For over a decade, The Polyester Prince, an unauthorised biography of Dhirubhai Ambani by Hamish McDonald, was unavailable to Indian readers thanks to legal opposition from the Reliance group. Finally, an up-to-date version of the book, titled Ambani & Sons, is being published in India. Exclusive excerpts.
Dhirubhai felt no need to leave a will, apparently confident that Anil would agree to work under Mukesh’s leadership. This was not at all Anil’s attitude when Dhirubhai died in July 2002. He immediately proposed that Kokilaben assume the Reliance chairmanship, leaving the sons as almost equal executive directors.
Mukesh rejected this immediately as “giving the wrong signal” and was voted chairman at the end of the month by the other directors. Talks about splitting the empire between the brothers began around November that year, with Anil talking to both (Anand) Jain and (Amitabh) Jhunjhunwala, but did not make any progress. Around this time, Anil learnt about the reconfigured ownership web. “When Anil got to know about the new matrix in 2002-03, he went berserk,” (Alam) Srinivas said. “It seemed to him that Mukesh had stabbed him in the back.”
The issue simmered through 2003, with Anil occasionally reverting to his old role as the public face of the group. The Indian media occasionally hinted at a surrogate rivalry between the two brothers’ wives. Nita Ambani, married to Mukesh, was emerging as a concerned and active corporate wife. She had supervised the planting of the green belt of mango trees around the Jamnagar refinery and the extension of drinking water to local villages from its seawater desalinators. In Mumbai, she had handled the design and landscaping of the company’s ‘Knowledge City’, ran the board of the new Dhirubhai Ambani International School and pursued educational programmes for slum children, besides practising yoga and traditional dance.
In various interviews after Dhirubhai’s death, Nita had talked about her role as Mukesh’s most frank confessor and advisor. In October 2002, the magazine Society headlined its cover story ‘Mukesh and Nita Ambani: on turning Dhirubhai’s dream into reality’. Savvy magazine talked of ‘Nita Ambani’s corporate avatar’. In interviews, Nita said she was the sounding board and the only one who could speak her mind to Mukesh, including on business affairs, such as what she called the “premature” launch of Reliance Infocomm. “People thought I came to Jamnagar as a rich man’s wife to pass my time,” she was quoted as saying. “Today I know what business is about. Today I understand and help Mukesh in execution.” Later, this was portrayed, in at least one newspaper report quoting unnamed ‘observers’, as part of a campaign to replace Anil as vice-chairman of the company and as having ‘driven a wedge’ between the brothers.
By the end of 2003, Anil’s actions were bringing him into serious conflict with Mukesh. Anil was starting to use Reliance Energy, of which he was chairman and managing director, like an independent company, even though it was 51 per cent owned by Reliance Industries. He had also got closer to the Samajwadi Party government in Uttar Pradesh, which broadcast the ‘news’ that Reliance was going to build a huge power plant in the western part of the state, feeding the industrial belts close to Delhi. In January 2004, Anil announced that the plant at Dadri would be the largest gas-fired generator in the world, costing Rs 100 billion or $2.2 billion, and would take its fuel by pipeline from the Reliance discovery in the Krishna-Godavari basin.
It was not actually until two days later that the project came before the Reliance board, which agreed to commit Rs 35 billion, but withheld any commitment of gas produced in the Bay of Bengal field. After a Congress-led coalition with Manmohan Singh as prime minister replaced the BJP-led Vajpayee government in May that year and immediately announced plans to privatise the notoriously squalid Delhi and Mumbai airports, Anil jumped in again with an announcement that Reliance would join the bidding, without consulting Mukesh or the board. Mukesh was also resisting pressure from Anil for the company to ‘adopt’ a hospital in Mumbai and put Rs 180 million into the foundation that ran it (Anil was later to explain it was his mother’s wish).
Mukesh’s tolerance snapped on June 16 (only 12 days after the New York Times reported ‘no obvious friction’, although it had also noted Anil’s absence from the Infocomm launch). He picked up the morning newspapers to read that Anil had accepted a nomination by the Samajwadi Party to occupy one of its allotted seats in the Rajya Sabha as an independent. Alongside him was Jaya Bachchan, actress wife of the ‘Big B’, Amitabh, who had apparently agreed to lend some of the family magic to Samajwadi in return for financial help arranged by Amar Singh from the Sahara group’s Subroto Roy for his business activities.
