Mahabharata in Polyester

by McDonald, Hamish

  The event had featured Mukesh and his wife Nita, pursuing the projection of Mukesh as the face of Reliance. Anil, who had been the group’s spokesman to the media and financial institutions for several years, was spending more time at business seminars and on media panels. Reliance Infocomm was billed as the work of Mukesh in bringing to life his father’s dream. In a long television advertisement, Dalal noted: ‘Anil has been carefully edited out, even from an annual general meeting clip, where the two sons had invariably flanked the father on two sides.’2

  The two brothers were mixing in different worlds. Mukesh was trying to project Reliance as a modern corporation run by professional managers. He surrounded himself with his senior executives, only a couple from within the family (the cousins Nikhil and Hetal Meswani), the rest old and trusted recruits like his former schoolmates Anand Jain and Manoj Modi and outsiders Satish Sheth and Amitabh Jhunjhunwala.

  Anil projected a more emotional view of Dhirubhai, frequently harking back to the early childhood memories of the crowded Bhuleshwar chawl and putting his father in an almost saintly light. His friends were mostly outside the company, including some older Mumbai business leaders like the Godrej family, Amitabh Bachchan and the omnipresent political wheeler-dealer Amar Singh. Anil stayed away from the Infocomm launch, but was in Mumbai for the introduction of the Dhirubhai Ambani postage stamp by Mahajan the next day.

  The younger son had previously backed away from what was expected of him. Instead of letting his parents find him a wife, he had insisted on marrying the film actor Tina Munim against their great opposition. In his early forties, he had pulled himself out of the slide into sedate middle age. An American at an investment roadshow in New York had given him some blunt, personal advice: ‘Well, Mr Ambani, the company looks in great shape and we have great confidence in its future. But have you looked at yourself recently in the mirror? … If you are not in good shape, I don’t think your company can be in good shape.’ Anil took the advice to heart and threw himself into a strict diet and early morning jogging regime that saw him lose 35 kilograms in weight. By 2001 he was running a half marathon once a week, swimming and learning the upper-class game of polo. He was as frequently photographed in his running vest and shorts as in a business suit, showing off his new lean form.3

  The younger son had also evidently taken to heart his father’s guru mantra that, to get ahead in India, you had to know the wrong people. Among all the ‘wrong people’ in the eyes of genteel society in India, few would have figured more prominently than Amar Singh, the portly bon vivant MP. Born in 1956 in the ancient Uttar Pradesh city of Aligarh, but raised in Calcutta where his grandfather had gone for work, Singh was scion of a modestly well-off family of Thakurs, a subdivision of the land-owning Rajput caste. He had made his way through a Catholic college, set up some small businesses, then found his vocation as a maker of connections that brought him close to senior political and media figures. In 1996 the rising lower-caste leader Mulayam Singh Yadav was Chief Minister in Uttar Pradesh. He persuaded Singh to join his Samajwadi (Socialist) Party as general secretary and take an upper house seat in New Delhi. They formed an alliance with the Lucknow-based tycoon Subroto Roy, a Bengali who had made a fortune in chit funds, a form of money-lending, and put it into a major Hindi-language newspaper group, a large printing press and a domestic airline under his brand, Sahara. The combination was a powerful one, raising the Samajwadi role in the coalition politics that had become the Indian norm. Singh’s official bungalow of Lutyens design, although protected by heritage laws, was transformed with white marble bas-reliefs of naked cherubs and angels, a large Jacuzzi with gold taps, massive plasma-screen video systems in many rooms and a remote-control opening ceiling in the dining room that displayed a roof garden through a miniature replica of the glass pyramid at the Louvre. Thronged with aspiring film starlets and sundry characters, the bungalow became party central for Delhi’s political influence peddlers.4

  Anil became drawn into this heady milieu and, as one of India’s wealthiest people and vice-chairman of its largest private industrial combine, was instantly welcomed with all of its flattery. It is said to have alarmed his mother, especially when tabloid newspapers and trashy magazines began linking him with female Bollywood stars and openly speculated on the prospects of a second stellar marriage (without, it must be noted, any evidence of more than passing acquaintanceships; later, there were allegations these rumours were spread to undermine Anil). Kokilaben had opposed the marriage to Tina in 1991, but by now had accepted her as the mother of two grandchildren.

