For his part, Anil’s peak moment came in February 2008 with a much-anticipated share listing for a new company, Reliance Power, that took over the power generation assets of his Reliance Energy. Three months earlier, Anil’s company had sent a letter to the Securities and Exchange Board of India complaining about a ‘disinformation’ campaign being waged against the initial public offering. The IPO’s launch had been marked by a spate of anonymous emails and blogger comments claiming that Reliance Energy had illegally transferred assets to the new company without shareholder approval. Several politicians had become seized of the issue and had written to the SEBI questioning standards of corporate governance at Anil’s group. Anil’s group was said to have fingered Mukesh’s organisation in its letter of complaint, although it declined to confirm this to newspapers. Mukesh’s Reliance Industries said only that it was ‘more amused than shocked’ over the allegations.
In the event, the Reliance Power offering was oversubscribed by would-be investors by seventy-three times the $3 billion sought, even though this was then the largest amount of capital ever tapped in the Indian sharemarket. But Anil’s exuberance was short lived. Within a day of listing, the share price had dropped 17 per cent below the issue price. There were reports that Anil’s group blamed Mukesh’s camp for somehow engineering the debacle.
Still, Anil had a massive injection of new cash, the party recovered in the Indian markets and soon Mukesh was looking defensive in his position as the richer brother. By the middle of 2008 Anil’s paper wealth was only a billion or so dollars behind Mukesh’s US$43 billion by some estimates.
Each played a constant game of one-upmanship against the other. When Mukesh bought the Mumbai Indians team in a new professional cricket tournament, the Indian Premier League, Anil was reported to be studying purchase of an English first division football club such as Newcastle United. When Mukesh announced bigger and bigger plans for his petroleum, retail and land divisions, Anil expanded his ties with the more glamorous worlds of communications, entertainment and media. His new venture, Reliance Big Entertainment, engaged a well-known lyric writer, producer and director of Bollywood movies, Amit Khanna, as chairman and a leading media executive, Rajesh Sawhney, as president, while the head of the Reliance Capital arm, Amitabh Jhunjhunwala, organised funding. During 2008 the new firm signed production deals with such Hollywood names as Tom Hanks, Brad Pitt, George Clooney and Nicolas Cage and took control of a cinema network across twenty-eight American centres. In October, in the midst of a global financial crisis, Anil replaced Paramount as partner in a joint production venture with Steven Spielberg’s Dreamworks, with an investment of $550 million. The deal was said to make Anil ‘one of the most powerful tycoons in Hollywood’.24
There was also a curious role-reversal. Mukesh had become the high-life socialite, with estimates of the cost of building his Antilla getting ever larger despite his attempts to downplay them. The perceived playboy Anil was portrayed as more ascetic, making frequent pilgrimages to Hindu shrines, even journeying on foot to circle the holy Mansarovar Lake and Mount Kailash in Tibet. He ran daily for kilometres before dawn and stayed in cheap business hotels instead of luxury suites on his travels. Communication between them came down to stiff press comments by spokesmen and a mounting number of court actions. However, both were said to put on a display of politeness at weekly breakfasts with their mother at Sea Wind.
In June 2008 Anil attempted a corporate manoevre that would have leapfrogged him in wealth far beyond Mukesh and possibly have made him the world’s richest man in paper wealth. At a dinner hosted by Kokilaben, Anil reached agreement with Phuthuma Nhleko, chairman of the large South African cell telephone company MTN, to merge their businesses. The merger would combine India’s second largest cellular network of 45 million subscribers with the 68 million subscribers of MTN through Africa and the Middle East, creating the world’s fourth biggest cell phone operator with a base in some of the world’s fastest growing emerging markets. The deal would involve Anil transferring his 66 per cent stake in Reliance Communications, in return for 35 per cent of MTN, then investing a further US$10 billion with the help of investment banks and Middle East sovereign wealth funds to gain effective control of the combined group.
