WHEN Dhirajlal Hirachand Ambani died on July 6, 2002, thousands of people lined the route of his cortege in Mumbai. Many more would have joined the procession but for the simple fact that the roads outside the crematorium were too full. The funeral could not be kept a private affair as the throngs of mourners treated his death as a personal loss. Men were seen weeping for someone who was essentially a stranger to them, but for lakhs of investors whose lives he had changed, Dhirubhai was no stranger. The scene demonstrated the implicit faith people had in Reliance’s shares and products.
Dhirubhai was something of a phenomenon. In fact, his entire life was shaped by his mastery of knowing the rules and knowing how to use them. He had full knowledge of the workings of the government, the bureaucracy and, indeed, the human mind. He “manipulated” these with a native intelligence to create India’s first privately owned Fortune Global 500 company. Not surprisingly, such a man inspired extreme emotions in people. There were very few people who did not love or hate him. Dhirubhai himself was so engrossed in taking his business to new heights that he remained largely indifferent to what people in general thought of him.
In his unauthorised biography The Polyester Prince: The Rise of Dhirubhai Ambani , the Australian journalist Hamish McDonald quoted Dhirubhai as saying: “The orbit goes on changing…. Nobody is a permanent friend, nobody is a permanent enemy. Everybody has his own self-interest. Once you recognise that, everybody would be better off.”
Dhirubhai was a master player in the arena of can-do capitalism. He is called a visionary, and in the classical sense of the word, he certainly did dream big—whether or not he would have achieved his vision without the expedient loopholes and the well-placed and, some say, “well-oiled” politicians and bureaucrats is a question that will have to remain unanswered. There are accusations that Dhirubhai manipulated the system, but the fact is the system was open to manipulation, and Dhirubhai did not miss the opportunity to exploit it. Stories abound about Dhirubhai’s early days and how he “managed” the political and bureaucratic powers that be. But such is the power of the man and his company that there is a general unwillingness among those in the know to go on record.
Very few men are capable of achieving what he did by the age of 69. He built a Rs.75,000-crore corporate empire that spanned the fields of petrochemicals and their by-products, synthetic fibres, textiles, oil and gas exploration, petroleum refining, financial services and telecommunication. All this was built from the Rs.500 he invested in 1957 after he came back to India from Aden, Yemen. Dhirubhai’s father was a schoolteacher in his native Chorwad village in the Saurashtra region of Gujarat. Being the middle son in a family of five, Dhirubhai must have felt the pressure to start contributing to what must have been a small family income. He gave up studying after school and decided to join his elder brother in Aden. He took up various jobs, one of which was with the oil company Shell. Fifty years later, he would own India’s largest oil refinery in Jamnagar, Gujarat—an irony that has been commented on frequently.
Public issue After eight years in Aden, Dhirubhai returned to India. In 1958, he started trading in yarn and spices in partnership with a cousin. Their business was named the Reliance Commercial Corporation. As it grew, Dhirubhai acquired a small spinning mill near Ahmedabad and started producing textiles. The company gradually began to be referred to as just Reliance. Many of his employees were friends and colleagues from his Aden days. Selling Reliance fabric was not easy. Dhirubhai was stonewalled by wholesale cloth merchants, who, apparently at the behest of bigger mills, refused to pick up his stock. Dhirubhai decided to go on the offensive and went to the retailers directly, bypassing the wholesalers. His selling mantra was a daring combination: a good product, a good price and no insistence on advance payments. The plan worked, and Reliance’s fabrics took the market by storm. Quick to take advantage, Dhirubhai renamed his fabric Vimal, meaning pure. When the time came to raise the bar, Dhirubhai balked at borrowing money. He decided instead to make the public his partner. In 1977, in what is essentially regarded as Reliance’s turning point, the company went public. With the huge success of Vimal and its “Only Vimal” advertising campaign, the public issue received a massive response. Equity capital was raised from thousands of investors across the country, many of them hailing from small towns.
