Anil Said This, Mukesh Said That

Everything had been decided. The compromise formula to settle the ongoing dispute between two siblings was to be made public by end-April. One of the feuding brothers had finalised his 10-day holiday starting May 1. An advisor was to go on leave in June once the media curiosity about the deal had sobered down. Things were working according to schedule. But then, events took a tangential course. They led to a second round of battle between the two Ambani brothers, Mukesh and Anil. This time, it was more vicious than the first round, which was followed by a lull for several weeks.

Talks had clearly broken down. Holidays were postponed, and it was back to street-fighting. Both camps went on the offensive as spokespersons gave on-record quotes. Anil gave a few bites to TV channels. Suddenly, while everyone was wondering what had gone wrong, Anil brought the public bickerings to a halt. Early last week, his Mumbai-based spokesperson said that Nikhil Meswani, a cousin of the Ambani brothers who was meeting hacks to voice Mukesh's viewpoints, had no locus standi to speak on family matters. Anil's side alleged Nikhil wasn't involved in the discussions to split the Rs 1,00,000-crore Reliance group between the Ambani brothers.

The accusations had a certain irony about them. In January this year, Anil's advisors announced a deal had been struck with Mukesh. They disclosed the nitty-gritty of the agreement to split the group equitably between the brothers. Mukesh's side denied it. While Anil had no qualms about his advisors going public on family-related issues, he had problems if his cousin did the same.

Still, Anil's ploy worked. Everyone immediately went into a shell. Mukesh's advisors said they weren't talking. "We want to play by the rules," said one of them. Another one refused to take calls. The third referred us to Nikhil, who had stopped his briefings. Anil's key advisor sent a message across that he wasn't speaking. Mukesh flew down to Delhi to meet the prime minister. The same day, Nikhil met finance ministry officials to counter Anil's fresh charges that the recent disclosures from Mukesh's camp had violated several legal norms.

Anil had effectively stopped the leaks and put Mukesh on the defensive by attacking Nikhil. So, what happened? Why did the talks break down? Have the two brothers gone back to the negotiating table? We have some answers because certain people were still doing what they do best—briefing us. The only caveat: as no one wanted to be identified with specific camps, the reader will have to figure out the source of the information. But, of course, there are enough clues.

It started with another unsigned note titled "The Spy As Executive" that was circulated in March. It sought to destroy the credibility of Anil's Delhi-based advisor. The note attacked him as a CIA spy (with links with Indian and British intelligence), who was using the Ambani "calling card" to "buy allegiance of media leaders, journalists, bureaucrats and politicians". It added that Anil's man used a mix of "fist and glove" to dig up damaging information on civil servants and secure their loyalty "on the promise of getting 'files closed'.... When all else fails, there's blackmail.... (Name deleted) is responsible for mounting honey-trap operations on a host of senior bureaucrats and their relatives."

Nothing wrong with that note per se as similar notes had been circulated against men close to Mukesh. But there was more damage in the offing. Sugrib Singh, a Lok Sabha BJD MP, apparently wrote a letter (enclosing the note) to the prime minister and the home minister. Another BJD MP, Prasanna Patasani, used its contents to write another one to the PM. Two other MPs from the same party, Trilochan Kanungo and Padmanava Behera, hurled new allegations at Anil and his advisors in Delhi and Mumbai, and hinted at his moves to eject Mukesh out of Reliance Industries Ltd (RIL), the group's flagship company.

Anil got mad at these below-the-belt tactics. For, Sugrib Singh's letter turned out to be a fraud. On April 28, Sugrib wrote to the PM alleging his earlier letter was "a case of blatant criminal forgery". It spelt his name as Sugriv, instead of Sugrib, it had the wrong phone number, and it did not mention his constituency that's mentioned in the original letterhead. Patasani said he was "used by vested interests" and withdrew the allegations. Kanungo and Behera, it seems, were MPs in the last Lok Sabha (when the NDA was in power).

