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Initially, the reports
elicited no response from either Mukesh Ambani
(who was still abroad) or Anil Ambani or from
either of their companies or associates. Reports
in the media were confined to the speculative
realm - "Will Reliance split?" "What does it mean
or shareholders" and such. There was no news event
for the hungry media to feed on.
On Monday, Mukesh Ambani
returned from the US to see that the house was on
fire. Reliance stoics had tumbled significantly on
Friday and Monday. Mukesh Ambani, in his capacity
as chairman and managing director of reliance
Industries issued a media release -- which was put
out as an advertised as a quarter-page advt on the
front pages of all major dailies-- that his
"remarks were torn out of context." The statement
said that a lot of sensationalism and
misrepresentation followed his comment about
"ownership issues". In response, CNBC aired
the unedited footage, where Mukesh Ambani talks
about ownership issues when questioned about
rumours of a split. He was not asked about
future Reliance inititatives.
The Mukesh Ambani
statement clarified that what he had in mind was
not the family ownership of Reliance, but the
ownership of future business initiatives of the
group. He also deplored some comments on his
father and group founder Dhirubhai Ambani made by
a leading newspaper which he termed "unjustified
and tendentious". He also said that in his life
time, Dhirubhai had settled all ownership issues
pertaining to Reliance.
The stock market took
some heart, and Reliance group stocks recouped
marginally. But the story was not over yet. In
fact, it had just started.
On Tuesday November 23,
in an email message to the 80,000 Reliance
employees -- Reliance is one the country's largest
private sector employers -- Mukesh Ambani
reiterated much of what he had said in the
previous day's newspaper statement. He also said,
significantly, that the CMD (himself) is the
"final authority" on all matters pertaining to
Reliance. He also said that the company will grow
from strength to strength. Despite his statement,
Reliance stocks fell, when the Sensex rose 46
points.
Interestingly, the same
day, one of the long-standing directors on the
board of Reliance Industries resigned, triggering
speculation that a board room tussle may be
brewing. Mr ML Bhakta cited no reason for his
resignation. Bhakta had been a long-time associate
of Dhirubhai Ambani and has been on the Reliance
board since 1977. Interestingly, the very next day
he withdrew his resignation, saying "Mukesh Ambani
had asked him to stay on." He said his resignation
had nothing to do with the happenings in Reliance.
Lights, camera, action!
Drama was to follow the next day, on Thursday,
November 25, when six directors of Reliance Energy
resigned, who have been known to be close to
younger brother Anil Ambani. Now, before we
proceed further, it is necessary to understand the
relation between Reliance Industries and Reliance
Energy.
Reliance Industries is
the Reliance group flagship, and is the cash cow
of the group. Reliance, due to its interests in
the energy sector had been gradually buying shares
of BSES, which is into power business. In 2002,
Reliance group, its stakeholding in BSES now
considerably high, took management control of BSES.
BSES was renamed Reliance Energy, and was made the
group's power business flagship. Reliance
Industries, by virtue of its 51% stakeholding in
BSES, nominated Anil Ambani as a director on the
board of Reliance Energy. Later, he was elected
chairman and managing director of BSES (now
Reliance Energy).
So what is Mukesh
Ambani's role here? During the lifetime of group
patriarch Dhirubhai Ambani, Mukesh Ambani was
already vice-chairman of Reliance Industries.
After his demise, Mukesh Ambani ascended to the
seat of the chairman and managing director of the
group flagship. Anil Ambani and several others are
also members of the Reliance Industries director
board. Anil Ambani is also a managing director on
RIL. Reliance Industries (and its associates) hold
about 51% stake in Reliance Energy. In simple
terms, Mukesh Ambani is the boss the company which
acquired Reliance Energy and put Anil Ambani in
charge there. Ultimately, RIL is the boss of REL.
Where does that put Anil
Ambani? He is in complete control of REL, while
for serious investment and policy decisions, he
must consult the parent company, RIL, which is
chaired by elder brother Mukesh Ambani.
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