June 20, 2005
 

Reliance carved up

The long running public spat between Mukesh and Anil Ambani which first came to the fore last November has finally culminated in India's industrial behemoth, Reliance Industries being carved up between the brothers. As pointed out earlier this year, it has taken two graduates from Wharton and Stanford to break up their illiterate father's empire. Perhaps they'll call it the "Daraar" - Dhirubhai Ambani Reliance Aadha Aadha Rachna [aka the Dhirubhai Ambani split Reliance in two plan/map/scheme].

According to an announcement by their mother Kokilaben Ambani, Mukesh Ambani gets control of the flagship firm Reliance Industries as well as IPCL (Indian Petrochemicals Corporation Ltd), which Reliance bought in 2002. Anil Ambani gets Reliance InfoComm, Reliance Energy and Reliance Capital. Business Line charts out the way the cake has been divided. What does complicate matters is the fact that of the companies mentioned above, Reliance InfoComm is the only one unlisted on the stock exchange. This means that its market capitalization needs to be guessed. Financial analysts assess its market cap between Rs. 55000 - Rs. 75000 crores. If it ends up being valued, by the number crunchers who're brokering this deal, at Rs. 55000 crores then Anil Ambani will expect the remaining amount of Rs. 20000 crores to be paid out to him in cash, or some other form. If it is valued at Rs. 75000 crores, there will not be any need for a cash payout.

BBC looks at the group's history and ponders about it's future.

This deal is obviously significant progress from last December when reports indicated that the two brothers were quite far away from reconciliation.

Strangely enough, finance minister P Chidambaram, while being elated at the news of the settlement, is also perfectly happy brushing under the carpet the various corporate governance issues which Anil Ambani raised in relation to Reliance Industries.

I think that is a real mistake. Whether Anil made those remarks and accusations in the heat of the moment is not the issue. If there are allegations, they need to be explored and if there is wrongdoing on the part of anyone, they must be brought to book.