A two-horse race
Reliance has the distinction of being India’s largest
private company. But it is even more unique for something else – that it is in
effect owned by a single family. Exclusive and lasting possession by families –
once called managing agents, and now promoters – is a common feature of Indian
companies. But they long ago grew far beyond the personal fortunes of their
controllers, who perfected the art of borrowing and placing equity in innocuous
hands to keep control. None of these artifices was necessary in Reliance,
although some were employed; the shareholding of the Ambani family itself has
been close to a half – enough to ensure control.
This controlling interest that
Dhirubhai so masterfully built up had inherent in it the conflict amongst his
sons. Perhaps he was too focused on making Reliance the dominant company of
India to think of its division after his death; maybe he thought that his sons
would follow the traditional Gujarati custom wherein the oldest son inherits
the mantle of the father and in turn is duty bound to be generous to his
siblings. They followed that tradition for three years; but finally the
differences in personality, ambition and outlook proved too strong. At that
point Mukesh acted like a traditional elder brother and cut Anil to size; but
Anil refused to fit the size, and erupted in a series of exquisitely
calculated, highly damaging public statements. Mukesh did not let them disturb
him. But they led to a worrying fall in the market capitalization of Reliance, and
were bound to limit its ability to raise outside capital. If for no other
reason, Mukesh was induced or compelled, as the case may be, to seek a
compromise.
The settlement basically leaves
the hydrocarbons-based business of Reliance in Mukesh’s hands, and envisages
the transfer of virtually everything else – electricity, telecommunications and
finance – to Anil. The value of the latter businesses still fell short of what
stayed with Reliance; so there are reports of Anil getting Rs 40-50 billion in
cash.
The sums involved are enormous:
both brothers will get wealth they could not spend in a few generations. But
either could gamble or lose it. In business, nothing lasts forever; only risk
is ever present, and folly lurks behind every bush. Mukesh is better placed, as
he inherits an established business with a steady cash flow. Anil inherits all
the problems. His power plant in Dadri will be dependent on Mukesh’s empire for
gas, or he will have to make some other arrangement, such as getting gas
through Pakistan. His telecommunications business has a huge customer base, but
poor cash flow. This is why he insisted on a cash infusion; but there is no
telling how long and how much telecommunications will bleed. But while he gets
all the challenges, Anil also has the entrepreneurial flair to confront them.
He is the man to watch.