Mukesh, who happened to be in southern Africa at the time, holidaying with his family in Botswana (entirely coincidentally, he said), immediately kyboshed the deal by writing to MTN and Anil to assert that, under the terms of the June 2005 division of their father’s businesses, each brother had the first right of refusal in the event of any proposed sale of the assets by the other. The merger would therefore be challenged in court if it went ahead.
Anil immediately announced that if this were the case, he would object to the transfer of 5 per cent of Reliance Petroleum to Chevron. It was also mooted that Mukesh’s action was insulting to Kokilaben, since she had seemed to bless the deal. But the deal was lost and eventually was offered to rival Bharti AirTel. By November 2009, India had 543 million cellphone subscriptions, an astonishing leap in less than a decade. Anil’s network had more than 90 million customers, still behind Bharti’s 116 million and with Vodafone Essar just behind with 88.6 million subscribers.25
Still, the unpredictable shifts of Indian politics were giving Mukesh some uncomfortable moments. Within a week of checking Anil’s bold gambit, Mukesh had to rush to New Dehli to shore up his political connections. Manmohan Singh’s government had pushed ahead with the agreement worked out with US President George Bush in 2006 that effectively lifted the Western nuclear embargo on India, in return for it separating its civilian nuclear facilities from its weapons-related ones and putting them under international safeguards. This had caused the Indian communist parties backing the Congress-led coalition to withdraw their support. Their place was taken by the Samajwadi Party, Anil’s former group. The share price of the Reliance flagship dropped 6 per cent immediately on the news.
Amar Singh was back at the centre of power-broking and immediately announced that his group would be pressuring Manmohan Singh to introduce a ‘windfall tax’ on super-profits made by oil refineries from the then extremely high international oil prices and to stop Mukesh disrupting the MTN merger. Mukesh had urgent meetings with Singh and Sonia Gandhi to seek assurances.26
• • •
As the Mumbai court case over the pricing of Krishna–Godavari gas headed towards adjudication on the enforceability of the June 2005 assets split and its attached conditions, relations became even more acerbic.
Where Mukesh had cited Kokilaben’s June 2005 settlement to foil Anil’s attempted cellphone merger with the South African company MTN, his lawyer, Harish Salve, was now telling reporters outside the Bombay High Court that the agreement was a ‘piece of trash’ as far as the company was concerned, in that it was ‘only between the two brothers’. In court he argued that the agreement was a ‘ghost MoU [memorandum of understanding]’ that had never been published and had no legal standing. Anil’s lawyers argued that the agreement had force and got its presentation in court, or at least the parts relating to the gas pricing, although the text was not disclosed to the public. The Indian Government also entered the fray, seeking a lifting of a block imposed by the court on sale of Krishna–Godavari gas to customers other than Anil’s Reliance Natural Gas, or to the government-owned National Thermal Power Corporation. The Petroleum Ministry’s secretary, R.S. Pandey, argued that opening the flow of gas from the field in January 2009 was ‘an issue of national importance’. (Mukesh himself said the full flow of oil and gas from Krishna–Godavari would save India about US$20 billion a year in energy imports.) Anil’s side argued that this intervention showed the Congress-led government’s partisanship towards Mukesh, even at the cost of damaging the interests of its own entity, the NTPC.27
So charged became the hostility and so high the economic stakes that the judges looked beyond the law for a resolution – to that icon of Indian society, the mother. In August 2008 the Bombay High Court bench suggeste
d that Anil and Mukesh go to their mother again for a settlement, thereby making legal history.
The bitter dispute, with this rich flow of energy at its heart, threatened also to open up some of the more potentially embarrassing aspects of the Reliance story. An interview by Mukesh with the New York Times in June 2008 had got around to the ‘dark side’ of the group’s activities. ‘What most distinguishes Reliance from its rivals is what Ambani’s friends and associates describe as his “intelligence agency”, a network of lobbyists and spies in New Delhi who they say collect data about the vulnerabilities of the powerful, about the minutiae of bureaucrats’ schedules, about the activities of their competitors.’ Mukesh was quoted as saying that all such activities were overseen by his brother before they split and had since been expunged from his tranche of the company. ‘We demergered all of that,’ he said, breaking out in what was described as a ‘belly laugh’.28
In August, Anil lodged a suit for defamation against Mukesh in the Bombay High Court, seeking Rs 100 billion for loss and damages. The Times and two Indian newspapers that published the interview were also named as defendants. Anil claimed the article was ‘malicious’ and that the defendants were ‘part of a concerted conspiracy whose object is to damage’ his reputation.
