The Telegraph
Since 1st March, 1999
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Govt lets Ambanis alone
- Institutions told to stay neutral in battle

New Delhi, Dec. 24: The finance ministry has asked government-run financial institutions to maintain a neutral stand in the dispute between the Ambani brothers.

The institutions own a little over 8 per cent in Reliance Industries Ltd (RIL) and 21 per cent in Reliance Energy Ltd.

Ministry officials said the institutions have been informally told that they should exercise their rights as shareholders only when 'their own interests are jeopardised. Otherwise, strict neutrality will be their credo'.

A meeting of the board of directors of RIL takes place on Monday. This is the first time the board is meeting since the dispute over ownership issues came out in the open on November 18.

The institutions do not have a representative on the board of RIL and have denied reports that they are seeking representation. They had a nominee ' U. Mahesh Rao ' on the RIL board till July 17, 2003. He was, however, withdrawn after the company paid back all the long-term loans it owed the institutions. The loan agreements had provided for one board slot for the institutions.

The directive from the government means that the institutions will go with the existing management on any resolution that is put to vote before the shareholders.

Both the Ambani camps are aware of this. 'It is natural that both should try to get the government on their side... that is why we don't want to be seen taking sides,' the officials said.

Anil Ambani today flew into Delhi in his Bombardier jet. The official reason was to pay homage to former Prime Minister P.V. Narasimha Rao. However, rumours flew thick and fast about an unscheduled meeting with finance minister P. Chidambaram. Anil's aides said: 'We know about the rumour... but he never had time to do anything but go to AICC headquarters and then meet a few other people.'

From the minister's side, officials said Chidambaram did not have any official engagement with any of the Ambanis today.

Ministry officials said that, as shareholders, state-run banks and financial institutions should be primarily concerned with the value of their equity holdings. It is because of this the institutions encouraged the Ambanis to come out with a share buyback scheme.

Reliance's board meeting will consider the proposal.

The institutions have lost 15 per cent of the value of their holdings in RIL alone because of the share price plunge since the spat began. 'At that stage we were concerned about how this fight would go for the state-run companies' holdings. After all, the institutions are major shareholders in all Reliance companies,' the officials said.

The government does not want to be accused of taking sides. 'This has been the central government's stand in all corporate boardroom battles dating back to the (Manu) Chhabria attempt to take over Shaw Wallace in the early 1980s,' they added.

Investigating and corporate policing agencies of the government have also been instructed to stay neutral. Officials said that the minister for company affairs, Premchand Gupta, has not received any formal complaint of wrongdoing in Reliance group companies.

See also Business Telegraph

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