  Mukesh was also concerned. For some time, according to the Outlook magazine’s business editor, Alam Srinivas, who later revealed himself as a conduit of leaks by Anil, he had thought of his younger brother as a potential ‘squanderer’ and had already taken steps to protect the family ownership of Reliance. ‘For a long time, Mukesh had been uneasy about Anil. He had misgivings about the younger brother’s professionalism, business acumen and sense of corporate strategy. Mukesh thought Anil went a bit overboard, both in his personal and professional life. And a number of Anil’s decisions could – and did – end up hurting the interests of RIL, its board and its shareholders.’5

  Dhirubhai had realised that the share-switching scandal of 1996 had blown the cover of the network of private investment companies through which the Ambani family churned its 34 per cent joint stake in Reliance (individual members of the family owned a further 5 per cent and the Meswani relatives a further 7 per cent, bringing the total extended family holding to a little over 46 per cent). The opposition MP Raashid Alvi had given further details in the dossier he published in 2001, listing 251 investment companies with names like Yangtse Trading, Madhuban Merchandise and Ornate Traders, whose directors included various accountants, employees, sales agents and other contacts of the Ambanis.

  Dhirubhai had asked Mukesh to reconfigure the entire network, which he began to do with the help of Anand Jain, the ‘third son’ heading Reliance Capital, forming hundreds of new companies in 1999 in a new coded ‘matrix’ of ownership. ‘As each code had to be changed to hide the new reality, someone put an idea in Mukesh’s head,’ Srinivas wrote. ‘What if the new configuration could be effected to his advantage? What if he could control the empire? What if he could build a new matrix that his younger brother, Anil, could never understand and, hence, could never break up the group?’ The aim was not to rob Anil of his inheritance but protect it from his own possible follies.6

  • • •

  Around the same time, in 1999, Dhirubhai had signed a deed of partition that had broken up the Ambanis’ ‘Hindu Undivided Family’, a customary entity recognised in Indian law as having corporate ownership, and dispersed its assets among the individual members. The family’s main asset, its 34 per cent of Reliance, was held in the thicket of investment companies. Dhirubhai felt no need to leave a will, apparently confident that Anil would agree to work under Mukesh’s leadership.

  This was not at all Anil’s attitude when Dhirubhai died in July 2002. He immediately proposed that Kokilaben assume the Reliance chairmanship, leaving the sons as almost equal executive directors. Mukesh rejected this immediately as ‘giving the wrong signal’ and was voted chairman at the end of the month by the other directors.

  Talks about splitting the empire between the brothers began around November that year, with Anil talking to both Jain and Jhunjhunwala, but did not make any progress. Around this time, Anil learned about the reconfigured ownership web. ‘When Anil got to know about the new matrix in 2002–03 he went berserk,’ Srinivas said. ‘It seemed to him that Mukesh had stabbed him in the back.’7

  The issue simmered through 2003, with Anil occasionally reverting to his old role as the public face of the group. The Indian media occasionally hinted at a surrogate rivalry between the two brothers’ wives. Nita Ambani, married to Mukesh, was emerging as a concerned and active corporate wife. She had supervised the planting of the green belt of mango trees around the Jamnagar
refinery and the extension of drinking water to local villages from its seawater desalinators. In Mumbai she had handled the design and landscaping of the company’s ‘Knowledge City’, ran the board of the new Dhirubhai Ambani International School and pursued educational programs for slum children, besides practising yoga and traditional dance.8

