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Ambani war: The mother who brought the brothers together, again
Five years earlier, armed with a four-page agreement and a 300-word press statement, she showed she'd brokered peace between her warring sons. Five years later, Dhirubhai's widow, Kokilaben Ambani, seems to have done it again.
Nobody will officially confirm or deny it, but those who work closely with either Mukesh or Anil Ambani or journalists working on the Reliance beat would tell you they saw it coming!
And, ever since Mukesh Ambani came to the Prime Minister's Office last week - sources say - to seek a review of the government's gas utilisation policy, it was clear a ceasefire was coming, sooner than later.
PMO sources say RIL made a pitch that the government should allow gas supply to even new power plants, which, by government policy, were to be denied allocation. Only existing power, fertiliser and industrial users of natural gas were to get preference.
And so, three weeks after the Supreme Court judgement, the brothers Ambani have formally decided to "create an overall environment of harmony, co-operation and collaboration" between the two groups.
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Ambani war: The mother who brought the brothers together, again
The influence of the diminutive 75-year old matriarch of the family is tough to spot. Ask any professional manager from either side who worked closely with either brother on most issues, and all they said was, "We only got to know about this today. It was negotiated between the brothers and their mother directly."
Yes, there was pressure from the family and friends, from peers and from the government. In the end, mother power won.
"The Supreme Court judgement was the biggest trigger, too much has happened for the last few years, a lot of energy wasted. It was clear this could go on and on as the two sides grow bigger. Today there is one clause of the MoU which is disputed, tomorrow there will be another. There had to be a closure," said a close associate of the family.
To many, this is the best compromise. Anil Ambani needs gas. He gets that, his projects, shareholders, stay protected.
"Ask any Reliance old-timer what shareholders mean to the group. The last few days have seen a significant erosion in shareholder wealth for Anil Ambani group companies. The ceasefire will obviously soothe investor sentiments, especially for the ADAG pack," says an analyst from a foreign brokerage house.
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Ambani war: The mother who brought the brothers together, again
There was another financial aspect. If Mukesh had reneged on the arrangement, then by the family understanding, he would have had to compensate Anil for the loss of value. Not just the 28 mscmd of gas for 17 years; by the agreement, ADAG also had 40 per cent right over any new discovery by RIL.
"The sum would potentially have run into billions. And, it was bound to open a new disputed flank. All that will be history now," says a group official.
Sea Wind, the 14-storied official Ambani residence, has seen enough storms since Dhirubhai passed away in 2002 The Sunday ceasefire will, hopefully, clear the dark clouds once and for all, is the hope.
The ceasefire...
It took a gentle nudge from the Supreme Court earlier this month to signal an end to the most publicised corporate war in India. Five years after going public with "ownership issues" and more in India's richest family, the Ambani brothers took a big step towards reconciliation of their feud that had made headlines and dragged in several government functionaries.
In separate statements, Mukesh Ambani-led Reliance Industries and the Anil Ambani-led Reliance ADA Group announced the two groups had cancelled all non-compete agreements - a step they hoped would lead to cooperation between them. The non-compete pacts were signed in 2006.
As a goodwill gesture, RIL said it would not enter the gas-based power generation arena till 2022, for which the two sides would enter a separate agreement.
Both groups also said they hoped to reach a conclusion soon on the gas supply agreement between RIL and Reliance Natural Resources, at the heart of their dispute.
The earlier agreement, taken to court, between the two brothers concerned the price, quantity and tenure of gas supplies by RIL. It called for 28 million units of gas a day to be sold to RNRL at $2.34 per unit for 17 years.
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Ambani war: The mother who brought the brothers together, again
The announcement comes weeks after the Supreme Court ruled in Mukesh Ambani's favour in the dispute over gas pricing and asked the two brothers to renegotiate their gas agreement within the frame work of government policies and prices.
"RIL and Reliance ADA Group are hopeful and confident that all these steps will create an overall environment of harmony, co-operation and collaboration between the two groups, thereby further enhancing overall value for shareholders of both groups," both the groups said.
Sources familiar with the development said the agreement, approved by the boards of both the companies, came after long discussions between the two brothers separately, but spokespersons of either did not confirm this.
This means RIL will now be also able to enter into growth sectors such as telecommunications and financial services, among others. Sources close to the development explained the agreement had been signed to allow younger brother Anil Ambani's telecommunication business to grow.
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Ambani war: The mother who brought the brothers together, again
"The agreement has been signed to help the younger brother's business to grow. Also, RIL thinks there are growth sectors like finance, which RIL might want to get into in future," said a source.
According to the settlement reached between the two brothers in 2006, Mukesh got the jewel, Reliance Industries, which has interests in oil and gas exploration, petrochemicals, infrastructure and textiles. Anil got the telecom, power and financial services businesses.
The non-compete pact was one reason why Reliance Communications, ADAG company, had to call off merger talks with South Africa's MTN group, after RIL threatened to block the sale if it wasn't given the first option to buy shares in RCom.
Meanwhile, S P Tulsian, an independent investment consultant, said this was more positive for RIL than R-ADAG, because this gives the former an opportunity to look into expansion in other areas, which they were not allowed to do earlier.
"You can't rule out the possibility of Reliance entering in sectors such as telecom," he said, adding Reliance shares were expected to open up on Monday.
| BUSINESS INTERESTS | |
| ANIL AMBANI | MUKESH AMBANI |
| * Financial services | * Oil, gas, petrochemicals |
| * Telecom | * Textile |
| * Infrastructure | * Retail |
| * Media & DTH | * SEZs, ports & gas terminals |
| * Power | * Life sciences & biotechnology |
| * Healthcare | * IPL |
| *Combined mkt cap Rs 1,08,792 cr (*as on May 21, 2010) | *Combined mkt cap Rs 3,26,717 cr |
| POSSIBLE OVERLAPS IN FUTURE | |
| * Telecom | |
| * Financial services | |
| * Power (non-gas) | |
| * Infrastructure | |
| * Media & Entertainment | |
