» Reliance »
Worm Alert, Mail Re-Routed
Akhil Gupta was one of Mukesh Ambani's closest friends, like a third son the late Dhirubhai Ambani never had. Gupta was one of the few outsiders who was treated like an Ambani family insider (he was the only non-Ambani to have an apartment at the family residence at Mumbai's Sea Wind). So it came as a surprise when Gupta quit as CEO (business development), Reliance Infocomm, to join the US-based Blackstone group, a financial services consultancy firm with a private equity arm to invest in several markets, including emerging ones.
But worse was yet to come. Confidential e-mails written by him to Mukesh last year were leaked to the media. And their contents were explosive. Yet again, it came to the fore that the road to peace between the two warring Ambani brothers, Mukesh and Anil, was wrought with landmines. It seemed the settlement between the two to divvy up the Rs 1,00,000 crore Reliance empire was still mired in problems. Obviously, there was more to it than met the eye.
One of the two e-mails established the fact that Gupta had warned Mukesh about Infocomm's scheme to re-route international calls as local ones—found illegal by the DoT and the telecom appellate. (DoT imposed a fine and a penalty on the company; Infocomm paid the fine but contested the penalty. The appellate upheld it.) In a March 2004 mail, the ex-CEO had stated that it violated the "spirit if not the letter of the law", and that if found out, the DoT would force the company to discontinue services. In retrospect, Gupta was correct. But what it implied was that Mukesh was aware he was treading a thin legal line. Still, he went ahead.
Gupta's e-mail also hints that Mukesh was listening to another key advisor, Manoj Modi, who may have been the brain behind re-routing. "I suggest that we hand over the sponsorship (or management) of the NRI (re-routing) scheme to MM/BDK (Manoj Modi/B.D. Khurana).... I have three to four weeks before we go on vacation. I will assist the new sponsors during this time," said Gupta in the same e-mail.
His second e-mail (December 2004) made it clearer that Modi might be the guilty party. "I have heard from several sources now that MM's office is spreading rumours that (I) was responsible for deciding to modify caller line identification (to show international calls as local ones) and not pay ADC (access deficit charge) . As you can see from my previous e-mail, I had opposed it and put my warning in writing.... Would you please help in stopping this unethical nonsense from spreading and set the record straight.... It is very painful to see... (that) the person responsible gets to blame someone else," said Gupta while dismissing the canards being spread against him.
A few weeks later, he quit. The Gupta episode, of course, created a furore. Who had leaked these e-mails? Why now when the two Ambanis were apparently on the verge of hammering out a deal to split the group amicably? And did it mean that Reliance knew that things were not above board with its re-routing strategy?
As is usual with anything to do with Reliance, there are as many theories as the number of people one spoke to. "The e-mails were leaked by Gupta himself. He was in Delhi and Mumbai the same week with his Blackstone boss as the US firm wanted to invest in the Indian bourses. He met three journalists, but only one of them decided to do an article based on the e-mails," said one source. Mukesh's aides though believe the source was Anil. "The younger brother was trying to recruit Gupta as the CEO in case he got Reliance Infocomm as part of the division deal. Gupta gave him the e-mails," said one of them.
On record, the Mukesh camp wasn't saying much. "The subject is sub-judice (Infocomm has gone to the SC contesting the DoT penalty).We can't comment on it. Please address the questions relating to Akhil Gupta to him. But, as the telecom minister said in an interview to your magazine two weeks ago, the issue is as good as over since our company has paid the fine imposed by DoT on the re-routing issue," said one spokesperson. A RIL insider, however, admitted it was one of the higher-ups who was responsible for re-routing. "But it wasn't Mukesh," he added. Anil's advisors too asked us to talk to Akhil Gupta, who wasn't available.
But there's still one more aspect to this tussle that was intriguing. The two e-mails, as well as a third one by Modi to Mukesh (see box), seemed to serve a specific purpose for Anil. It helped him distance himself from the re-routing controversy. This was godsend, especially if the younger brother got Reliance Infocomm as part of the partition agreement. Armed with these e-mails, Anil could confidently walk up to the policymakers and regulators and claim he had nothing to do with the re-routing strategy. It was all done by Mukesh, who probably knew he might be skirting the law. It was Modi who pushed it through. Therefore, the government shouldn't hold anything against Anil on the issue.
The logic made sense since all indications are that Anil is likely to get Infocomm, along with Reliance Energy and Reliance Capital. At the Infocomm HQ in Navi Mumbai, executives are apprehensive of taking sides. Many of them have left, some are quietly waiting for the Ambani deal, and a few are even calling Anil's friends to prove they are on the younger brother's side. Sources say Anil has even hired a top-notch consultancy firm to do a due-diligence of Reliance Infocomm. That is to ensure there are no hidden business bombs that can explode in Anil's face at a later date.
At the same time, Mukesh has gone on the offensive to prevent other government departments and ministries from taking action against RIL. He had no other option. On May 16, minister for company affairs Prem Chand Gupta said that he had asked the registrar of companies (RoC) to issue notices to Reliance, based on complaints filed by RIL vice-chairman Anil Ambani. This was reiterated by Komal Anand, secretary (company affairs), a few days later. Meanwhile, the SEBI chairman too admitted that the market regulator was acting on Anil's complaints.
Meanwhile, RIL was doing a bit of fire-capping of its own. And soon enough, Prem Chand Gupta had changed his tune. He said there was no official probe against Reliance. In a phone conversation with Outlook, he explained: "In February 2005, Anil met me three times to say some of the files relating to Reliance's investment companies were missing. We found out that the files were all there, and only a few were incomplete. In May, he wrote a letter to the secretary (company affairs) raising fresh issues. We have asked the RoC to find out and a report will be submitted within the next 5-10 days. But we have to be careful before we act on individual complaints or media reports because Reliance has millions of shareholders...it contributes 3-5 per cent of the country's GDP. We cannot unilaterally act against the Reliance group."
But the best was yet to come. The finance minister, P. Chidambaram, made a public statement that the government always had the power to intervene in the Ambani affairs, but "I don't think it's required". He added that both the brothers talked to him from time to time and that he had advised them to settle their dispute quickly. "I think they are moving towards a settlement," he told a news channel. That set the plate right. No probe by SEBI, no investigations by the ministry of company affairs. Even the finance ministry wasn't interested in meddling with Reliance at this stage.
The best part of Chidambaram's statement was his contention that the brothers were working towards an amicable agreement to carve out the Reliance empire.The other message: the finance minister would not allow politics to influence the process.
Meanwhile, the near-regular sniping between the two camps continues as usual. Younger brother Anil fires salvos at regular intervals to put pressure on Mukesh and influence the negotiation process. Mukesh retaliates, but in his own silent way. And the battle continues. The Ambani vs Ambani war will only be over when the two sign on the dotted line. That still looks a few weeks away.