What's Next For The Reliance Group

Following the well-publicized feud between two brothers, the Indian giant announces plans to restructure.By Sunil Puri

Corporate Profile
By Sunil PuriWhat's Next For The Reliance GroupFollowing the well-publicized feud between two brothers, the Indian giant announces plans to restructure.The juicy tale of two brothers fighting for their father’s empire may be coming to an end. In August, the $22.5 billion Reliance Industries Ltd. (RIL) — India’s largest private corporation — announced that it will be restructured into separate companies. This announcement ends the speculation that has surrounded the company since the feud between the Ambani brothers became public a little more than two years after the death of their father — Dhirajlal Hirachand Ambani, the legendary founder of Reliance.The senior Ambani (also fondly known as Dhirubhai Ambani) started RIL in 1932 and almost single-handedly turned it into one of the pillar companies in India. With his sons Mukesh and Anil, Dhirubhai expanded the company’s activities — which today span oil and gas exploration, refining and marketing, petrochemicals (polyester, polymers and intermediates), textiles, financial services and insurance, power, telecom and infocom services.In July 2002, Dhirubhai Ambani died without a will, thus leaving the brothers (both of whom are today well-recognized figures in their own right among the Indian industrial elite) to battle for control of this massive conglomerate.The dispute between the brothers first became public when Mukesh admitted that there were “ownership issues in the private domain.”

Dhirubhai H. Ambani (seated), founder of Reliance Industries Ltd., with his two sons, Mukesh (standing, left) and AnilRestructuring PlansFollowing the long and public battle, the first sign of a settlement came in June when the widow of Dhirubhai issued a statement to declare that an “amicable” resolution between her sons has been reached.Details of the settlement were made public by the company directors during the annual meeting. Under the agreement, RIL’s assets and liabilities in telecommunications, coal-based energy, financial services and gas-based energy undertakings will be restructured into four separate companies:1. Reliance Communication Ventures Ltd2. Reliance Energy Ventures Ltd.3. Reliance Capital Ventures Ltd.4. Global Fuel Management Services Ltd.Everyone except certain specified shareholders of RIL will be issued shares of the restructured companies. The transaction is scheduled for September, after which, the separated companies will be listed in the stock exchanges in India.Reliance currently owns 46 percent of Indian Petrochemicals Corp. Ltd. (IPCL), the nation’s biggest maker of polymers; half of Reliance Energy, India’s secondbiggest utility company by market value; 45 percent of Reliance Infocomm Ltd., the nation’s second-biggest mobile phone company; and 42.6 percent of Reliance Capital, which provides financial services. Mukesh Ambani, the current group chairman, will retain control of Reliance Industries Ltd., the group’s petrochemicals flagship, and Indian Petrochemicals Corp. Mukesh will essentially have control over the core businesses of oil, gas, polyester and chemicals. These sectors together bring in close to $19 billion a year in revenues.Meanwhile, Anil Ambani will take over Reliance Energy, Reliance Infocomm and Reliance Capital, plus an estimated $1 billion in cash to equalize the division.FutureWith Reliance Industries under his belt, Mukesh Ambani is looking for “exponential growth”in the future.Announcing a growth plan for the company, he said “RIL will be increasing its polyester manufacturing capacity by 550,000 tonnes per year this financial year. This would take RIL’s total polyester capacity to 2 million tonnes per year. This capacity increase would address value-added differentiated polyesters such as microfilaments, pre-colored and heavy denier yarns.”In addition, a new world-class purified terephthalic acid (PTA) plant with a capacity of 630,000 tonnes per year is under construction, which is scheduled for completion next year. This will take RIL’s total PTA capacity to 1.9 million tonnes. This and other capacity expansions will further consolidate RIL’s global leadership in polyester and polyester intermediates.Reliance already has experienced rapid growth in the past several years — it took over the operations of IPCL and this year took over the Glycol division of SM Dyechem Ltd., which has a monoethylene glycol (MEG) production capacity of 80,000 tonnes a year.
Editor's Note: Sunil Puri is a Mumbai, India-based textile journalist.
September/October 2005