MUMBAI - India's billionaire siblings Mukesh and Anil Ambani are again doing
their best to outdo Cain and Abel in giving brotherhood a bad name, this time
over a gas supply pricing dispute. At stake is a "huge scandal", alleges the
younger Anil (50), involving US$10.31 billion of profit that his elder brother
Mukesh (52) would get from "dishonoring" a four-year-old agreement.
The
original deal was for Mukesh Ambani's Reliance Industries Ltd (RIL) to supply 28
million cubic meters of gas per day, at a rate of
US$2.34 per million British Thermal Units (Btu), to Anil Ambani's
energy company Reliance Natural Resources Ltd. [1]
But Mukesh wants to sell at $4.20 per million Btu, the government-determined
revised price, for gas he gets from the government-owned D6 block of the
Krishna-Godavari basin in the Bay of Bengal.
The price difference is unfair, illegal and will bring whopping profits for
RIL, says Anil, at the cost not just to the interests of millions of investors
and consumers but also to the government.
Anil also argues that there is no "government-set" price for gas supply,
Bloomberg reported on Thursday, citing an exchange of e-mails with the Amabani
brother.
The feuding siblings may have gone too far this time. Their latest spat has
dragged in the Petroleum Ministry, the Supreme Court, the Mumbai High Court,
opposition political leaders and parliament in a fracas that has investors
worrying where this mega corporate feud is heading.
Anil has claimed the dispute affects "15 million shareholders and has global
implications for the energy business".
A senior marketing manager in Mumbai told Asia Times Online how the Ambani
brothers had merely made a laughing stock of themselves. "People [in the
market] are saying the brothers are now fighting over government property like
it is their father's property," he said.
Anil quoted his more controversial father Dhirubhai (1932-2002) often enough in
a remarkable speech at his company's annual general meeting in Mumbai on July
28, perhaps of a kind never heard before in Indian corporate industry.
He made a long and virulent attack on the Petroleum Ministry for intervening in
the quarrel with his brother, who, he said, had refused all overtures for an
out-of-court settlement.
The brothers have been at war since 2005, when Anil sensationally broke away
from the parent company Reliance Industries that was founded by his father.
India seems to be getting tired of their feud. Disgruntled noises from across
the investor and political spectrum are demanding long-term measures to ensure
the economy is not dominated by such family-owned businesses, particularly over
national assets such as oil fields.
The brothers' respective group companies together total over $60 billion in
annual revenues and rank among the world's largest corporate groups. The
growing fear is that such family sagas will scare away foreign investors
looking for good returns, not soap operas.
The stakes are high. Anil's Reliance-Anil Dhirubhai Ambani Group
(R-ADG) reports a shareholder base of 12 million, among the world's largest.
Mukesh's Reliance Industries Ltd Group is India's largest private-sector company
with annual revenues of over $30 billion.
Courts have not succeeded in resolving the dispute. On June 15, the Mumbai High
Court reconfirmed its two earlier verdicts upholding the original pricing
agreement, which is to last for 17 years.
The matter reached the Supreme Court after the Petroleum Ministry intervened in
the case and asked the court to overturn the Mumbai High Court in favor of
Mukesh's RIL. This upset Anil.
Responding to the furor after Anil's AGM speech, the Petroleum Ministry said it
went to court because the gas at stake was a national asset. Opposition
politicians have alleged the real reason is that Minister for Petroleum and
Natural Gas Murli Deora is a Mukesh supporter.
The Ambani gas spat hit parliament on Wednesday, with political leaders raising
the issue amid uproar. Each brother has his own political and media camp, with
the divide reaching to the highest echelons of government and senior-most
editors in India. It's an ugly mess.
The government and top politicians were forced to take notice after the
outraged Anil's AGM address. In his emotional 20-page speech - and sometimes
close to tears, according to a business reporter present at the AGM - Anil
blasted both his former company, RIL, and the Petroleum Ministry, using
unusually strong language that the government and top politicians could not
ignore.
"It is unfortunate that RIL has tried every trick in the book - and apparently
several outside - to back out of its solemn, legal and contractual
obligations," Anil said, and accused the Petroleum Ministry of "unnecessarily
intervening in the Honorable Supreme Court".
