the last one week the world has been gripped by the spectacle
of a new imperial power, the US, seeking to wrest control
of the Ukraine from Russia's grasp by means of every tool,
from propaganda to media control, that money can buy.
The outcome of that struggle could well ignite a confrontation
that becomes the signal conflict of the twenty-first century.
But as far as Indians are concerned, it might not even
be happening. For, over the past ten days they have been
preoccupied to the exclusion of everything else, in their
own family drama the saga of the Ambanis.
It has everything that the public could desire. A great
father, now deceased, who founded one of the fastest growing
industrial empires in the world (an increase in sales
of 140 times in 25 years); a tightly knit family devoted
to his memory and committed to fulfilling his cherished
dreams; two extraordinarily talented sons whom the father
trained and who have so far worked together in complete
harmony. Four million shareholders whom this company has
served like no other in the world. And then suddenly the
brothers are fighting; there is talk of going to court,
and Reliance seems on the verge of a split. And equally
suddenly they are no longer icons of Indian Industry:
just another family enterprise going the way of countless
No one, literally no one in the entire country, wants
that to happen. Few companies have enjoyed the outpouring
of good will, and of anguish at the possibility of its
break-up, that Reliance is receiving today. What makes
it different is not just its sheer size but the unique
contribution it has made to the evolution of the Indian
share market and the Indian middle class. Reliance Textiles
industries made its first public issue of shares in 1977.
It did so at the height of the command economy. The share
market had been dead for 21 years following the Mundhra
was an unknown company. A handful of people bought those
shares. Today they are all millionaires. In rupee terms
many are billionaires. As share issue followed share issue
in the '80s and '90s, their numbers multiplied. Today
there must be at least a hundred thousand 'Reliance millionaires'
in the country. To them the company is God.
did not only serve its shareholders. It ignited the revival
of the Indian financial markets that was made possible
by the first tentative economic liberalisation of 1981.
In a single sentence, it made millions of Indians stop
hoarding their savings as gold or land, and start buying
shares. It was, and to a large extent remains, the midwife
of Indian capitalism.
When the future of such a company appears in doubt it
is inevitable that the air will be clouded by rumour,
speculation and accusations of bad faith. But those who
are making them are neither being fair to the two brothers,
Mukesh and Anil, nor doing Indian industry a service.
There is nothing petty or personal at the root of the
differences that have now come out into the open: just
the need to choose between two immensely important but
vastly expensive projects, and a shortage of money within
the conglomerate to carry out both at the same time. The
companies are Reliance Energy, managed by vice chairman
Anil Ambani, and Reliance Infocomm, managed by elder brother
and chairman Mukesh.
Reliance energy is the older of the two perhaps
the last project conceived by the great strategic brain,
Dhirubhai Ambani. For years he bought shares in that excellent
Mumbai power company BSES till he gained control of it.
Since then BSES, rechristened REL, has successfully bid
to take over electricity distribution in Southern Delhi
and elsewhere, and as Anil Ambani announced recently,
has formulated plans to build a 3,500 MW power plant in
UP. The plant is to be gas-based and, thinking years ahead,
Dhirubhai had been working towards a rapprochemement with
Pakistan to allow central Asian gas to flow to India as
far back as in 2000 and 2001.
By contrast, Reliance Infocomm is Mukesh's brain child.
The sheer sweep of the vision behind it is breathtaking.
It has galvanised competition in the industry, and introduced
a new system of financing that has made mobile telephony
take off at a rate that now equals if not exceeds that
both projects need additional investments of thousands
of crores. The obvious way to raise it, for a company
like Reliance, is to make a fresh share issue, either
for REL or for Reliance Infocomm. On the face of it, the
latter is the more appropriate candidate. Not only is
it fully owned by the Ambani family and companies and
therefore least threatened by dilution, but the mystique
that it has already built around it ensures huge oversubscription.
However, Reliance Infocomm is at that critical stage in
its takeoff when huge investments have been made but most
of the returns are still in the future. Sound venture
capital management would therefore suggest postponing
a public issue till a little further down the line.
in the meantime the brunt of the lack of funds is being
borne by REL. Six months ago, it earned the displeasure
of the Delhi government for not having lived up to its
capital investment commitments in South Delhi as Tatas
had done in the northern sector. This is hardly the kind
of publicity that REL needs. It may well have started
the rift that is now in the open.
projects are important. Even one 3,500mw power plant in
UP could transform much of North India, creating industry
and millions of jobs. But the beneficiaries of Reliance
Infocomm are also not the idle rich. They are mainly millions
of workers in the informal sector whose incomes have multiplied
because they can now be contracted for casual work anytime,
country needs both projects. And it needs a united Reliance.
The only way forward is to issue shares raise the money
and rely upon the people
to continue supporting the present management. What must
end now is the close family held tradition that Dhirubhai
inaugurated. India, and Reliance, have moved on.
The author, a noted analyst and commentator, is a former
editor of the Hindustan Times, The Economic
Times and The Financial Express,
and a former information adviser to the prime minister
of India. He is the author of several books including,
The Perilous Road to the Market: The Political Economy
of Reform in Russia, India and China, and
Kashmir 1947: The Origins of a Dispute, and a
regular columnist with several leading publications.