Dhirubhai had a certain genius for money matters. It was perhaps an extension of his earlier days of struggle when his innate innovativeness helped him survive. In his book, McDonald tells a story about Dhirubhai’s first fortune. In “Lessons from the Souk”, the second chapter of the book, he writes: “Early in the 1950s, officials in the treasury of the Arabian kingdom of Yemen noticed something funny happening to their country’s currency. The main unit of money, a solid silver coin called the rial, was disappearing from circulation. They traced the disappearing coins south to the trading port of Aden…. Inquiries found that an Indian clerk named Dhirubhai Ambani, then barely in his twenties, had an open order out in the souk (marketplace) of Aden for as many rials as were available. Ambani had noted that the value of the rial’s silver content was higher than its exchange value against the British pound and other foreign currencies. So he began buying rials, melting them down, and selling the silver ingots to bullion dealers in London. ‘The margins were small, but it was money for jam,’ Dhirubhai later reminisced. ‘After three months it was stopped, but I made a few lakhs of rupees. I don’t believe in not taking opportunities.’” Although the book is a clear-eyed commentary on the man and his methods, it is full of stories such as this which offer a new perspective on Dhirubhai’s early days. Worried about the implications of such revelations, Reliance threatened the would-be publishers of the Indian edition, who backed off. It took more than a decade before the book was made freely available in India. Dhirubhai’s ability to attract monetary success continued over the years, and Reliance became something of a byword with the name itself standing as some sort of guarantee of wealth to small investors who soon numbered more than 10 lakhs. Attending a Reliance shareholders’ meeting in Dhirubhai’s time was akin to attending a massive family wedding. There was a sense of belonging that bonded the shareholders. No doubt, it was the handsome dividends their shares got, but more than that there was a feeling that Dhirubhai was responsible for passing on this wealth, that he was keen to share his profits with his investors.
Arun Shourie, Union Minister for Disinvestment in the Bharatiya Janata Party (BJP)-led National Democratic Alliance government, while addressing a function organised by Reliance to mark the first death anniversary of Dhirubhai in 2003, said: “The faith he placed in shareholders, the faith they reposed in him... this is what we can learn from Dhirubhai.” At another level, this bond helped keep investors faithful to Reliance.
Dhirubhai’s rise to fortune was meteoric. The seed money of Rs.500 was certainly put to good use because over the next two decades his Reliance group’s annual turnover rose to Rs.70 crore. By 1992, the turnover had jumped to Rs.3,000 crore and at the turn of the century this stood at Rs.60,000 crore. How was this possible? Dhirubhai operated in an era when the licence control raj was at its peak. “Managing” people was the key to his success, and Dhirubhai seemed to have mastered it. While this was true of the lumbering economy of the 1970s and 1980s with its overpowering red tape, the justification did not seem acceptable for the post-liberalisation era of the 1990s. Yet, in the new era of economic reforms, the Ambani family continued with its old tactics. Its old ways almost cost the company its precious investor confidence in 1995 when the Bombay Stock Exchange questioned share duplications and accounting inconsistencies, which could have caused losses for small shareholders. Probably realising it had gone too far, the company pleaded guilty and blamed the inconsistencies on clerical errors. No intent to defraud was found, and Reliance’s stock rose once again.
In the post-liberalisation era, there was a need for change, especially among the older companies. Before Raghuram Rajan assumed charge as the Governor of the Reserve Bank of India in September 2013, he had said that there was a need to rescue capitalism from capitalists. He was referring to the balancing act between law and the spirit of enterprise. The Ambani family’s almost reckless (albeit successful) embrace of the latter sometimes meant the former was shunted aside.