The government went into damage control mode. Reports circulated of a possible
revision of the original Petroleum Ministry petition in the Supreme Court
challenging the earlier Mumbai High Court order, back to favoring Anil.
Phew. Drama, controversy, power struggles and shady dealings seem never far
away from the Ambani brand name. For me - part of perhaps the world's most
skeptical breed of humans called a "professional journalist" - the affair
cannot but call to mind the term almost automatically associated with some
companies, such as that other huge Indian group "Tatas", is "trust".
The Tatas may make mistakes like everyone else, but in the past 17 years as a
journalist, I have not heard anyone accuse the Tata Group of corruption,
bribing politicians and journalists and cheating consumers with deliberately
inflated bills. Neither have they been said to create shell investment
companies and tax havens in the Isle of Man, use duplicate shares and insider
trading to manipulate the Bombay Stock Exchange, or fake accounts to pay less
taxes.
For the corporate name "Ambani", "trust" is not the word that instantly springs
to mind.
This dubious, troubled, divisive Ambani legacy reflects fabulous new wealth as
well as the worst of India's economy. The brotherly fallout was inevitable
considering the turbulent legacy of their father Dhirubhai and how much of it
infects them.
In the biography Polyester Prince - The Rise of Dhirubhai Ambani, author
Hamish McDonald says: "Dhirubhai Ambani attracted adulation or distrust. To his
millions of investors, who had seen their share prices multiply, he was a
business messiah. To one writer, he was a 'Frankenstein's Monster' created by
India's experiments with close government control of the economy."
The latest messy spat fits well with the complex, clouded air that hangs over
the entire Ambani empire. For reasons best known to them, the Ambanis have none
of their companies listed in the New York Stock Exchange (now NYSE Euronext)
that has some of the most stringent transparency and corporate governance
norms. Twelve Indian companies, including two Tata companies, are listed on
NYSE, the world's largest bourse - but not India's largest private-sector
group.
The warring brothers are giving India an unwanted 21st-century version of the Mahabharata,
the great Indian epic in which a divided family goes to war over a kingdom.
The other great Indian epic, the Ramayana, celebrates the unbreakable
fraternal love of Lord Ram and his younger brother Laxman. Older brothers are a
respected species in India and Pakistan, where a girl can walk up the road and
address an older male who is a complete stranger as bhaiyya, or "elder
brother".
Likewise even in his bitter AGM speech, the younger Ambani was careful to refer
to Mukesh as "my respected elder brother". But the latest gas spat shows there
isn't much love or respect left to lose among the two Ambanis.
They are a study in contrast. Anil, with personal wealth valued at $42 billion,
is ranked sixth-richest man in the world. Slightly more flamboyant than Big
Bro, he made more pleasant headlines on July 15 after signing a $825 million
deal with Steven Spielberg's DreamWorks Studios to make films for a worldwide
audience.
He was also linked last year in $160 million talks to buy English Premier
League football teams Newcastle United and Everton. A fitness freak, the junior
Ambani can be spotted jogging around in a tracksuit in Mumbai.
The Yemen-born older brother Mukesh, with a net worth of $63.2 billion, was
ranked the world's richest man in 2007, and is now the world's
fourth-wealthiest and the richest in Asia.
He is quieter, seems calmer, sports a figure that advertises that he employs a
good cook, is building a $3 billion home in Mumbai, and owns the Mumbai Indians
cricket team in the $2 billion Indian Premier League. In 2007, he gave his wife
Nita as a birthday gift an Airbus A-319 luxury jet costing $61 million.
The cost to the Ambanis of their gas fracas should become clear in the next few
weeks or months, as the Supreme Court probes the mess.
"Truth shall prevail", said Anil in his stormy AGM speech, but the question is
whether the two brothers are going to like it when the truth, or the Supreme
Court's version of it, does emerge.
Note
1. British Thermal Units is a standard unit of measurement of energy or fuel.
It is measured also as the energy required to heat one (US) pint of water, or
0.43 liters, from room temperature of about 60 degrees Fahrenheit to boiling
point of 212 degrees Fahrenheit.
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