Nov 25, 2004

The Reliance ownership tussle



Sometimes, I think that the Indian business climate hasn't really improved from the days before liberalisation.

Imagine, an entrepreneur creates India's biggest private organization from rags to riches with nothing apart from street smart savvy and the ability to raise money for mega projects. Dhirubhai Ambani becomes the icon for the primary investor in India and vitalises the Bombay Stock Exchange. Reliance starts off in the textile industry, integrating backwards into Polymers, then Petrochemicals. It discovers its strength as the ability to project manage huge projects and the ability to raise money cheap. It even sought to takeover construction company L&T to further reduce time and cost of its projects. Then it moved into areas like Oil & gas and Telecom bringing it's same strengths to reduce cost and think big. Dhirubhai passes away and the mantle falls on his two sons.

Mukesh, the chosen heir, hardworking, organization man.
Anil, the younger son, flamboyant, glamourous, the external communicator and the financial brain.

Reliance's moves into new economy areas like Broadband, Telecom etc areMukesh's pet projects. Anil moves into the background making media appearances.

And last week, when a reporter asked Mukesh on percieved differences between the brothers, Mukesh said "There are ownership issues, but they are in the private realm"

Helllooo?

Private realm?

With a comment like that did Mukesh really believe that it could remain private? Or was he pushing the envelope ? We will never know. What followed was a classic case of what not to do in crisis management.

The markets reacted with the Reliance Industries shares nosediving.
It was public news that Dhirubhai had not left any will. So the laws of the Hindu Undivided Family take over, and the matriarch Kokila Ben called for a family meeting of the two brothers and their two sisters to sort out the tangle.

After that Mukesh sent off an e-mail to all the employees saying in effect "I'm the boss"

As of now Anil Ambani has not made a public statement , but apparently the brothers are consulting their lawyers.

Looking at this as a student of Organizational Behavior this seems like a classic case of the first revolution from Griener's model. An organization that was largely entrepreneur driven and where the ownership and management control were focussed into the family (who were often ranked as THE most powerful people in India) had to unravel sooner or later. What took people by surprise is the timing.

Where is the group headed now? Mukesh might have the money, but Anil has more powerful friends (like Amitabh Bachchan, Amar Singh) and he is a Rajya Sabha politician also. I personally do not think this will go to the courts. Both the brothers stand to lose a lot of wealth as values will erode soon in such a case. Anil, being the more canny strategist would probably ensure a settlement like (as a Biz journalist pointed on TV yesterday) "The Line of Control" !