Shourie perhaps cleared the path when he spoke at the function organised by Reliance in 2003: “My acquaintance with Dhirubhai went through an almost 180-degree turn over the years. I first learnt about him through the articles of my colleague S. Gurumurthy. The point of most of the articles was that Reliance had done something in excess of what had been licensed and was producing in excess of that capacity. Most would say today that those restrictions and conditions should not have been there in the first place, that they are what held the country back. And that the Dhirubhais are to be thanked, not once but twice over: they set up world-class companies and facilities in spite of those regulations, and thus laid the foundations for the growth all of us claim credit for today; second, by exceeding the limits in which those restrictions sought to impound them, they helped create the case for scrapping those regulations, they helped make the reforms.” Shourie’s gushing comments were doubly surprising then. First, by portraying Dhirubhai as a man ahead of his times, a rebel of sorts battling for the good of the economy at large rather than for his own personal gains, he made Dhirubhai out to be some sort of a Robin Hood of corporate reformation. Second, during this extraordinary feat of bending over backwards, the Minister seemed to have forgotten his own journalistic past when he was part of the dogged effort by Indian Express to expose Reliance through a series of articles in 1986 and 1987.
Express exposes The exposes of Indian Express stemmed from the friendship between Nusli Wadia of Bombay Dyeing and Ramnath Goenka, chairman of the Express group. Wadia complained to Goenka that his newspaper was carrying articles against Bombay Dyeing and that they were planted by the Ambani camp. Goenka decided to get a non-journalist to investigate the allegations and hired an accountant who used to manage his books. This was S. Gurumurthy, who was also convener of the Swadeshi Jagaran Manch, an organisation that believed in economic nationalism. Gurumurthy’s research was thorough, and in a series of articles, he detailed how one of India’s most powerful business houses had subverted the system for its own interests.
The battle between Reliance and Bombay Dyeing in the mid-1980s started as corporate elbowing for the same turf. Both groups were producing chemicals that were competing in a small market. Reliance was manufacturing purified terephthalic acid (PTA) and Bombay Dyeing made dimethyl terephthalate (DMT). Reliance won, but it was Gurumurthy’s articles that exposed how this happened. His investigations showed that Pranab Mukherjee, Finance Minister in the previous Indira Gandhi-led Congress government, had actually assisted Reliance on the basis of a system of differential taxation in the textile industry in such a way that Bombay Dyeing became the loser. Although Wadia lost the commercial battle, he continued the war. In the meanwhile, a senior manager in Reliance came under suspicion for conspiring to kill Wadia, but the charge was never established. Seemingly in retaliation, a newspaper owned by Reliance accused Wadia of holding dual passports and harped on Wadia being the grandson of Mohammed Ali Jinnah.
Of the series of articles written in Indian Express by Gurumurthy, some were co-authored by Shourie. The articles essentially charted how the government had “assisted” the growth of the Reliance group. For all the sterling work that Shourie had done in Indian Express , he seemed to have climbed down when he joined the BJP and became its Disinvestment Minister. Shourie was in charge when 26 per cent of the equity capital of the public sector company Indian Petrochemicals Corporation Limited (IPCL) was sold to Reliance. The sale was an important one because it ensured that Reliance had a say in the management of IPCL. By getting a foot in the door, the Reliance group was able to dominate the Indian market for a wide variety of petrochemical products. In his 2003 speech, Shourie referred to this: “There had been unbelievable pressure throughout to disqualify Reliance.” When Reliance won, Shourie said, Dhirubhai had called him. “His voice was choked with emotion. ‘I know what you have been put through. Anyone else would have given up…. I will never forget…. I don’t care about business. I care about relationship…. No one in my family will ever forget...’ Actually, I hadn’t realised the contest had meant that much to him. I had merely been implementing government policy,” Shourie said.
V.P. Singh moves
In the country’s political spectrum, Dhirubhai found many accomplices and associates. Almost all political outfits, barring the Left parties, failed to question his methods and motives. Among those who held power at the Centre during the rising years of Ambani, only one politician dared question and initiate moves against Reliance and its associates. That was Vishwanath Pratap Singh. During his tenure as Finance Minister in the Rajiv Gandhi government in 1985, V.P. Singh shifted the import of PTA out of the Open General Licence category. PTA was an essential ingredient for the manufacture of Reliance’s polyester filament yarn. Dhirubhai, who was reputed to have ears in high places, got wind of the likelihood of change of category. To safeguard his interests, he obtained letters of credit from various banks so that his company could import a full year’s quantity of PTA.
