Oh brother!

As Mukesh and Anil Ambani must know only too well, a dash of Dhirubhai8217;s legendary generosity is the magic pill that could cure the Rs 99,000-crore Reliance group of its current ills. But whatever be the objective behind the mails-and-minutes battle being played out, there8217;s no indication of a compromise8212;yet.

And it8217;s hurting the country8217;s largest private sector entity8212;more so, its millions of shareholders.

Already, since the controversy erupted, Reliance group companies have lost a staggering Rs 8,000 crore of market capitalisation. And with the market abuzz with talk of foreign institutional investors FIIs relooking at Reliance group shares, the group8217;s five listed entities can hardly be looking forward to the markets on Monday morning.

Other players are expected to get into the act soon. The demands for the involvement of market regulator Securities and Exchange Board of India and domestic financial institutions can only rise. The FIIs, too, are learnt to be keen to push for tougher corporate governance norms in the group. 8216;8216;Our rivals must be thrilled,8217;8217; says a senior Reliance Industries official. 8216;8216;What they couldn8217;t achieve in their lifetime, the two brothers are8230;8217;8217;

Impasse Inc.
TIME8212;and the growing damage8212;is the worrying issue for Mukesh Ambani. The recent concentration of powers in the hands of Reliance Industries8217; chairman and managing director gives him total control of the flagship. And the board8217;s polite but firm rebuttal to Anil Ambani8217;s objections shows just who is in charge.

Add to this the fact that final control over the bulk of investment companies that own the promoters8217; shares in Reliance Industries rests with Mukesh Ambani. The Anil Ambani camp is waving the stick of a legal battle to ascertain when these voting rights were transferred to Mukesh. Reliance Industries officials insist it was in Dhirubhai8217;s lifetime and as per his wishes.

Either way, if the impasse between the brothers is hurting Reliance, a prolonged legal battle will hurt more. While it is still not clear why six directors resigned from the Anil Ambani-controlled Reliance Energy, it has forced the markets to officially take note of what was till then shadow-boxing between the brothers.

Sibling rivalry
FROM the tone of his letters and e-mails to Mukesh Ambani, it appears Anil Ambani is upset at having to report to a brother who is just two years his senior. Earlier, important decisions were perhaps routed through Dhirubhai, who would have acted as a buffer between the egos of the two siblings.

Dhirubhai was well aware of the differences in the brothers8217; personalities. It8217;s telling that the two aggressive diversifications, into politics as an Independent Rajya Sabha MP backed by the Samajwadi Party Anil and telecom Mukesh, came after Dhirubhai8217;s death, and immediately widened the chasm between the brothers.

Mukesh was reportedly unhappy at Anil8217;s decison to join politics and, as a consequence, have the entire Reliance empire identified with the SP. Anil8217;s announcement of a Rs 10,000-crore power project for Uttar Pradesh precipitated matters further: Mukesh told the Petrowatch website that gas from the Dhirubhai reserves in Andhra Pradesh would not be available till 2008. The UP plant requires supplies from 2006.

Anil, on the other hand, was said to be unhappy with the way Reliance Infocomm8212;Mukesh8217;s pet project8212;was being handled. Reliance Industries have already invested close to Rs 10,500 crore in the telecom firm, but returns have been poor.

Mukesh has also pioneered the forays into bio-technology and life sciences, while Anil finds himself running the relatively smaller Reliance Energy, a Rs 3,415-crore company that supplies electricity to Mumbai and New Delhi suburbs.

People power
ANOTHER key factor contributing to the differences between the brothers is said to be Mukesh8217;s complete control over new projects. Anil, group-watchers say, has had hardly any say in key appointments and future plans. Indeed, in terms of people, Mukesh has an advantage, having built a strong A-Team that runs Reliance today.

This team8212;including classmates Anand Jain and Manoj Modi, as well as K P Nanavaty and P M S Prasad8212;was built up by Mukesh during Dhirubhai8217;s lifetime. Key appointments in Infocomm, petroleum, and gas have also been made by Mukesh.

Independent directors of Reliance Industries8212;many of whom were close to Dhirubhai8212;are now expected to play a crucial role. 8216;8216;I have great respect for the group,8217;8217; says S Venkitaramanan, former governor of the Reserve Bank of India governor and an independent director on the Reliance Board. Mansingh L Bhakta, who is now reconsidering his resignation from the Reliance board, is apparently trying to negotiate a fraternal compromise.

If the Ambani brothers drive down Dalal Street8212;the busy hub of the country8217;s stock trading8212;punters will perhaps ask both brothers to shake hands and continue rolling the Reliance juggernaut, which is reporting huge profits every quarter. Says BSE stock broker Pawan Dharnidharka: 8216;8216;The news about a possible split has already made us very nervous about Reliance.8217;8217;

As the nervousness spreads, the brothers could do worse than remember Dhirubhai8217;s8212;and Reliance8217;s8212;basic tenet: Never let down the stockholders. Can Mukesh and Anil stop the slide and quickly craft a compromise? The stakes have never been higher at the Reliance empire.

Ambani vs Ambani