Brother Trouble

DQI Bureau
New Update

While all attempts are on to convince the world that the ownership issues

within Reliance, particularly between brothers Mukesh and Anil, would be sorted

out soon, the rift between the two brothers seems to be growing by the day. In

fact, its now pretty clear that the rift between the two has moved much beyond

the ownership and management control issues of various Reliance companies.


Sources close to the family say that the fight between the two has been on

for the last 10 years. But the fight gathered momentum when Dhirubhai died and

the two brothers, though each one of them has been handling different Reliance

companies, never had consensus on company policy issues. Eventually the fight

has now come on streets after Mukesh made changes in the clause that redefines

the power of chairman and the board approved it. The entire world is keeping a

watchful eye on the developments going on in the largest Indian conglomerate as

the money of 3.5 lakh shareholders is at stake.

It all started during Dhirubhai's time when Mukesh decided to come out of

his father's shadow and dreamt of having his own venture. Mukesh launched

Reliance Infocomm soon after Dhirubhai's death. Though both brothers together

own 55% in Reliance Infocomm, while the rest is owned by Reliance industries,

Anil and his family were absent at the Infocomm launch-enough to indicate what

was brewing between the brothers.

Both the brothers hold almost equal stakes in Reliance companies. It is

really recent developments that have spurred the real fight between the two.

Reliance is known for its political influence and Anil's intimacy with the

Samajwadi party made him Rajya Sabha MP. That, according to sources, Mukesh didn't

like. The next straw was the immediate announcement by Anil of a Rs 10,000 crore

gas pipeline project in UP without even informing or consulting Mukesh.


According to sources, an aggrieved Mukesh decided to clip Anil's wings and

at the July 27, 2004 board meeting, the agenda of which was to discuss health

and environment issues, was supplemented with another agenda of redefining the

role of CMD, one that the board approved immediately. As per the redefined role

of CMD, Anil was to become a subordinate of Mukesh and report to him while

Mukesh would continue to report to the board. Earlier both Anil and Mukesh used

to report to the board directly.

However, Anil didn't react at the meeting but sent a letter of dissent to

all the board members that they rejected. According to sources, board members

were of the opinion that all world-class companies have only one power center.

There can't be two power centers in one company and the same should apply in

Reliance Industries as well. That's when the e-mail war started between the

board members and Anil and eventually ended up in a statement on the ownership

issue in an interview to a television channel. This was followed by his e-mail

to the 80,000 employees saying he is the boss and the final authority on any


Interestingly, even the statement issued by Mukesh, saying that his comment

on the ownership issue was "torn out of context" and had nothing to do

with the ownership issue in the family, was initially meant to be a joint

statement with Anil to dispel the controversy.


However, with Anil refusing to address the media jointly with his elder

brother, Mukesh had no option left but to issue a statement about wrong

interpretation of his statement.

Sources suggest that issues do exist between the brothers and that's the

reason Anil reacted immediately when Mukesh made a statement on the ownership

issue and requested his mother to take a decision on his behalf.

Reliance Industries

Marcap: Rs 75,000 cr

Promoters stake: 34% (Rs 24,000 cr approx)

Mukesh Ambani: 2.5 %

Anil Ambani: 2.5%

Other family members: 29%

Reliance Infocomm

Marcap: Rs 45,000 crore

Mukesh Ambani: 27.5% 

Anil Ambani: 27.5%

RIL: 45%

Year ended Mrach 04: Reported 

loss of Rs 390 cr

Quarter ended June 04: Loss of Rs 100 cr

Applied for: $250 mn overseas loan

IPO planned: March 2005


With analysts pegging the Reliance Infocomm valuation at Rs 45,000 crore, and

the two brothers (read promoters) owning the nearly 55%, the value of their

stake works out to around Rs 23,000 crore, making it far too lucrative for

either to be able to forgo without resistance. However, the Mukesh camp has been

hardselling the fact that he has single handedly built this Rs 20,000-crore

telecom empire that aims to translate into reality Dhirubhai's dream of making

all calls within India cost no more than a postcard.

There is another twist to the tale though. Reliance Industries is a 45%

shareholder in the Rs 45,000 crore Infocomm project and the project is expected

to have a debt-equity ratio of one. According to financial analysts Reliance

Infocomm continues in red, with a loss of about Rs 100 crore for the quarter

ended June 30, 2004. It has reported loss of Rs 390 crore in the last financial


With only Reliance Energy under his fold, Anil has been demanding more of the

overall family pie to make his ownership stake equally balanced with that of

Mukesh. Sources suggest that Anil feels the balance can be achieved by handing

over the Reliance Infocomm business to him, a formula not acceptable to Mukesh.

So far, Anil does not sit on the Reliance Infocomm board nor does he have any

operational role in the company.


The Ambani family directly and through various financial companies, own

around 34 percent in Reliance Industries, which at today's market

capitalization, is worth roughly Rs 24,000 crore. Of this, Mukesh and Anil

Ambani own 5%, with the remaining 29% being held by other Reliance investment

companies. It's now evident that the fight between the brothers is not

restricted to the management control but also on the stake that other members of

the family are having in RIL.

Rahul Gupta in Mumbai/CyberMedia


How They Drifted Apart


July 27, 2004: The RIL board approves a supplementary agenda titled

"the formation of a health, safety and environment committee", with

one of its annexure redefining the powers of the chairman, MDs, executive

directors and various committees of directors, giving Mukesh Ambani overriding

authority on financial and investment matters.

July 29, 2004: After several requests for the minutes of the board

minute, Anil Ambani is finally handed over the draft minutes.


July 29, 2004: Anil shoots a letter to Mukesh saying that as there has

been no discussion between the brothers and/or other directors about the

proposed modifications, the additional agenda cannot be approved by the board.

July 29-October 24, 2004: The beginning of the e-mail war, with Anil

repeatedly sending e-mails to Mukesh and the company secretary's office

opposing the move and asking them not to finalize the minutes without his


October 25, 2004: Anil threatens to go public about the whole episode

in an email alleging that while the other directors, and even a few employees,

knew about the proposal in advance he was not informed about it.

October 25, 2004: A few hours after Anil's mail, a board meeting is

called which approves the minutes of the July 27 meeting despite Anil's

protests, thereby giving Mukesh full control over the group.

NOVEMBER 18: In an interview to CNBC TV 18, Mukesh Ambani, reveals

that there were ''ownership issues''.