Once again, Anil was upping the ante in the feud with his brother. Indian business and political circles regarded the prospect of juicy court revelations with mixed glee and trepidation, as well as concern about what this dispute was doing to the ‘story’ of the new India in the outside world. Unfortunately, they were to be disappointed, as the brothers backed off. Mukesh said his remarks were made ‘in jest’, and Anil did not pursue the action.
The Bombay High Court action moved on appeal from both Mukesh and Anil from a single company law judge to a higher bench, which ruled in June 2009 that the family agreement prevailed, and that there was nothing in Mukesh’s production-sharing contract with the government prohibiting the sale of gas to Anil at less than the price set by the formula approved by the government ministers. All three parties – Anil’s Reliance Natural Resources, Mukesh’s Reliance Industries and the Indian Government – appealed on various grounds to the Supreme Court of India.
The judgement handed down on 7 May 2010 was a victory for Mukesh and the Indian Government supporting the higher gas price. In different terms, two justices supported the argument of Mukesh’s legal team, led by Harish Salve, and the government’s lawyers that the production sharing contract required the private sector contractor in petroleum fields to obtain government approval on pricing and allocation of gas or oil production. The inability of the government’s NTPC to clinch its parallel deal with Reliance for Krishna–Godavari gas proved a fundamental weakness in Anil’s position. The argument that Mukesh’s evasions had robbed Anil of a ‘bankable’ supply contract to start building his power plants was rejected, given the huge sums Anil’s corporate floats had raised.
The Chief Justice of India, K.G. Balakrishnan, who was about to retire four days later, lent his decision to the more moderately framed judgement, which ordered Mukesh and Anil to start negotiating a new gas supply agreement within six weeks and conclude it by eight weeks later. The judges observed that while the family agreement was ‘not legally binding, it is a commitment which reflects the good interests of both the parties’ and told the two sides to take it into account.
The minority judgement, by Justice B. Sudershan Reddy, was a more passionate tirade in defence of state authority, beginning with a Latin prescription by the Roman jurist Justinian that ‘Public law cannot be changed by private pacts’, and railing against the ‘neo-liberal agenda’ intent on stripping the state of power in order to benefit the rich few. ‘Predatory forms of capitalism’ organised themselves first and foremost around extractive industries to exploit natural resources. Sudershan Reddy said he was moved to these reflections by the petition of Anil’s company “that it is entitled to receive, on account of a private pact between members of the Ambani family, vast quantities of natural gas, amounting to a significant portion of what would be available for the entire country, at a low price and for a long time, de-hors [sic] any policy made by the Government of India’.29
Anil, who had been sitting in the wood-panelled court to hear the judgement, went out to find the share prices of his power companies crashing. In a one-page statement Anil said he had no plans to file a review petition to the Supreme Court and looked forward to negotiating a new supply arrangement in the light of the court’s finding that the family agreement had been the ‘guiding force’ in the division of Reliance. Mukesh did not attend.
On a Sunday two weeks later the brothers issued a joint statement proclaiming a rapprochement that would ‘eliminate any room for further disputes’ and that they were now confident of building an ‘environment of harmony, cooperation and collaboration’ between their groups. Yet, strangely, the substance that was revealed was a scrapping of the ten-year ‘non-compete’ clause of the 2005 agreement worked out under the auspices of their mother. The field of gas-fired power generation was the one exception, whereby the non-compete agreement was extended to 2022. This was initially hailed as an end of the feud, lifting shares prices of both groups. More sceptical observers thought it could be the prelude to more general warfare, now that each brother was free to enter the sector previously reserved for the other, although not under the Reliance name.
