Let us try to understand & begin the story with the split between the two brothers after the death of Dhirubhai Ambani in 2002.
Circa 2005, The Dispute.
Dhirubhai Ambani, hadn't left a will. Mukesh became chairman and managing director of Reliance Industries Ltd Anil was made vice-chairman.
Mukesh & Anil were in a bitter fued for the control of the Ambani empire & it became ugly when Mukesh tried to oust Anil from the Reliance board.
The annual report of Reliance had Dhirubhai & Mukesh, not Anil, on the front page.
It is at this time that the differences between the brothers became public.
The Ambani brothers were once referred to as Ram-Lakshman in corporate circles. Anil hero worshipped his brother & he was happy to let Mukesh run the mega-corporation but resented being sidelined.
Anil consoling Mukesh at their father's funeral.
He did not dispute Mukesh’s position or chairmanship but wanted some credible space for himself.
And their wives were bitter rivals.
In an interview to CNBC 18, in 2004, Mukesh had said,
Well, there are issues which are ownership issues. These are in the private domain, but as far as Reliance is concerned it is a very-very strong professional company.'
At the time the Ambani’s had a 46.67% stake in Reliance Industries Ltd, the public 13.48%, and FII’s 22.85%.
Now the split was imminent.
Circa 2005, The Split.
In June 2005, the brothers settled their dispute after their mother Kokilaben intervened and arranged a de-merger.
She issued a statement to the press saying:
With the blessings of Srinathji, I have today amicably resolved the issues between my two sons, Mukesh and Anil, keeping in mind the proud legacy of my husband Dhirubhai Ambani."
The Divide.
The Rs.99,000 crore empire in 2005, was divided in this manner,
Mukesh took the control of flagship Reliance Industries & IPCL, with interests in petrochemicals, oil and gas exploration, refining and textiles.
Anil got Reliance Infocomm, Reliance Energy & Reliance Capital.
The wealth was equally divided amongst the brothers.
By March 2006, with the consolidation of his telecom companies Anil Ambani had toppled Mukesh Ambani in net worth, to be the 3rd richest Indian after Laxmi Mittal & Azim Premji.
Anil was richer than Mukesh by approximately Rs. 550 crores.
The present day.
It is a fact the Mukesh has been more successful since the split and Anil’s fortunes have dwindled.
The current holdings of both brothers.
The 10 year report since the brothers split.
As of now the difference of wealth between the brothers is $ 41 Billion, which is about Rs. 282900 crores.
Mukesh Ambani’s net worth is $ 43 Billion whereas Anil Ambani’s net worth is $ 2 Billion.
Debts.
In November 2017, Mukesh’s Reliance Industries debt had doubled to Rs 1,96,601 crore in the last five years as it invested telecom subsidiary, Reliance Jio Infocomm Ltd.
The company raised $ 800 million with the sale of 10-year bonds overseas at the cheapest rate for a non-financial Indian issuer.
Meanwhile Anil’s, Reliance Infrastructure debt was at Rs. 28,000 Crore, Reliance Communications was Rs. 45,000 Crore & Reliance Power Reliance Power is at Rs. 30,000 Crore debt.
But Anil Ambani's Reliance Communications, defaulted on dollar bond payments.
How did this happen?
Mukesh Ambani.
In 2002, when Dhirubhai was alive, Reliance Infocom was launched. Mukesh & Nita indirectly owned 50.5% & 45% of the shares were held by RIL.
On the birth anniversary Dhirubhai, 28/12/2003 Reliance Infocom launched its services, it was Mukesh’s way of paying homage to his father.
The marketing strategy was aggressive & the campaign hovered around Dhirubhai’s dream of making voice calls on mobile phones cheaper than a 50-paise postcard. Call rates soon became affordable.
In June 2005, when the two brothers split, Mukesh had to leave Reliance Infocom as the company was Anil’s now.
The loss of the firm became a sore point for Mukesh, & in June 2008, when Anil announced that RCom would merge with South African telecom giant MTN, Mukesh opposed the merger.
A clause where none of the brothers could sell their stakes in their existing companies without granting the first right of refusal to the other, was done surfing the demerger and hence the MTN-RCom negotiation were called off.
There was also a non compete clause between the brothers till 2010, where no brother would conduct a similar business to the other.
After 2010, Mukesh once again plunged into the mobile business, & invested Rs. 2.5 Trillion ($34 billion) over the next seven years to build a speedier 4G wireless network for his company Reliance Jio Infocom Ltd.
It took a long time to pay off as Mukesh had to invest money earned by Reliance into the mobile sector. And the price of the shares were stagnant. But Reliance was a good company which had large cash reserves and this helped Mukesh.
By 2016, Reliance Jio was launched & in two years it had signed up 252.3 million users and was making a profit. Competitors had to reschedule their monthly plans to catch up with Jio, and Indians were never as happy.
Sanjiv Bhasin, executive vice president at India Infoline Ltd said,
Reliance’s strategy to diversify beyond the energy sector was the biggest game changer.Mukesh Ambani had the 10-year vision to foresee that data will be the next gold and he invested heavily.
Anil Ambani.
Anil invested in Naval, Defense, but he didn’t have a company which generated cash like Reliance, so many of his investments increased his debts. And this debt mounted.
When the Banks called for the repayment Anil had to sell assets, as investors were concerned due to mounting debts, which contributed to declines in his share prices.
Reliance Naval & Engineering lost 75% proving hard to make a turn around. Its loan accounts were irregular or substandard since 2014.
The defence contractor was in arbitration & two creditors have an ongoing lawsuit to send Reliance Naval into insolvency.
Similarly Reliance Defence Ltd, has come under scrutiny over the negotiations between France & India for $ 8.7 Billion of Dassault Aviation’s Rafale jets.
Reliance Infrastructure Ltd, which built Mumbai’s first metro line, missed a bond payment in August. It plans to be debt-free by next year.
Reliance Power Ltd, has failed to avoid a decade of overall decline in its shares since its record IPO in 2008. This is a global phenomena in the power sector.
Reliance Capital Ltd has also seen its shares decline this year, despite making some profit.
Reliance Communications Ltd, once the flagship of Anil’s portfolio, was hit by the price war when Reliance Jio started. So it sold its 178,000 km fiber-optic network to Jio for Rs. 3000 crore, & exited the mobile phone business.
Present.
The sale of RCom’s assets to Reliance Jio brings the legend of the two brothers a full circle.
Mukesh has reached where he had intended to, and Anil has had some problems deciding his objectives.
It was said that Dhirubhai had made a modest beginning from scratch and when Mukesh (1981) & Anil (1983) joined Reliance, they had equal contributions in different manners to take Reliance to great heights.
Anil has had some bad starts but he has hung in there and he has a pedigree to boast about. But he must have a vision for the future, else he and his share holders are staring at a deep abyss.
Future plans.
Mukesh Ambani.
Mukesh has announced plans for an e-commerce venture that would join Reliance’s telecom and retail business, to take on global rivals like Amazon & Walmart. He has the infrastructure to make this plan a success.
Mukesh’s children during the Jio phone launch.
Anil Ambani.
While Anil has decided to enter into the business of real estate with Reliance Realty, a subsidiary of RCom. It will develop Dhirubhai Ambani Knowledge City in Navi Mumbai.
It is a registered IT and fintech park. The company has 3 million sq. ft of built-up space, which will be leased out to multinationals.
The future of many shareholders in India are linked to the Reliance group owned by both brothers. It is the biggest group of India, and the success of this group augurs well for all the Indians, directly or indirectly.
It is to our benefit that both brothers flourish.
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