Amar Singh flanked his two new stars as they were sworn in to their positions. Anil’s required register of assets listed his wealth as comprising investments of Rs 1.6 billion, other assets of Rs 900 million and jewellery worth Rs 272 million, while his wife Tina’s jewellery was put at Rs 650 million, giving a total of Rs 3.42 billion or about $77 million—meaning that the main Reliance stake in the investment companies was not being counted.
Mukesh was incandescent with anger at Anil’s jump into politics with an opposition party, according to a family confidant. Soon afterwards, he moved again to put Anil in his place. At a Reliance board meeting on July 27, 2004, the agenda included as its item No. 17 a motion blandly titled as being “to approve constitution of a ‘Health, Safety and Environment’ Committee and to confirm authorities hitherto delegated by the Board to Committees of Directors/Directors/Executives as also confirm such of those delegated authorities as are subsisting and to consider modifications, if any”. Tucked away as an annexure was a note setting out the functions of the chairman and managing director (Mukesh) and the vice-chairman and managing director (Anil) who would be under the ‘overall authority’ of Mukesh. The condominium was over: Mukesh was the boss.
Dhirubhai and Kokilaben at the inauguration of the Dhirubahi Ambani Hospital, Raigarh, 1998. (Photograph by Abhijit Bhatlekar)
The Reliance drama by now had almost every element of an Indian soap opera. It had wealthy tycoons, brothers fighting each other, sleazy political netas, clever financiers, angry wives, religious seers, a disputed inheritance, private eyes, allegations of forgery and phone-tapping, officials pretending to be active, frustrated investigators and a chorus of reporters besieging the main characters. Most important of all, it had the mother, respected and loved by all for her innate and unsophisticated wisdom, able to cut through to the main emotional issue.
Kokila had raised the four children with the help of a tutor while Dhirubhai spent most of his time on company business. She remained a god-fearing member of the Modh Bania, carrying with her from childhood a picture of Srinathji and going to worship at Nathdwara at least four times a year. Her husband was her other devotion: as they grew older and his health became fragile, she began collecting material and memorabilia about his life, which she was later to publish after his death.
The rapid breakdown of the working relationship between Mukesh and Anil brought Kokilaben to the centre of things. Anil had quickly realised that Mukesh held nearly all the cards inside the company, but was it partly bluff? Family pressure offered him the best leverage with which to find out. By the end of December, Mukesh was being asked to show his main card: when and how had Dhirubhai handed him charge of the inner sanctum, the web of hundreds of companies ‘acting in concert’ to make family control of Reliance unassailable? He couldn’t, or for some reason wouldn’t, and was conceding too that he would abide by Kokilaben’s decision.
After the showdown at the December 27, 2004, board meeting, Kokilaben had used family meetings the next day on Dhirubhai’s birth anniversary to sound everyone out about where to go. Mukesh and Anil were still not speaking to each other directly. The older brother wrote privately to Anil three times over these weeks (on November 30, December 7 and January 18) offering to meet and work out an arrangement. On January 20, Anil had replied that he would meet ‘only if there is an agenda and if all the family is present’ and was reported to have said: “We need two hands to clap, Mukeshbhai.”
But a division of the empire was already being discussed in the media, with lawyers and accountants giving their views on how it might be done. There were suggestions that Anil had been offered the companies he already ran, Reliance Energy and Reliance Capital, plus some cash, to go away. If so, he wanted a much more even split.
The problem was that so much of the group’s value was concentrated in the core business under Reliance Industries. Dividing it would immediately remove the synergies and tax advantages of vertical integration, not to mention running roughshod over the interests of other investors. To try to clarify and split the ownership of the investment company web was also problematic. Dhirubhai had designed the matrix to be as opaque and impenetrable as possible, partly to lower taxes and make opportunistic trading profits, but also to make it difficult for the holding to be broken up. His confidence in it was enough for him to feel no need to make a will and to dissolve the Hindu Undivided Family status. There were non-core group companies that could be surrendered more easily, but the biggest of them, Reliance Infocomm, was acknowledged even by Anil to be the pet project of Mukesh. Was it yet ready to be weaned away from the cash-cow of the parent company? The day after the sad anniversary, Kokilaben called in one of the Mumbai financial community’s best brains, an elder with a long and close relationship with the family. K.V. Kamath, chairman and chief executive of the icici Bank, had, as a junior officer of the government lending institution, approved one of the earliest loans obtained by Dhirubhai. Behind a cloak of secrecy and denials, Kamath got to work on the valuations of the different Reliance arms and the way in which they could be divided.
