The Hindu : Opinion / Editorials : A matter of great relief

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Monday, Jun 20, 2005

Opinion

Opinion - Editorials

A matter of great relief

It might have been just a difference in outlook, temperament, and style that elsewhere would have made for a family quarrel and remained unnoticed. Yet, when the family involved controls the largest private sector company whose revenue is equivalent to 3.5 per cent of the country's GDP, which contributes 10 per cent of the indirect tax revenue and 5 per cent of the total exports, where 3.1 million investors have a stake, the differences that developed between Mukesh and Anil Ambani and spilled into the boardrooms of the companies could not but cause widespread national concern. The country as a whole, and particularly the investing public, would heave a sigh of relief over the settlement brought about by their mother with the help of some friends of the family. True, the brothers are not staying together and running the group as one entity, the differences having become irreconcilable. Even if ultimately there had to be a parting of ways, it is a fair and amicable parting with Mukesh Ambani getting the responsibility for the flagship Reliance Industries and IPCL and Anil Ambani taking over Reliance Infocomm, Reliance Energy, and Reliance Capital. The Reliance group was built up from scratch during the lifetime of one man, Dhirubhai Ambani, who set his goals higher than any other industrialist in the country had dared to and whose focus on shareholder value brought in thousands of small investors and transformed the stock markets. Now, each of the companies is more than big enough to stand on its own and indeed the split should not handicap the two brothers in any way as they go about managing them separately.

If in its early years Reliance had to depend on its skills in negotiating the difficult waters of the licence-permit raj in ways that at times turned out to be controversial, its later development was based on thinking big, focus on technology and innovation, efficient management, and sound business decisions. Reliance Industries, for instance, could complete its refinery in a world record time of three years and its operations extend from exploration through refining down to retail gas stations. While Reliance Industries is perhaps best placed right now, Reliance Infocomm is a company whose potential in the fast changing and uncertain telecom industry would seem to be immense and Reliance Energy too with its ambitious plans seems poised for rapid growth. It is a measure of the confidence that Dhirubhai Ambani created among the shareholders that even at a time when the feud between the brothers seemed to be paralysing the top management, investors did not lose faith in the company. Indeed, between the time the quarrel came out into the open and the first reports of a settlement, Reliance Industries's market capitalisation increased by Rs. 10,000 crore, reflecting both shareholder confidence and the higher profits posted by the company. As the two brothers now go their separate ways, they need to keep faith with the shareholders who retained their trust in the group even in difficult times.

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