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Ambani: A tycoon for all
seasons
By Raju Bist
MUMBAI
- Even a week after he slipped into coma following a
brain stroke, the number of visitors inquiring about
Dhirubhai Ambani's health had not diminished. Indian
politicians, film stars, industrialists … they had all
been to the Breach Candy hospital in south Mumbai.
 But what surprised security guards
at the hospital was the large number of concerned
commoners walking in to ask about their favorite Indian
businessman, 69, before he passed away on Saturday, July
6.
And why not? Every fourth Indian equity
investor holds shares in Reliance, the business group
the former Shell petrol pump attendant floated in 1977.
A lowly employee of the oil giant in Aden, Yemen, Ambani
dreamt of owning his own oil company one day. His is an
amazing rags-to-riches story, the stuff of which legends
are made.
In 1958, at the age of 25, he had come
back to Mumbai and invested 15,000 rupees (US$307) at
today's rate) to start a firm exporting spices and
trading in textiles and textile intermediates. At the
outset, Ambani worked with just a chair, table and a
care-of telephone number, earning a mere 4,500 rupees a
month. The business had later metamorphosed into
manufacturing and services.
Today, Reliance is
India's largest private sector company, reporting sales
of US$13.2 billion and with interests in textiles,
petrochemicals, oil and gas, petroleum, financial
services, insurance, telecom, media and power.
Two years ago, it set up a 27 million tonnes per
annum (tpa) refinery at Jamnagar in the west Indian
state of Gujarat. It was the largest grassroots refinery
in the world. Ambani had finally realized his oil
company dream.
The seed money for some of these
initial forays came from an unlikely source. Unlike
other Indian businessmen who funded their operations and
expansions from banks and private lenders, Ambani was
the first to tap the small shareholder in a big away.
Reliance set off an equity cult, the like of which has
rarely been seen anywhere in the world.
The
heavily-built entrepreneur always remained the favorite
of stock market investors. Some of them have married,
bought their first car or invested in office space by
selling off part of their Reliance holdings. In 1977,
the year Reliance went public, it had 58,000
shareholders. Today, the number has swelled up to 3.5
million. Long time investors have been rewarded
regularly with dividends and bonuses and have seen their
investments grow at a whopping 43 percent, compounded. A
shareholder's 1,000 rupees invested in Reliance in 1977
is worth 165,000 rupees today.
In the stock
markets, Ambani cut a messiah-like figure. For the
ordinary shareholder, he became a kind of god. The name
Reliance spread to smaller towns as Ambani focused
heavily on smaller exchanges. He gave investors tips on
tracking shares and encouraged the habit of reading
financial dailies. Says Dina Mehta, a former president
of the Bombay Stock Exchange (BSE), "For the small
shareholder, investing in Reliance was like converting
their hard-earned money to gold."
Winning the
trust of small investors and having an endless supply of
cheap funds was thus a winning formula for Ambani.
Another reason he succeeded in a big way was that he
always thought big. Remembers an longtime associate at
Mumbai's Mulji Hetha Market, India's oldest and largest
textile market, "We would find it scary to sell 100
tonnes of polyster. But he would pick up 10,000 tonnes
of the material and actually succeed in selling them to
textile mills, convincing them grandly of the quality of
his product."
Similarly, when the Birla Group,
one of India's oldest business houses, made its foray
into petrochemicals, it set up a 9 million tpa refinery
in Karnataka state in south India. Ambani's, of course,
was thrice that capacity.
For someone who did
not complete schooling, the management structure in the
85,000-employee Reliance is the envy of his peers.
Managers are given a free hand - but also shown the door
if they fail to perform. Most of them manage to stay on
and then show an unfailing loyalty to tycoon. Says Raghu
Mody, a middle-rung Indian industrialist. "Try luring
away Reliance managers even with an offer of double
their salary. They will refuse; their commitment to
Ambani is total."
Son of a school teacher,
Ambani once said, "I have trusted people and they have
put their trust in me. I have encouraged youth, and they
have never let me down. I have asked my people to take
initiative and to take risks. It has paid me rich
dividends. I insist on excellence. This helps us to be
leaders. Reliance is built on some of these principles."
His people skills were legendary. A former
secretary reveals: "He was very helpful. He followed an
'open-door' policy. Employees could walk into his cabin
and discuss their problems with him." The chairman had a
special way of dealing with different groups of people,
be they employees, shareholders, journalists or
government officials.
Ambani's competitors
allege that he bought off officials and had legislation
re-written to suit him. They recall his earlier days and
how he picked up the art of profiteering from the
then-Byzantine system of controls of Indian officialdom.
He exported spices, often at a loss, and used
replenishment licenses to import rayon. Later, when
rayon started to be manufactured in India, he exported
rayon, again at a loss, and imported nylon. Ambani was
always a step ahead of the competitors. With the
imported items being heavily in demand, his profit
margins were rarely under 300 percent.
But for
every competitor who dismisses the Ambani success to
bending rules, there are hundreds of villagers in
Kokaswada who feel he is a godsend. The small, dusty
village in Gujarat is where Ambani was born and is the
place he remembered even after he had been declared
'Businessman of the Century' by India's Business Barons
magazine. As he lay at Breach Candy, the villagers were
praying for the man who gave them a chance to get better
education, health and drinking water.
Ambani did
not forget - either friend or foe.