  In various interviews after Dhirubhai’s death, Nita had talked about her role as Mukesh’s most frank confessor and adviser. In October 2002 the magazine Society headlined its cover story ‘Mukesh and Nita Ambani – on turning Dhirubhai’s dream into reality’. Savvy magazine talked of ‘Nita Ambani’s corporate avatar’. In interviews, Nita said she was the sounding board and the only one who could speak her mind to Mukesh, including on business affairs, such as what she called the ‘premature’ launch of Reliance Infocomm. ‘People thought I came to Jamnagar as a rich man’s wife to pass my time,’ she was quoted as saying. ‘Today I know what business is about. Today I understand and help Mukesh in execution.’ Later this was portrayed, in at least one newspaper report quoting unnamed ‘observers’, as part of a campaign to replace Anil as vice-chairman of the company and as having ‘driven a wedge’ between the brothers.9

  • • •

  By the end of 2003 Anil’s actions were bringing him into serious conflict with Mukesh. Anil was starting to use Reliance Energy, of which he was chairman and managing director, like an independent company, even though it was 51 per cent owned by Reliance Industries. He had also got closer to the Samajwadi government in Uttar Pradesh, which broadcast the ‘news’ that Reliance was going to build a huge power plant in the western part of the state, feeding the industrial belts close to Delhi. In January 2004 Anil announced that the plant at Dadri would be the largest gas-fired generator in the world, costing Rs 100 billion or $2.2 billion, and would take its fuel by pipeline from the Reliance discovery in the Krishna–Godavari basin.

  It was not actually until two days later that the project came before the Reliance board, which agreed to commit Rs 35 billion, but withheld any commitment of gas produced in the Bay of Bengal field. After a Congress-led coalition with Manmohan Singh as Prime Minister replaced the Vajpayee BJP-led government in May that year and immediately announced plans to privatise the notoriously squalid Delhi and Mumbai airports, Anil jumped in again with an announcement that Reliance would join the bidding, without consulting Mukesh or the board. Mukesh was also resisting pressure from Anil for the company to ‘adopt’ a hospital in Mumbai and put Rs 180 million into the foundation that ran it (Anil was later to explain it was his mother’s wish).

  Mukesh’s tolerance snapped on 16 June (only twelve days after the New York Times reported ‘no obvious friction’, although it had also noted Anil’s absence from the Infocomm launch). He picked up the morning newspapers to read that Anil had accepted a nomination by the Samajwadi Party to occupy one of its allotted seats in the Rajya Sabha as an independent. Alongside him was Jaya Bachchan, actress wife of the ‘Big B’, Amitabh, who had apparently agreed to lend some of the family magic to Samajwadi in return for financial help arranged by Amar Singh from the Sahara group’s Subroto Roy for his business activities.

  Amar Singh flanked his two new stars as they were sworn in to their positions. Anil’s required register of assets listed his wealth as comprising investments of Rs 1.6 billion, other assets of Rs 900 million and jewellery worth Rs 272 million, while his wife Tina’s jewellery was put at Rs 650 million, giving a total of Rs 3.42 billion or about $77 million – meaning that the main Reliance stake in the investment companies was not being counted.

  Mukesh was incandescent with anger at Anil’s jump into politics with an opposition party, according to a family confidant. Soon afterwards he moved again to put Anil in his place. At a Reliance board meeting on 27 July 2004 the agenda included as its item no. 17 a motion blandly titled as being ‘to approve constitution of a “Health, Safety and Environment” Committee and to confirm authorities hitherto delegated by the Board to Committees of Directors/Directors/Executives as also confirm such of those delegated authorities as are subsisting and to consider modifications, if any’. Tucked away as an annexure was a note setting out the functions of the chairman and managing director (Mukesh) and the vice-chairman and managing director (Anil) who would be under the ‘overall authority’ of Mukesh. The condominium was over: Mukesh was the boss.

  Anil did not immediately twig to Mukesh’s tactic. When he did, within a day or two, he began bombarding his brother and the company secretary with objections. It was neither in good faith, went one email on 30 July, nor in the spirit in which such matters had been handled within the company before, or the traditions set by Dhirubhai. It was a sorry state of affairs. The question had to be hammered out between the two brothers before coming back to the board.

  The passage of the item remained in the minutes of the board meeting. Anil persisted with his objections, which were noted then rejected in a board meeting in October. The majority felt that Anil was overreacting and that the explanation of functions simply formulated the status quo of the company’s leadership.

