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Follow UsWhile all attempts are on to convince the world that the ownership issues
within Reliance, particularly between brothers Mukesh and Anil, would be sorted
out soon, the rift between the two brothers seems to be growing by the day. In
fact, its now pretty clear that the rift between the two has moved much beyond
the ownership and management control issues of various Reliance companies.
Sources close to the family say that the fight between the two has been on
for the last 10 years. But the fight gathered momentum when Dhirubhai died and
the two brothers, though each one of them has been handling different Reliance
companies, never had consensus on company policy issues. Eventually the fight
has now come on streets after Mukesh made changes in the clause that redefines
the power of chairman and the board approved it. The entire world is keeping a
watchful eye on the developments going on in the largest Indian conglomerate as
the money of 3.5 lakh shareholders is at stake.
It all started during Dhirubhai's time when Mukesh decided to come out of
his father's shadow and dreamt of having his own venture. Mukesh launched
Reliance Infocomm soon after Dhirubhai's death. Though both brothers together
own 55% in Reliance Infocomm, while the rest is owned by Reliance industries,
Anil and his family were absent at the Infocomm launch-enough to indicate what
was brewing between the brothers.
Both the brothers hold almost equal stakes in Reliance companies. It is
really recent developments that have spurred the real fight between the two.
Reliance is known for its political influence and Anil's intimacy with the
Samajwadi party made him Rajya Sabha MP. That, according to sources, Mukesh didn't
like. The next straw was the immediate announcement by Anil of a Rs 10,000 crore
gas pipeline project in UP without even informing or consulting Mukesh.
According to sources, an aggrieved Mukesh decided to clip Anil's wings and
at the July 27, 2004 board meeting, the agenda of which was to discuss health
and environment issues, was supplemented with another agenda of redefining the
role of CMD, one that the board approved immediately. As per the redefined role
of CMD, Anil was to become a subordinate of Mukesh and report to him while
Mukesh would continue to report to the board. Earlier both Anil and Mukesh used
to report to the board directly.
However, Anil didn't react at the meeting but sent a letter of dissent to
all the board members that they rejected. According to sources, board members
were of the opinion that all world-class companies have only one power center.
There can't be two power centers in one company and the same should apply in
Reliance Industries as well. That's when the e-mail war started between the
board members and Anil and eventually ended up in a statement on the ownership
issue in an interview to a television channel. This was followed by his e-mail
to the 80,000 employees saying he is the boss and the final authority on any
decision.
Interestingly, even the statement issued by Mukesh, saying that his comment
on the ownership issue was "torn out of context" and had nothing to do
with the ownership issue in the family, was initially meant to be a joint
statement with Anil to dispel the controversy.
However, with Anil refusing to address the media jointly with his elder
brother, Mukesh had no option left but to issue a statement about wrong
interpretation of his statement.
Sources suggest that issues do exist between the brothers and that's the
reason Anil reacted immediately when Mukesh made a statement on the ownership
issue and requested his mother to take a decision on his behalf.
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With analysts pegging the Reliance Infocomm valuation at Rs 45,000 crore, and
the two brothers (read promoters) owning the nearly 55%, the value of their
stake works out to around Rs 23,000 crore, making it far too lucrative for
either to be able to forgo without resistance. However, the Mukesh camp has been
hardselling the fact that he has single handedly built this Rs 20,000-crore
telecom empire that aims to translate into reality Dhirubhai's dream of making
all calls within India cost no more than a postcard.
There is another twist to the tale though. Reliance Industries is a 45%
shareholder in the Rs 45,000 crore Infocomm project and the project is expected
to have a debt-equity ratio of one. According to financial analysts Reliance
Infocomm continues in red, with a loss of about Rs 100 crore for the quarter
ended June 30, 2004. It has reported loss of Rs 390 crore in the last financial
year.
With only Reliance Energy under his fold, Anil has been demanding more of the
overall family pie to make his ownership stake equally balanced with that of
Mukesh. Sources suggest that Anil feels the balance can be achieved by handing
over the Reliance Infocomm business to him, a formula not acceptable to Mukesh.
So far, Anil does not sit on the Reliance Infocomm board nor does he have any
operational role in the company.
The Ambani family directly and through various financial companies, own
around 34 percent in Reliance Industries, which at today's market
capitalization, is worth roughly Rs 24,000 crore. Of this, Mukesh and Anil
Ambani own 5%, with the remaining 29% being held by other Reliance investment
companies. It's now evident that the fight between the brothers is not
restricted to the management control but also on the stake that other members of
the family are having in RIL.
Rahul Gupta in Mumbai/CyberMedia
News
How They Drifted Apart
July 27, 2004: The RIL board approves a supplementary agenda titled
"the formation of a health, safety and environment committee", with
one of its annexure redefining the powers of the chairman, MDs, executive
directors and various committees of directors, giving Mukesh Ambani overriding
authority on financial and investment matters.
July 29, 2004: After several requests for the minutes of the board
minute, Anil Ambani is finally handed over the draft minutes.
July 29, 2004: Anil shoots a letter to Mukesh saying that as there has
been no discussion between the brothers and/or other directors about the
proposed modifications, the additional agenda cannot be approved by the board.
July 29-October 24, 2004: The beginning of the e-mail war, with Anil
repeatedly sending e-mails to Mukesh and the company secretary's office
opposing the move and asking them not to finalize the minutes without his
approval.
October 25, 2004: Anil threatens to go public about the whole episode
in an email alleging that while the other directors, and even a few employees,
knew about the proposal in advance he was not informed about it.
October 25, 2004: A few hours after Anil's mail, a board meeting is
called which approves the minutes of the July 27 meeting despite Anil's
protests, thereby giving Mukesh full control over the group.
NOVEMBER 18: In an interview to CNBC TV 18, Mukesh Ambani, reveals
that there were ''ownership issues''.