The Telegraph
Since 1st March, 1999
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Battle in boardroom
- Anil seeks meeting of Reliance directors

Mumbai, Dec. 15: Anil Ambani, the younger scion of the Reliance group, has asked for a meeting of the 12-member board of directors of Reliance Industries to discuss his battle with brother Mukesh over ownership issues.

The move takes the battle to a new level: the shadow-boxing that had gone on through emails and leaks to the media is over. It now enters a crucial phase where the directors will have to decide on whose side they are.

Vinod Ambani, company secretary of Reliance Industries, responded with alacrity to Anil's letter, dated December 6, by writing to all the directors seeking a suitable date for convening the meeting.

So far, indications are elder brother Mukesh has a considerable majority on the board, though one senior member, M.L. Bhakta, had expressed his desire to resign on the ground of age.

Mukesh had persuaded Bhakta, a close associate of Dhirubhai Ambani, to reconsider his decision. Bhakta has reportedly been upset over the way the squabble between the brothers has escalated in the past month.

Along with a meeting of the board, Anil has sought a discussion on the resignation of the 'most esteemed M.L. Bhakta, a legal eagle and one of the closest friends of RIL's late founder Dhirubhai Ambani'.

Anil has also reportedly asked for details of Reliance Industries' investments of Rs 12,000 crore in Reliance Infocomm, the telecom arm which is considered to be Mukesh's bailiwick and is currently at the centre of the storm.

Recriminations have flown thick and fast about a lack of transparency and equity in dealings with other shareholders of Reliance Industries who do not benefit as much as Mukesh from Reliance.

Anil has been questioning the price at which Reliance Infocomm shares have been offered to Reliance Industries Ltd (RIL) because Mukesh has acquired a holding in the telecom entity at a fraction of the cost.

This has resulted in a situation where Mukesh and his associates have a controlling stake in the company with a very small investment while RIL is a minority shareholder.

The war between the brothers has had other repercussions. The first sign of trouble came with a rather unflattering rating assessment today by Standard & Poor's, the well-known credit rating agency.

Although it retained RIL's local currency rating at BB+ with a stable outlook, S&P said it 'expects the differences between Reliance's chairman and vice-chairman ' on future plans for the Reliance group and its management control ' will have greater potential to weaken the Reliance group's other businesses, rather than its core oil refining and petrochemicals business, particularly its day-to-day operations. In addition, these differences could affect Reliance's strategic direction, resulting in a substantial change in Reliance's business plans or the group structure which could require a review of its rating'.

S&P analyst Sharad Jain also wrote that the telecom business 'remains susceptible to high bad debts in future. In line with industry trends seen in other expanding telecommunications businesses, it is expected that regular capital expenditure will remain large'.

Anil, in his capacity as chairman of Reliance Energy, has also requested the RIL board to discuss the recent letter written by two independent directors of Reliance Energy, General (retd) V.P. Malik and Dr Leena Srivastava.

The two directors of Reliance Energy had voiced their apprehension about the availability and pricing of gas from the group's Krishna-Godavari fields, which is crucial to operate the proposed Rs 11,000-crore Dadri project in Uttar Pradesh.

The fight between the brothers has cast a pall of gloom on shares of RIL and Reliance Energy. RIL shares today fell sharply by Rs 10.20 to Rs 495, even as the leading indices where RIL has a huge weightage leapt to a historic high of 6402.29.

Leading foreign brokerages such as CLSA and DSP Merrill Lynch have expressed concern at the looming crisis caused by the differences between the siblings.

'Family feud may delay upcoming projects. The key risk is a prolonged dispute between the brothers,' said DSP Merrill Lynch. Some of the research houses also wondered whether the core operations would continue in the integrated form.

Anil has reportedly mentioned in his December 6 letter that it was with 'great sadness and anguish' that he had witnessed the events of the last three weeks which had affected the image of the company and the interests of over 30 lakh shareholders and all other stakeholders.

He also did not miss out on the opportunity to talk about how Dhirubhai used to run the show. 'He was to most of us not just the chairman of the board but, more importantly, a close personal friend, a confidant, a teacher, a guru and a guide,' he said.

'The father of the Indian capital markets, Dhirubhai, wished, above all else, to maximise value for his first, last and only constituency, Dhirubhai's real family of over 30 lakh shareholders,' Anil added.

This statement is being construed as a snide remark against Mukesh, who is said to have collected 50 crore shares at par value of Re 1 in Reliance Infocomm as sweat equity by virtue of being the lead promoter of the project.

Meanwhile, company affairs minister Premchand Gupta said the government would not take suo motu cognisance of the allegations that the Reliance group had flouted corporate governance norms.

'There is no point in disturbing such a big industrial house which has created wealth for millions of its shareholders as well as huge infrastructure for the country,' Gupta said.

Capital market watchdog Sebi has already directed the stock exchanges to examine whether there had been a violation of listing agreement rules because of the company's failure to communicate market-sensitive information arising from the ownership tussle to the bourses.

Gupta said unless his ministry received specific complaints against Reliance, it would not initiate any action against the group.

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