The three-month old dispute over ownership of the Ambani group of industrial empire with its market capitalisation of more than Rs 90,000 crore has affected not only the peace of Ambani family, but has also disturbed simultaneously the country’s capital market, foreign investment decisions, India’s tax revenue composition and its gross domestic product at large. Significantly, the amount of India’s central tax revenue sourced from Ambani group of Industries comprises around 12.5 per cent of total collection and forms more than one per sent of its gross domestic product (GDP). Though differences among the Ambani brothers started even before the death of their father, Dhirubhai Ambani in July, 2004, due mainly to the elder, Mukesh enjoying larger slice of parental confidence in managing the affairs of business, the feud did not surface in much perceptible way. However, after the death of Dhirubhai, the cold war among the brothers came out in the open with claims and counter claims over a disputed will supposed to be left by Dhirubhai with respect to bigger share of property in favour of his elder son, Mukesh and lesser for the younger, Anil Ambani.
The Reliance group of industries has a number of holding companies of which some were acquired and some promoted. Most important among them are Reliance Infocomm (RIC) and Reliance Information and Communications Pvt Ltd (RICL). It may be noted here that before July, 2004, the original Reliance Co Ltd changed into the present Reliance Industries Ltd which promoted the Reliance Infocomm (RIC) and in December, it was merged with RICL and the post-merger firm was named Reliance Infocomm (RIC). The elder Ambani, Mukesh was formally listed as promoter of RIC in overseas loan memo and got shares valued at Rs 7200 crore for just Rs 50 crore of down payment. This was given to Mukesh as sweat equity shares in his role as promoter of RIC under a July-2000 agreement. This opened up a major point of dispute between the two brothers in the battle for control of Reliance. Anil camp alleges that Reliance Industries (RIL) chairman, Mukesh Ambani was not the initial promoter of the Group’s telecom project, the RIC. If the allegation is true, Mukesh certainly cannot be entitled to the sweat equity share valued at Rs 7200 crore for just Rs 50 crore which took place in mid-2004. The Reliance Industries chairman, Mukesh Ambani annulled the 50-crore shares of RIC he got at a price of Re 1.00 each, giving him 12 per cent personal stake in the company. He had thus given up claim to shares currently worth Rs 7200 crore, diluted his holding in RIC and boosted the stakes of RIL shareholders in the Infocomm venture. Mukesh justifies his decision to annul his sweat equity holding on the ground that his decision was to create national assets and not to enrich himself. His decision was accepted by the Board of Reliance Communications Infrastructure Ltd. It is important to note that after annulment of holding by Mukesh Ambani Reliance Industries stake goes up to 45 per cent in RIC with another 45 per cent held by Mukesh-associated companies and the rest of 10 per cent by employees though no explanation of which these associated companies were, was available from the Mukesh camp. Another development in the mean time is that Anil Ambani-controlled Reliance Energy succeeded in amending Articles of Association (AOA) on appointment of Directors after the parent company chaired by Mukesh Ambani gave up its resistance. Thus, the younger brother has thrown the ball back in the court of Reliance Industries.
In the continuing war of attrition between the Ambani brothers, Anil Ambani has been recently urged to withdraw his resignation as vice-chairman and Director of Indian Petro-chemical (Ltd (IPCL), erstwhile a PSU acquired by Reliance three years ago in a meeting of the IPCL Board under chairmanship of Mukesh Ambani. It may be noted that Anil refused to be on the IPCL Board since he felt that the close associate of his elder brother, Sri Anand Jain had conspired to divide the Ambani family and he took up the matter with the Union Finance and Power Ministries. The row has badly affected the interest of shareholders of the Reliance Industries Ltd which happens to be India’s largest petrochemical producer. Its shares rose just 3 per cent in December quarter compared to the BSE index gain of 18 per cent. The stock has fallen 5.5 per cent to Rs 511 since a share buy-back started on January 10, exceeding a 3.7 per cent drop in BSE Index, in which it has an 11 per cent weightage. A cool down of the feud is urgent in the interest of the country’s economy since Reliance group has 3.5 million sharehoders with its business interest spread over the entire energy sector from underseas gas reserves to oil refining, petrochemicals, fibres and electricity, telecom, etc. Hence, when its business is disturbed, the country’s economy gets affected. What is, however, understood is that there is no indication so far from either of the brothers of a split in Reliance Industries. This is a welcome sign. With many contradictory reports about compromise formula being offered and rejected, an observer while wishing a quick solution, has to admit that the Ambani brothers are a dynamic team and can move much further ahead with united efforts. Since both brothers are willing to abide by their mother’s decision, the best course would be for the Ambani family to sit together and hammer out a compromise formula with the aid their mother, Kokilaben. The sooner this is done, the better it is.
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