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Thursday, Dec 09, 2004

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Flashback of a flare-up

S. Murlidharan

S. Murlidharan fears that the battle of the RIL brothers can rake up the old question of the role of investment companies in the group

INTRIGUES make for heady stuff. Nothing ever has intrigued the nation more than the two events of recent past admittedly having nothing to do with each other — l'affaire Shankaracharya and l'affaire Reliance. The focus of this article is on the latter. The Reliance issue is being shrugged off by a section of the cognoscenti as a clash of egos between Ambani siblings, Mukesh and Anil. Superficially, it does look like a case of bruised perception of the junior brother, as is common in most households.

Anil seems to resent the fact that he has no share of action in the Ambani flagship company Reliance Industries Ltd (RIL), especially because RIL calls the shots in other companies of the Reliance group as well, including in those which have been carved out as Anil's fief, by virtue of the sizeable shareholding it has in them. RIL is Mukesh's baby for all practical purposes. Or, so he claims. He thus effectively calls the shots in the other companies as well. Hence, the resentment and a feeling of being constantly snapped at the heels. This is something already known to the readers.

What is perhaps not known is the fact that the Ambanis have the dominant stake in RIL — figures ranging from 40-45 per cent are freely bandied about. And bulk of it is reportedly held by some 1,400 investment companies! Control through investment companies is nothing new in the Indian corporate world. Almost all the family-owned companies in the country have adopted this route. What raises eyebrows is their staggering number.

Rewind to the events of almost three decades earlier. Reliance, read Ambanis, was hounded by a section of the media for misusing the NRI investment window. It was alleged that investment companies with dubious sounding names such as Crocodile were floated in tax havens, particularly British Channel Islands, to legitimise investment. Now that the ownership issue has surfaced, one cannot help wonder whether some or all of RIL's investment companies have their homes in distant shores.

Mukesh has gone on record averring that the Reliance patriarch, the late Dhirubhai Ambani, had in his lifetime settled the ownership issue in his favour. In a corporate setup, the man who controls the shareholding calls the shots. Is Mukesh tacitly telling everyone that the ownership of these investment companies vests with him?

It is common knowledge that opacity marks most of the Indian family-controlled companies when it comes to the exact percentage of shares held by the promoterByzantine route of investment companies, especially those on foreign shores can compound ownership tussles. In a milieu of liberalisation, would it not be heretical to talk of government controls?

The apologists of Reliance say who-owns-what is strictly not relevant to the public. Perhaps they may counsel the feuding siblings to bury the hatchet lest the government exhume the issue, which was given the quietus decades ago. It is worth noting that the Companies Act empowers the Central Government to order investigation to find out the men behind a company.

(The author is a Delhi-based chartered accountant.)

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