissioned in 1999, the world's largest refinery with a capacity of 27 million tonnes per annum, was the single largest investment ever made at a single location in India. Besides the refinery, the plant included India's largest port terminal, fully automated rail-road loading and product dispatch terminal, a 3.5 million tonne tank farm, a 500MW power plant, a 12 mgd sea water desalination plant, a 1000-giga byte IT network, connecting 50 servers and 2,500 terminals with 200 km long optic fibre cables. This plant accounts for over 25% of India's total refining capacity. The process of expansion revealed Dhirubhai‟s interest in integrating vertically and