Well, Anil wasn't the only one who was livid. Mukesh felt his younger brother was deliberately derailing the settlement process by making fresh demands each day. First, the latter demanded a huge premium to give up management control in RIL. (As a part of the deal, RIL was to go to Mukesh and, hence, Anil had to sell the stake that he would have got in the flagship). This was no small change and would make a difference of over Rs 3,000 crore for Anil (whose holding in RIL could be just over 11 per cent).

Mukesh agreed, but insisted he should also be paid higher premia for RIL's substantial stakes in group entities that would fall in the younger brother's lap. (The deal stated that Anil would get Reliance Energy, Reliance Capital and Reliance Infocomm). In addition, Mukesh wanted a higher amount for his personal stake (55 per cent) in Reliance Infocomm. But Anil refused to buy these arguments as he considered himself to be the aggrieved party. Mukesh felt Anil was delaying the process to get a larger slice of the Reliance pie.

Finally, the duo couldn't agree on a formula to value the cross-holdings that needed to be untangled to split the group. Mukesh was willing to pay a small premium over the current market price (Rs 540 per share) for Anil's stake in RIL. The younger brother put the price at Rs 750 a share, based on earlier valuations by several foreign investment bankers. Merrill Lynch, in its March 2004 report, had put the real price of RIL at Rs 673 per share and, according to Anil, this would have gone up because of improved operations and optimistic outlook for Reliance Infocomm. Mukesh wanted the telecom venture to be valued at Rs 50,000 crore, instead of Rs 20,000 crore that Anil thought it was worth.

There was an additional problem. Mukesh, while assenting to part with Reliance Infocomm, decided that RIL will not extend the telecom venture any financial help in the future. This made some sense as Anil had criticised RIL's huge investments in Reliance Infocomm in the past few years. But now, Anil found this unacceptable. His logic: the telecom firm needed huge amounts, over Rs 5,000 crore this year itself, and there was no way he could raise such resources. (In the past, Anil had maintained that Reliance Infocomm would require another Rs 10,000-15,000 crore).

Things turned ugly when Anil thought the other side was working behind his back to shortchange him. First, his resignation from IPCL's board was quietly accepted and his name was dropped from the management and directors' list on the company's website. (IPCL is currently managed by Mukesh and the company insists it told the registrar of companies about the acceptance of the resignation on March 28). Anil was enraged when he found out that Reliance Capital had sold its holdings in IPCL at a loss. While he raised the issue that it was against shareholders' interest, there was another little-known reason why he was scared.

For Anil, there was no reason to sell a group company's stakes in other family-owned entities. Such a transfer should happen only after a consensus had emerged on valuations of the firms within the Reliance empire. Moreover, if he gained control of Reliance Capital, the sale reduced his wealth for he would have demanded a premium over the market price for Reliance Capital's holdings in IPCL, or any other entities. But the Mukesh camp scoffed at this logic by clarifying that the acceptance of Anil's resignation from IPCL's board and the sale of Reliance Capital's stake in the petrochemicals firm was a part of the overall attempts to untangle the cross-holdings.

All these feelings came to the forefront the day RIL held its board meeting to announce the company's annual results for 2004-05. On April 27, Anil openly expressed himself in front of TV cameras stationed outside RIL's headquarters in Mumbai's Maker Chambers IV. That's when he gave his oft-quoted remark that this was a different sort of a cricket game where he was single-handedly playing against Mukesh XI. (Later, someone said a better analogy would have been American football, where the touchdown expert is invariably tackled by several defenders at the same time). Anil also dismissed the clean chit that an internal committee gave RIL on corporate governance issues that he had raised in the past. "What else did you expect the committee to do?" he asked.

For a few days now, we haven't got emails from vague names like Santa Claus and Bhupinder Singh, which are aliases used by one of the camps to send information to newspapers. We also haven't got long faxes (sometimes 40-50 pages) from numbers that can't be traced back to any of the Reliance group companies. We haven't even got calls from mobiles whose numbers don't show up on your handset. That would indicate the two sides are back to sorting out the various unresolved issues in a bid to hammer out a compromise. And that should be good news for the Ambani family members, their advisors and aides, and their friends and well-wishers. But their enemies are hoping they'll witness more rounds of fighting and the show should just go on.