When V.P. Singh became Prime Minister in 1989, there was more trouble for Reliance. The company tried to gain managerial control over the professionally run engineering firm Larsen & Toubro. The move was opposed by government-owned financial institutions that had a stake in it and were directed by the V.P. Singh government to not allow the sale. In fact, there was so much pressure that Dhirubhai resigned as chairman of L&T in favour of a former chairman of State Bank of India. L&T was a sort of bugbear for Reliance. In 2000, when Reliance tried to sell its stake in L&T to Grasim Industries, there were allegations of insider trading. Accusations were made that Reliance had managed to increase its stakeholding just before the sale took place. The Securities and Exchange Board of India (SEBI) inquired into this and penalised Reliance with a fine. The charges against the company have been many. At one time it was accused of forming shell companies that were registered in the tax havens of Panama, the British Virgin Islands, the Isle of Man and the Channel Islands. The investments in these amounted to, by 1985 standards, a staggering Rs.70 crore.
The year 1986 was on the whole not the best year for Dhirubhai or his company. He suffered a stroke, and though he gradually recovered from it, he decided to hand over the running of the empire to his two sons, Mukesh (56), who had been to Stanford University, United States, and Anil (54), who went to The Wharton School of Business. The brothers worked amicably in their father’s lifetime but split soon after his death. Acutely conscious of the brand name of Reliance, they grappled for a share of it. By September 2004, the brothers had stopped interacting with each other. Anil felt his elder brother had sidelined him. He, his wife, Tina, and their two sons held about 1 per cent in Reliance Industries Limited (RIL), hardly enough to assert himself. Immediately after their father’s death, a board meeting of RIL decided that Mukesh would be the overriding authority and his younger brother would, in essence, report to him. This set off a prolonged wrangle between the two brothers. Such was the power of this family that an internal joust for power spread beyond the confines of the company. Jittery markets, nervous shareholders, falling share prices… none of this could be avoided as the representatives of the brothers remained tight-lipped about the future. Their mother, Kokilabehn, attempted to draw them together as did others from the corporate world, but the battle carried on for another year. In 2005, they agreed to divide the empire. Mukesh got Reliance Industries and the oil, gas and petrochemicals businesses; Anil took Reliance Energy, Reliance Infocomm and Reliance Capital.
The feud resurfaced in 2009, this time over an agreement for the sale of gas by Mukesh’s gas exploration company to Anil’s power company at a discounted rate. Union Petroleum Minister Murli Deora scrapped the deal saying neither of them had the right to trade government gas at lower rates. Anil accused Deora of supporting Mukesh in order to help him make high profits. The battle between the two brothers had turned so bitter that Pranab Mukherjee, who was the Finance Minister, suggested that they resolve the issue as it was a matter of “national interest”. The dispute was ultimately resolved by the Supreme Court, which ruled in Mukesh’s favour but maintained that he could sell to Anil at prices higher than those agreed upon earlier. Although the brothers shook hands publicly and wished each other well, their face-offs have taken a toll on their companies. It is generally held that the investor confidence that their father had fostered will never be seen again.
When Aam Aadmi Party leader Arvind Kejriwal demanded that the nexus between Gujarat Chief Minister Narendra Modi and the Reliance group should be exposed, nobody expressed shock that such a cosy relationship existed between a potential future Prime Minister and India’s largest corporation. Reactions to Kejriwal’s questions ranged from admiration to shock to animated interest to indignation and indifference. There were even those who suggested that business houses always had a finger in the political pie.
Either way, the absence of shock at some of the responses to Kejriwal’s statement is an indication of the tacit acceptance by sections of the population that the success of Reliance, or any other large business for that matter, rests on political patronage. It is also to be noted that Dhirubhai remained largely apolitical, currying favour with the party in power regardless of its ideology. By the late 1970s, when Reliance went public, Dhirubhai was already close to Indira Gandhi and her aides. When she won the general elections in 1980, he made a public appearance with her. He had also been close to successive Finance Ministers. Mukesh Ambani’s courting of Modi has to be seen in this context. It would also be worthwhile to remember that the family’s single-minded pursuit of assets and its resolute self-preservation ensure that the Ambanis rarely, if ever, back a loser.