Raghuvir Srinivasan

IT WAS, in retrospect, a short-lived truce. The settlement reached between the Ambani brothers in June last year was expected to put a full-stop to their dispute, but it was a mere comma.

Here were the two brothers, both ambitious, eager to prove a point to each other and the world at large, seemingly reaching a settlement and carving up the empire built by their father into two distinct halves. Ironic as it seems, that very settlement may have contained the seeds of the latest conflict.

The inbuilt weakness in the settlement, as events have now proved, was the dependence of the two halves on a common resource to fuel their ambitions the gas reserve in the Krishna-Godavari Basin. The reserves are vital to both Mr Mukesh Ambani and Mr Anil Ambani, but significantly, are under the control of the former.

The settlement did contain a plan for sharing of the reserves but the interpretation of this plan appears to have set off the latest round of sparring between the brothers.

To give just one example of the differing interpretations between the two camps: According to the Anil Ambani group, it was entitled to a 40-per cent share of not just the existing gas reserves of Reliance Industries but also future accretions.

However, the Mukesh Ambani team used June 18, 2005 the day of the settlement as the cut-off date to determine the sharing scheme.

And it went right ahead and inked a gas supply deal on its terms with Reliance Natural Resources, technically an Anil Ambani company, before transferring control to the latter. This, along with other alleged deviations from the non-compete and brand agreements, has irked the Anil Ambani group.

As has now become the familiar practice, the two sides have alleged a host of other instances of misdoings by each other and the picture is now completely muddy and confusing to the layperson, which includes the common Reliance group shareholder.

The bottomline is this: The world of business appears much too small to accommodate the two brothers and their ambitions.

Making things worse is the fact that both have set their eyes on the same areas of businesses as for example, infrastructure. So, their paths are bound to cross and when it does, sparks will fly. Witness, for instance, how the Mukesh-controlled Reliance Industries recently pipped the Anil group in a multi-crore real estate deal to build a convention centre in Mumbai.

With several common resources being shared right from the Reliance brand name down to the gas in the KG Basin, the scope for conflict caused by varying interpretations is certainly high.

So what does this mean for the shareholders of the Reliance group companies, controlled by the two brothers?

First, the shares of the group companies are unlikely to be affected much unless the conflict deteriorates to levels where the powers that be the government or SEBI are forced to take notice.

While it has indeed come tantalisingly close to that on a couple of occasions in the last few months, it is unlikely that it will happen again.

The two Ambanis are much too smart for that and surely understand that things can veer out of control once the authorities enter the scene.

The biggest plus for shareholders and indeed, the factor that has supported the shares of the group companies even during the worst phases of the conflict between the brothers, is that the businesses are doing extremely well and continuing to grow at a fast clip.

Till such time this continues, the group company shares are unlikely to be affected by the sparring between the brothers. Besides, the stock market appears to have accepted the fact that such sparring will be more the norm than the exception at least in the next two years till the two groups settle down in their respective businesses.

At the end of it all, one fact comes out loud and clear from the latest round of sparring between the brothers: The settlement plan was no more than a physical carve-out of the empire and the brothers are not just about to bury the past and move forward.

(This article was published in the Business Line print edition dated February 12, 2006)
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