The Battle for Reliance is over

Far from the maddening crowds, there was a big brouhaha between the two brothers – Anil and Mukesh – jointly known as the Ambanis and the owners of Reliance Group, a $22.5 billion conglomerate, that is as indispensable to the Indian economy as Intel is to Silicon Valley. The empire was built by their father, a piss poor school teacher turned trader, with blood, sweat and tears. Some guile and palm greasing involved as well. But such is the way of business in India. The brothers, smart as they might be, are not a patch on the grand old man, who truly empowered the individual investors and changed the ways of the world. When Dhirubhai died a few years ago, everyone cried, felt sad, for he had made many rich beyond belief. Think of him as Bill Gates of India. I am an unabashed fan. Then came the split between the two brothers. It felt as if some Bollywood script writer was taking his script, and replacing The Ambanis as main characters. It got so ugly, that even the normally jittery stock markets shut down.

The impact was felt here in the US. Remember Qualcomm expressed some queasiness about overseas sales. You could track that back to Reliance Infocomm, one of the big customers of CDMA related phones and hardware. Reliance’s telecom arm has been in holding pattern for a while. And believe me I am being polite when I say that. Mukesh used to run the Infocomm business, which had a lot of question marks. Anil is said to have hated that business. Anil charged that Mukesh had taken 55% of Infocomm’s shares at 1% of their real value and distributed them to some politicians. He had managed to get a loan from parent company, Reliance Industries, at about 7% interest, even though the company gets 20% return on its investment. DoT and state owned phone companies took Reliance to court for tariff related fraud and Reliance Infocomm had to pay back the missing tariffs – $100 million or so – along with $30 million in penalty. Whatever – there was ample proof of wrong doing.

Ironically, as part of the settlement, Mukesh gets the $19 billion a year petrochemical business, and Anil gets energy and telecom. Reliance Infocomm has a big broadband rollout planned and many told me that things were moving at the pace of a lonely farmer tilling his field at high noon in Central India. Whatever the outcome is, the delay has been a big help to Reliance Infocomm’s rivals, Tata in particular which after slow start has managed to get its act together. Hopefully this will also help accelerate the broadband and IPTV rollout in India.

Business Week has full details.

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