Anil Ambani at the press conference after the Reliance split was announced, June 19, ’05. (Photograph by AFP, From Outlook, October 04, 2010)
The Ambani Legacy
So what to make of Dhirubhai Ambani: revolutionary business guru or unsurpassed corruptor, or both? And how much of his legacy remains with the two business empires of Mukesh and Anil and more widely in corporate India?
Some analysts excuse the Ambani methods as an unavoidable—even just and necessary—riposte to a rotten and moribund system. “Much of the criticism of Ambani is, in effect, of the Indian system of bureaucratic controls, state intervention, high but variable tariffs, industrial and import licensing, state control of unit trusts and life insurance,” wrote a respected Hong Kong-based authority on Asian business, the journalist Philip Bowring. “To beat the system to get ahead, it was necessary to exploit the human frailties of its power holders. Everyone did it. Ambani did it more effectively.”
Indeed, that was noted by some as a key strength. Reporting the first year in which Reliance actually paid corporate profit tax—1997, nearly four decades after its beginning—The Economist noted that the Ambanis had built a “strangely modern company” in an Indian business environment described as the “Galapagos of capitalism”. In the same article, corporate analyst Manoj Badale saw the only common thread in the group’s diverse activities (by then including telecommunications) as “a focus on capital-intensive industries in which success turns on the ability to get around regulators—and that, it seems, is what the Ambanis reckon is Reliance’s core competence”.
But it has to be said: this doesn’t do justice to Dhirubhai’s outstanding abilities and drive on so many fronts: as an innovative financier, an inspiring manager of talent, as astute marketer of his products and as a forward-looking industrialist. His story is also about the flowering of entrepreneurship from a traditional, isolated backwater like Junagadh; the accumulated ethic of centuries of business and banking among the Bania castes being transferred to modern corporations; the impressive numeracy of so many Indians, from the poorest street traders to the high financiers; the way in which the age-old trading links to the Indian Ocean rim have been extended into Europe and North America by the past 40 years of migration.
The energy and daring that showed itself in his early pranks, practical jokes and trading experiments developed into a boldness and willingness to live with risk that few other Indian corporate chiefs dared to emulate. His extraordinary talent for sustaining relationships and sometimes impressing men of standing, with much better formal education, won him vital support from both governments and institutions that was not always, or solely, based on mutual reward.
As for investors, as long as there was growth in the price of Reliance shares, they quickly forgot the controversial episodes. These were, notably, the mergers of subsidiaries at great advantage to promoters; the unexpected private placements; the duplicate share and share-switching cases; the sustained pump-priming of share prices using the company’s own funds or money raised for other purposes; the short-term investment profits reaped via the scores of ‘trading and investment’ companies in the ownership ‘matrix’. After his death, there was the issue of the ‘sweat equity’ cornered by Mukesh in the cellphone venture, later exposed by his brother.
Mukesh, Dhirubhai and Anil at the Vimal plant inauguration in Naroda, Gujarat, 1977-78. (Photograph by Jayanta Saha)
Not so, say the critics who accused Dhirubhai Ambani of pervasive subversion of free press inquiry and commentary, via tactics of inducements, selective leaks, advertising power and marshalling of legal and regulatory obstacles. They cite the broad spectrum of government employees who became listed as Dhirubhai’s people, plied with small gifts, their names put forward for favourable postings and made aware that decisions counter to Reliance interests could result in an abrupt transfer to a career backwater. Politicians learnt that their support resulted in a talented team of Reliance government liaison staff pushing their advancement. Displeasure meant the same operatives digging for dirt or disadvantaged constituents and making sure the details were publicised in the least favourable light.
From this viewpoint, there was a dark side of Dhirubhai: an instinct for human weakness and a willingness to exploit it. This gained him preferential treatment or at least a blind eye from the whole gamut of Indian institutions at various times. Over decades in India, some of the world’s best minds had applied themselves to building a system of government controls on capitalism. Dhirubhai Ambani made a complete mockery of it—admittedly at a stage when the system was decaying and partly corrupted already. The ministry of finance and its enforcement agencies, the Reserve Bank of India, the Central Bureau of Investigation, the Securities and Exchange Board of India and the Company Law Board, proved timid and ineffectual in their handling of the questionable episodes involving Reliance. Public financial institutions that held large blocks of shares in Reliance and had seats on its board were passive and acquiescent spectators, rather than responsible trustees for public savings.
