The $23-billion Reliance Industries, representing 4% of India's economy will be split between the brothers Anil and Mukesh Ambani, heirs to the sprawling industrial behemoth created by their father, Dhirubhai Ambani.
Some background may be in order for those unfamiliar with the conglomerate. It operates in the fields of petrochemicals, telecom, textiles, oils, and finance. It is India's largest private sector company, and has the most shareholders of any company in the world. It is also the only Indian private company in the Fortune 500, and the first to float ADRs in the US market. It operates some of the world's largest oil refineries, and their telecom company purchased FLAG Telecom, with 50,000 kilometers of undersea fiber-optic cable. Net profit last year was over one billion dollars, revenues of $23 billion, and market cap estimated at $20 billion.
The founder, Dhirubhai Ambani, structured the company with a number of holding companies, and sub-divisions, over 300 inter-connected organizations. He died in 2002, leaving a murky succession plan. His two sons, Mukesh, a hard-driving engineer, and Anil, seen as a dynamic business-oriented individual, assumed the reins, but signs of a split were visible early on, with Anil a no-show at the IPO of Reliance Infocomm. Mukesh was named the Chairman and Chief Managing Director. Anil filed his papers for the Indian parliament's upper house in 2004, but faced objections from Mukesh's camp.
In late 2004, Mukesh admitted to "ownership issues", roiling the Indian markets. Six directors resigned from the board when he declared in an e-mail that he, or rather hsi role as CMD, was the final authority. Anil refused to sign off on the balance sheet of the corporation, and objected to share transfers between the companies. On Jan 23, 2005, Anil sent a 500-page note to the board declaring a 'lack of transparency' in the operations. The Securities and Exchange Board of India puts the company under the microscope, but takes no action. Deals like the awarding of 30,000,000 shares to a friend of Mukesh at Rs.1/share, worth $100,000,000 are brought into question.
The widow of Dhirubhai Ambani, Kokilaben, stepped in and declared that the two brothers must resolve their differences or split the company by July 6th, the 3rd death anniversary of their father. The inner details of the discussions and arbitration may take a while to be known, and not until the books are written. She announced the details of the split first, even before the Board's announcement, on Saturday.
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Article comments
1 - Bennett
You did a lot of research for this one, eh? Sounds like Mom did a heck of a job bringing about an amicable split of the corporations.
The shareholders must be absolutely thrilled!
Do you own any stock?
This was a facinating look at industries I never see reported in our national news. Thanks Aaman.
2 - Aaman
No, I never did get around to buying Reliance stock, but 25% of all Indian shareholders own stock in Reliance.
The business mags all have reports on the split, and you should see some write-ups in the other papers soon.
Not enough interest in this, though - imagine if the Fords split up Ford.
3 - Aaman
The "Carnival Of the Capitalists" has included this post from my blog in this week's edition
Feels good:)
4 - Vishal Sharma
I have posted an article why Ambani's split as it's inevitable in today's environment.
http://vashistvishal.blogspot.com/2005/06/why-ambanis-reliance-industries-split.html
Read this and see what u make of this.
5 - Bennett
Congrat Aaman! It is a very well written piece and deserves wider exposure.
6 - Aaman
Thanks Bennett - I assume yr talking about mine.
I can't quite say the same of the post in #4 - well-intentioned, but narrow-minded.
7 - Bennett
I was definitely talking about yours, Aaman.