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Dhirubhai's secret of success


THE PASSING away of Dhirubhai Ambani, Chairman of the Reliance group on July 6, signals the end of an era in Indian corporate history. For the company, however, it raises some queries regarding the future of the group.

While there is no shortage of plaudits for the genius and financial acumen of Dhirubhai Ambani, his two sons — Mukesh Ambani (45), Vice Chairman and Managing Director, and Anil Ambani (43), Managing Director of Reliance — have inherited the reins of a Rs. 65,000 crore empire.

The reasons why Dhirubhai Ambani is touted as having the equity cult in the country are not far to seek. The company entered the capital market in 1977 with what was then a huge public issue of 28 lakh shares under the name of Reliance Textile Industries. Thereafter, it has approached the market on several occasions and the investing public have always responded heartily.

The stage was set in 1985 itself when the company's annual meeting was held in the Cooperage grounds of Mumbai (a football stadium) and attended by no less than 12,000 eager investors.

First to tap GDR market

Reliance was also the first Indian company to successfully tap the Global Depository Receipt (GDR) market in 1992. It is also the only Indian company to raise 50 and 100 year bonds in the U.S. debt markets. Thus, it successfully raised cheaper funds overseas with lower borrowing costs to repay higher cost Indian borrowings.

The company also successfully dabbled in the stock market; often creating controversy and there is no shortage of accusations that it `managed' the political environment and has often been seen to have influenced policy making.

In the years of the `Licence Raj' — industrial policy declarations made periodically where public sector enterprises were given preference for licences, example, availability of raw materials, foreign exchange and quotas — a phenomenon that peaked in the late 1970s and the early 1980s but died out in the 1990s, Ambani's skills were at their best. A senior industrialist, when asked what differentiated Ambani from other businessmen, said, "Everyone managed to get things done during that period; only Dhirubhai managed it better.''

Phenomenal growth An interesting fact is that the Reliance group has seen its most phenomenal growth in the last decade and a half; the period when Dhirubhai Ambani had already suffered his first debilitating paralytic stroke. Recall that when he suffered the stroke in 1986, the company's assets were a mere Rs. 1,000 crores. Then, it had three major projects going on stream — PTA (purified terephthalic acid), PSF (polyester staple fibre) and LAB (linear alkyl benzene) — all inputs for polyester — in Patalganga. The Hazira mega complex was then only an aspiration.

The secret of the success post-1986 is buffeted by the transition of power from the father to sons Mr. Mukesh Ambani and Mr. Anil Ambani with a clear cut division of responsibility between the two under the supervision of Dhirubhai Ambani.

While one face of Reliance is its project implementation skills, the second is the financial wizardry. The project implementation team is kept away from all the happenings of the corporate team. The skills of the project team are borne out by the fact that it was able to implement the mega projects at Patalganga, Hazira and Jamnagar in record time.

The financial team has, over the years shifted from raising funds from domestic equity investors to financial institutions and overseas investors. Today, Reliance enjoys a high credit rating and has no problem convincing institutional investors. The project implementation and finance teams are considered worldclass and top of the line.

Today the Reliance group is the country's largest enterprise in the private sector with revenues in excess of Rs. 60,000 crores, assets of Rs. 55,000 crores and a net profit in excess of Rs. 4,500 crores. Its sphere of activity span petrochemicals — up and down the value chain — including synthetic fibres, fibre intermediates, textiles and oil and gas. More recently, Reliance entered financial services, power, insurance, telecom, biotechnology and infocom.

Foray into telecom

The recent diversifications are unrelated and that is where Reliance will have to really pass the acid test. That the group does not lack financial muscle to power its way into these areas is a given, but each of the new areas is as unrelated to the other as it is huge. The telecom-infocom foray is a case in point. The Reliance group has committing to invest more than Rs. 25,000 crores in this sector that is beset with competition.

Reliance has a 26 per cent stake in Reliance Telecom which provides cellular services to over 3.50 lakh subscribers over 15 States. The group will also be investing in building a broadband backbone, to connect 115 cities with 60,000 kilometres of fibre. Reliance Infocom plans to have a national footprint in telecom with a presence in fixed line, mobile, national and long distance and international long distance telephony, data, image and value added services. This, however, goes against the recent international trend of choosing the more remunerative value-added services over building and renting telecom infrastructure.

Then there are new areas such as insurance and biotechnology that needed to be tackled. This is where the mettle of Mr. Mukesh Ambani and Mr. Anil Ambani will be tested or not.

Ramnath Subbu

in Mumbai

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