Dhirubhai Ambani cautioned about the “jealousy” inherent in the Indian business milieu. Reliance frequently, routinely, put any criticism or opposition to its actions down to motives of envy or a desire to pull down anyone achieving success. Throughout every crisis caused by exposure of alleged manipulations, company publicity took on a self-pitying victim’s tone. But the record tends to show that it was Dhirubhai and Reliance that often made the first move to put a spoke in a rival’s wheel, whether it was Kapal Mehra or Nusli Wadia, whose supporters blame hostile lobbying by Reliance for some of the financing difficulties encountered in Essar’s efforts to build a steel, petroleum and shipping empire based on India’s west coast.
Can the run of unfortunate incidents hitting various rivals—government inspections, tax problems, unfavourable press reports, physical attacks and, in Wadia’s case, a damaging forgery, a deportation order and, on the police case yet to be tested in court, an alleged murder conspiracy—be just a series of coincidences?
Reliance sought larger capacity clearances, lower duties on its imported chemical ingredients and higher duties on its finished products for itself—not for all players. It has been relentless in its use of monopoly or dominant market share. Many Indians took the effects of Dhirubhai Ambani’s sustained cultivation of politicians and officials much more seriously than Mani Ratnam’s film did. “Ambani’s hand in tarnishing the Indian state—in rendering dubious practice systematic—has dire consequences for ordinary Indians. Not everyone can afford the bribes for basic amenities and rights relentlessly extorted by a system made greedy by visionary local capitalists. And needless to say, it will be a very long time before ordinary Indians count among the beneficiaries of Ambani’s economic revolution,” wrote Leela Gandhi in 1999 in The Age, Melbourne.
Sis-in-laws Nita and Tina Ambani attend the Reliance AGM in Mumbai, 1999. (Photograph by Atul Loke)
The question on most minds in India, though, was whether Mukesh and Anil would work together, apart, or against each other? Anil’s decision not to pursue the avenue of a review petition against the May 7, 2010, judgement of the Supreme Court, and the issuing of the joint statement about striving for an “environment of harmony, cooperation and collaboration” was partly the result of two influences. One was the office of the Prime Minister, Manmohan Singh, which had been urging the brothers to stop their public fighting in the overall interests of India. The other was Kokilaben, who was undoubtedly anguished by the continuing rift in her family and the unfavourable attention it was bringing.
Even without this pressure, commercial realism would have impelled the modification of the family agreement and the pledge of cooperation. Anil had started a lot of costly projects in the entertainment sector that depended ultimately on the taste and discretionary choices of consumers; his projects in the non-discretionary sector of electric power were lagging; he was having to spend heavily on licence fees to stay in the cellphone competition. Though at the higher price set by the government, supply of Krishna-Godavari gas was still a huge business advantage. By conceding Anil a 12-year lead in gas-fired power generation, Mukesh gained from the scrapping of the non-compete and first-refusal clauses of the 2005 agreement—a freedom he immediately exercised with his move into wireless broadband—and, it was suggested in the media, an obligation to cut Anil into future petroleum discoveries.
Moreover, it must have recognised the energies expended on the fraternal wrangling was distracting from the challenges of a more global business environment. Mukesh had been unsuccessful in takeover bids for a large Dutch petrochemical concern, Lyondell Basell, and for oil sands and shale-oil producers in Canada. At home, he and Anil were two among a growing list of multi-billionaire tycoons with comparable savvy in raising capital, building brands and mastering technology. The political scene was heading for a generational change towards the middle of the decade, with the Congress being rebuilt by the emerging fourth-generation leader of the Nehru-Gandhi family, Rahul Gandhi, and the bjp groping for a younger-generation figure to match.
The shape of the rapprochement, if that’s what it was, emerged only slowly. The Indian media floated stories that the two brothers and their families had gone on safari together in Africa, that Anil had stayed in a temple pilgrimage guesthouse owned by Mukesh’s companies, that the two had been more relaxed at gatherings in honour of Kokilaben. Hard heads among business analysts were cautious about declaring that the feud was over. The sniping had stopped, but the signs of active collaboration were yet to come. The master agreement for the sale of gas from Mukesh’s offshore field to Anil’s power plant at Dadri was lacking in hard numbers. It seemed more like a truce, a reaching for a modus vivendi, than a firm peace, let alone a rebuilt alliance. What seemed certain was that the continuing story of these two brothers—real-life ‘slumdog billionaires’ whose homes have gone from the chawl in Bhuleshwar to their own high-rise towers—was unlikely to become dull.