Anil was able to pull some chestnuts from the fire, thanks to the Supreme Court’s order to negotiate a gas price in the spirit of the family agreement. The continued element of the non-compete agreement pointed to a merger or sale of Anil’s power-generation business to Mukesh’s group. Meanwhile, Anil was now unhampered by the ‘right of first refusal’ aspect of the non-compete agreement, which Mukesh had used to scupper the proposed MTN merger in cell phones. His Reliance Communications began entertaining approaches from foreign telecom firms for a 26 per cent stake, to recoup some of the heavy outlay in licences for 3G signal spectrum. Mukesh quickly launched a return into telecommunications, paying Rs 48 billion ($1.045 billion) for Infotel Broadband Services, a company that had won licences for wireless broadband across India. The move would require him to add another Rs 128.5 billion for the licences, and more than Rs 45 billion to build a network, but it put the new Reliance Infotel in prime position for when India embraced broadband in a big way, as it had done with cell phones in previous years.
The irony that the court’s blow for the authority of the state was also putting extra billions in the coffers of one of the world’s half-dozen richest men, as well as a lesser flow of royalties into government revenue, was not explored in the judgement. Nor did the judges reflect whether their ‘resource nationalism’ was in the best interest of encouraging more petroleum exploration for energy-short India. Private sector oil companies, Indian and foreign, were digesting the fact that their freedom to sell whatever they discovered was now greatly limited, subject to changeable and often murky government decisions. The price of $4.20 per mmbtu set by Pranab Mukherjee’s ministerial team in 2006 for five years was a maximum price, based on what had become a subdued oil price at the start of this century. At times, the oil price had soared much higher. The prospect of great reward for great risk was diminished.30
Meanwhile, the Supreme Court noted in passing that gas from Reliance’s older west coast fields (Panna, Mukti and Tapti) was being sold at a higher price, $5.51 per mmbtu, which was in fact the highest price allowed any of the listed private sector gas fields. The government’s petroleum producers were continuing to supply gas to fertiliser factories and other customers designated as high priority for less than $2.
The final ruling on Krishna–Godavari had come from judges of India’s apex court, respected for its high level of jurisprudence, incorruptibility and judicial activism. Yet the intervention of the Congress-led government had undoubtedly carried enormous weight. Once again, government policy had turned out to be tailor-made for the immediate needs of Reliance.
22
Goodbye, Gandhi
When the film Guru based on Dhirubhai Ambani’s life appeared in 2007, distributed by Anil’s company Adlab and with his Bachchan coterie involved, it seemed to show a new maturity in the Ambani camp about the mixed shades of the patriarch’s legacy.
It certainly had a level of adulation that at least one of India’s leading business chiefs, a Parsi himself, found too ‘sickening’ to keep watching the film when he flicked it on during a long-haul flight. But it included several of the clashes narrated in this book, ones that do not reflect too well on Dhirubhai. Guru falls out with Gupta when he tells the newspaperman about having ‘one gold slipper and one silver slipper’ with which to tap the recipients of his largesse, meaning that everyone has their price. He falls out with his original business partner after taking big decisions without consultation: an echo of his rift with his first co-investor in the textile trade, Chambaklal Damani. There is even an encounter with a central government ‘minister’ – shown from behind, but having a profile and bald patch suspiciously like those of Rajiv Gandhi – in which Guru mentions a ‘small deposit’ left with him by the politician’s late uncle and seeks instructions what to do with it. The minister is soon agreeing to open Guru’s newest factory. The counterpoint to this protean myth is given by an investigative journalist, clearly based on Gurumurthy. ‘He doesn’t just bend or break the law, he buries it and builds a beautiful park on it,’ Saxena says, recalling the ‘first-class fountain’ remark made by Dhirubhai about his early scrapes with legality. Guru is the biggest hope of Indian industry, but ‘he is a disease, who should be locked up in jail and the keys thrown away,’ Saxena says. His growth rate is 400 per cent, ‘but corruption and greed have grown at twice that rate, thanks to his bribes’.
Mahabharata in Polyester Page 36