After the
completion of his education he left Kokaswada for
Chorwad where he lived in rented accommodation. He
wanted to go to Aden in search of a job where his elder
brother was employed. But he had no money to pay for his
ticket and his then neighbor, Surabapa Barda, helped him
reach his destination.
Ambani remembered Barda’s
kindness even a decade later and helped Vimal, the son
of his daughter Ujamben, get a job at Reliance's
Ahmedabad factory. Ambani has also helped Barda’s son
Rajabhai by continuing to employ him past his retirement
age.
A tourist lodge operator from Uttaranchal
in north India also remembers how he decided to drop in
at the Reliance headquarters while on a visit to Mumbai
last year. He had not seen Ambani, who was once a
regular client, for about two decades and was not sure
if the business tycoon would place him. Ambani not only
remembered his old associate, he hugged him and invited
him for a leisurely breakfast the next morning at Sea
Wind, his multi-storeyed skyscraper of a residence in
south Mumbai.
On the other hand, adversaries rue
the day they crossed swords with the perennially
smiling, seemingly rustic businessman. They include
Nusli Wadia, chairman of the 100-year-old Bombay Dyeing
textile group; Arun Shourie, now the Indian Minister of
Disinvestment and the former editor who wrote scathing
reports about Ambani's unusual business methods; the
Mafatlals, whose plans for expanding their
petrochemicals complex on the outskirts of Mumbai were
allegedly stymied by Ambani's powerful "connections" and
Kapil Mehra of Orkays, another textiles giant, who had
to face the ignominy of being locked up behind bars for
a few days.
Ambani, however, could not win all
politicians over to his side and a former prime
minister, V P Singh, had gone on a personal crusade to
finish off India's most controversial businessman. There
were probes by the economic offenses wing of Mumbai's
crime branch, the Directorate-General of Revenue
Intelligence, the Enforcement Directorate and the Income
Tax Department. But the first family of India Inc
emerged unscathed.
If some stock brokers helped
him make the Reliance scrip the darling of investors, he
destroyed those that did not. On April 30, 1982, the
bears attacked, short selling the Reliance scrip and
sending it plummeting from 131 rupees to 121 rupees as
more than 300,000 shares hit the market. But something
the bears never dreamt of happened. Challenging them,
Ambani’s brokers bought everything that was sold. Ambani
then demanded delivery of the shares. The panicky bear
cartel was forced to buy Reliance shares from all
possible avenues. Chaos ensued and the Bombay Stock
Exchange had to be closed for three days.
The
Ambani reach extends much beyond the stock markets, as
Hamish McDonald, the former New Delhi bureau chief of
the Far Eastern Economic Review and author of the
unauthorized Ambani biography, The Polyester
Prince, discovered to his dismay.
The book,
brought out by an Australian publishing house, Allen
& Unwin, is not kind to the Ambanis. It tells
frankly what obliging journalists have hidden all along
- the sharp methods Ambani used to become one of the
most powerful men in India; his wars with competitors
and inquisitive media barons; controversies over export
manipulation and licensed capacities; his capturing of
political and bureaucratic power.
Even though
the book was published in 1998, it is still not
available in Indian bookshops. That's because the
Ambanis have threatened legal action for anything they
perceive as defamatory in the book. And when the Ambanis
say something, they really mean it.
Critics like
McDonald say that Ambani was a creation of the
manipulations of the license-permit-quota raj. But his
supporters point out that the Reliance Group has grown
much faster in the post-1991-liberalization era.
Vir Sanghvi, editor of the influential Hindustan
Times daily newspaper and a long time Ambani-watcher,
has this to offer,"The answer, I suspect, is that
whatever the rules of the game, Ambani will just play it
so much better than the rest. If the name of the game
was manipulating rules and politicians he was the
champion. Now that the game involves globalization and
the free market, he is still the best player in the
country."
The Reliance Group's leadership
position in the Indian economy is reflected in its
all-round contribution: 3 percent of India's GDP; 5
percent of India's total exports; 9 percent of the
government's indirect tax revenues; 2.3 percent of the
gross capital formation in the country in the past five
years. The group reported net profits of $950 million,
has total assets of $11.8 billion and a market
capitalization of around $12.7 billion. It is the only
Indian private sector company to make it to the Fortune
500 rankings.
Now that he is no more, the media
and business circles are agog with only one question:
After Ambani, what?
To the outside world, Ambani
was Reliance and Reliance was Ambani. But after
surviving his first stroke (February 9, 1986), which
left his right hand paralyzed, and a paralytic attack
two years ago, Ambani had slowly moved away from the
hands-on management of the group. Of late, he had been
spending only two hours a day at his office in the south
Mumbai business district of Nariman Point.
The
day-to-day running of the show had been left to his sons
Anil, a graduate of Wharton, and Mukesh, an MBA from
Standford. Anil handles marketing, corporate
communications, investments and the financial markets.
Mukesh is the behind-the-scenes man, taking care to see
that projects are executed on time. The brothers in turn
delegate to a talented and devoted band of managers.
Analysts say that the group has grown quite
strong over the years and has enough systems in place
not to collapse overnight after its founder's demise.
The organization has been fine-tuned to aptly react to
any exigency or opportunity.
The thumb-rule at
Reliance: Do your work with excellence. The Reliance
motto: Just Do It.
Ambani had got it right much
before Nike did it. For the shoe giant, it was only an
advertising slogan. At India's largest enterprise,
Ambani had perfected it into a habit.
(©2002
Asia Times Online Co, Ltd. All rights reserved. Please
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