  • • •

  Not long afterwards it all broke out into the open. The spark was an entirely random and unrelated event. At a big function on the evening of 17 November 2004 attended by the ‘cream of corporate captains’ in Mumbai, Mukesh had introduced a talk on ‘Unlocking Innovation’ by the visiting chief executive of Microsoft, Steve Ballmer, who had been a classmate at Stanford University’s School of Business.

  After an effusive speech by Mukesh, Ballmer took the podium: ‘I hope he [Mukesh] won’t mind,’ he said, ‘but in our class in Stanford Business School, there were exactly two people who dropped out at the end of the first year, me and Mukesh.’

  As Mukesh was to explain three years later, he had indeed not completed his master’s degree. The young chemical engineer had won entrance to the prestigious school and quickly immersed himself in it. Then Reliance got its licence for the first polyester plant at Patalganga, and Dhirubhai told his son that work would start immediately. Six months short of completing the graduate program, Mukesh pulled out and returned to Mumbai.10 Nothing wrong with that, and Mukesh had clearly got a lot out of his year at Stanford. But ever since his return in 1981, Reliance had been listing Mukesh as an MBA from Stanford, including this ‘fact’ in many of its corporate reports and statements. Ballmer’s quip sent a frisson around the audience, many of whom were unclear whether it was a joke or the truth.

  Possibly Mukesh was rattled too. As the event broke up around 10pm, he was stopped by a team from the television news channel CNBC-TV-18 in which a Reliance subsidiary had a stake and which had sponsored Ballmer’s talk. The reporter, Menaka Doshi, put the question in the most delicate way. ‘There have been rumours about the Reliance group and the way the businesses are going to go in the future,’ Doshi said. ‘I don’t think you need me to articulate any further. But can you, for your investors, tell us if there is ever going to be a likelihood of any split of any kind?’

  After some minutes of blather about how Reliance was ‘beyond one, two or three individuals, including myself’ and was now run by professional talent, Mukesh came to the question. ‘So, well, there are other issues which are ownership issues,’ he said to the camera. ‘These are in the private domain, but as far as Reliance is concerned, it is a very, very strong professional company.’

  The channel put the interview in edited form to air that night, but it was not immediately noticed and Mukesh flew off the next morning to the United States. Only when the Press Trust of India put out a report in the afternoon did newspapers and the stockmarket wake up. There was an immediate plunge in the share prices of Reliance and all its listed subsidiaries and affiliates, including IPCL, thus bringing down the entire market index.

  The Indian media began a feast of speculation and vaguely sourced reports, fed by anomymous sources said to be close to one or other of the brothers’ ‘camps’. Anil was said to have been sidelined from financia
l and investment activity after he had raised questions about the funds the parent company had been providing the Infocomm subsidiary. Mukesh had indicated that he was delaying by two years the commitment of Krishna–Godavari gas to the Uttar Pradesh power plant. Even the alleged intrusion of Mukesh’s wife was raked up, amid the scanty public evidence available to explain the background of the ‘ownership issues’.

  One hard fact did emerge: that Dhirubhai had died intestate. Under the law of Hindu succession, the property of a man who died without leaving a will had to be divided among his wife and children. Property registered under the Hindu Undivided Family law had to be split between the wife, sons and unmarried daughters. But, as we have seen, Dhirubhai had nullified that undivided family status. Who actually owned the controlling 34 per cent stake held in the corporate web?

  The Business Standard columnist T.N. Ninan found it ‘astonishing’ that Dhirubhai hadn’t left a will, given all the evidence of bitter corporate rifts that had occurred after the death of various founders, like the division of the Indian Express group between the grandnephews of Ramnath Goenka.

  People with unusual success stories usually have a good understanding of human motivation and frailties … Both Mukesh and Anil Ambani are able, energetic and ambitious, and beyond a point no one company can have enough space for both of them, especially when the age difference is not great and there are family tensions adding to the complications. If this is obvious to most observers, surely it should have been obvious to Dhirubhai, who had few peers in his ability to size up people and situations. So why did he not plan an orderly succession?11