• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Raghuvir Srinivasan

When will the winds of change blow? - Shashi Ashiwal

YET another mysterious chapter unfolded in the Ambani brothers' squabble last week as reports came in of a possible settlement between the two brothers. The reports, unconfirmed yet, spoke of a settlement having been mediated by their mother, Kokilaben, when the family got together for Dhirubhai Ambani's birth anniversary on December 28.

Such a settlement, if true and acceptable to both brothers, may really be the best way out for Mr Anil Ambani who appears to have been checkmated, at least for now, in the tussle with his brother. Mr Mukesh Ambani appears to hold all the aces and the board meeting of Reliance Industries on December 27 only strengthened his hand.

Indeed, the proceedings and resolutions of that board meeting came as a major setback for the younger sibling who, as Vice-Chairman and Managing Director of Reliance Industries, could not influence the board to toe his line on the share buyback issue.

Even this setback is minor if one considers the other major resolutions that were passed by the board in a meeting that will go down as a milestone in the annals of the Reliance group. It was the meeting where the elder brother won the legitimacy to lead the company as the entire board, save Anil of course, reiterated its full faith in Mukesh.

With all directors firmly casting their lot behind his elder brother, out went one option for Anil to regain his footing in Reliance Industries.

The second setback came through another resolution which said there would be no dismemberment whatsoever of Reliance Industries. It may have been a decision that went down well with the stock market but surely not with Anil as one of his options was to gain control of the energy businesses of the group.

This would have meant that the upstream oil and gas exploration business, inclusive of the gas finds in the Krishna-Godavari basin, would be hived off Reliance Industries and handed over to Anil, either separately or as part of Reliance Energy.

Such a deal would have proved good for Anil who would have had an integrated business of his own from the "well-head to the wall socket", as he himself once described it.

It would also have handed him control of enormous assets and, importantly, given him access to steady and rich future cash flows from the gas fields.

Unfortunately for him, this option was also closed by the board when it resolved that Reliance Industries would not be dismembered; the implication being that there could be no settlement that would mean a separation of the upstream business from the company.

The above two resolutions ensured that Anil would not get that foothold in Reliance Industries which he was desperately seeking.

Separately, a third event happened that completed the series of setbacks for Anil. Reliance Industries, in its capacity as promoter and principal shareholder of Reliance Energy, wrote to that company seeking a change in the Articles of Association that would grant it (Reliance Industries) the powers to appoint majority directors on the board.

Hitherto such powers were vested in the Reliance Energy Managing Director, Anil.

The implication of this move is crystal clear: Anil cannot pack theReliance Energy board with his nominees and it is also a signal to him that he is a nominee of the parent company on the Reliance Energy board and that he is there at the pleasure of Reliance Industries and, well, Mukesh.The checkmating of Anil appeared complete. He had been denied a toehold in Reliance Industries and put on notice in Reliance Energy.

It is in this context that the intermediation of Kokilaben has to be seen. The mother's intervention is really one of only two options for Anil to get a good separation deal, the other being the legal one.

The legal option can be ruled out straightaway as it is bound to bring forth a lot of unpleasant details on the way the group is controlled and managed.

This will be in the interest neither brothers though one cannot rule out the exercise of this option by Anil if he is pushed to the extreme.

The option of seeking a mutually acceptable settlement and separation is probably the most practical one under the circumstances.

Of course, its success would depend on how equitable the terms are from Mr Anil's perspective as he presently finds himself in a less advantageous position vis-à-vis his brother.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Mutual Funds in 2004 — Winners across the equity board

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line