A couple of months back billionaire Anil Ambani declared that that his company Reliance Communications (RCom) and Reliance Jio Infocomm, owned by his elder brother Mukesh, have 'virtually' merged. Whether they will really merge or not, a lot of water has flowed under the bridge since their family split in 2005. Both had fought each other bitterly and built their empires separately. Who did what in these years?
The revenues of Mukesh's Reliance Industries (RIL) has grown by 278 per cent to Rs 2,76,544 crore in 11 years despite the dip in crude and petroleum products' prices. The profit rose by 263 per cent to Rs 27,504 crore - largely unaffected by the huge capital investments.
ALSO READ:Indian telcos gear up for the spectrum auction
Anil Ambani group's (Reliance Group) revenues increased by 270 per cent to Rs 59,685 crore (a comparison of the combined consolidated revenues of the companies in 2004-05 or since each one's listing, with the last financial year numbers) - thanks to the listing of Reliance Communications, creation of Reliance Power and acquisition of Pipavav Defence. The total of the consolidated profits of five companies comes to Rs 4,226 crore in the last financial year. It cannot be directly compared to 2004/05 since there were just two listed companies with him then - Reliance Energy and Reliance Capital - with a combined profit of Rs 626 crore. Their profits improved 169 per cent and 1,176 per cent, respectively, in the 11 years. In FY 2007, RCom posted Rs 2,409 crore profit, but it dipped to Rs 703 crore in the last financial year. Reliance Power registered a profit of Rs 854 crore in FY 2008 improved to Rs 1,362 crore in FY 2016.
Beyond the numbers, the past describes how they strategically built their empires. After the death of India's corporate czar Dhirubhai Ambani in 2002, his two sons launched into a bitter and public battle, leading to a split of the family's business empire in 2005. Their mother, Kokilaben, announced the settlement on June 18 by sending out a statement to the press saying: "With the blessings of Srinathji, I have today amicably resolved the issues between my two sons, Mukesh and Anil, keeping in mind the proud legacy of my husband Dhirubhai Ambani."
Elder brother Mukesh got the flagship oil business, RIL and IPCL, while Anil got the control of Reliance Infocomm (telecom), Reliance Energy (power), Reliance Capital and Reliance Natural Resources (RNRL).
The peace was over all too soon. The legal battle between the Ambanis started in 2006 with RNRL filing a petition against RIL for effective implementation of the demerger scheme. The contentious issue was the supply of natural gas from RIL's KG D6, in Andhra coast, to RNRL for power generation at a price of $2.34 per million British thermal unit (mBtu) for 17 years. In its verdict in 2009, the Bombay High Court upheld the arguments of Anil's RNRL. But the Supreme Court reversed the order next year and Mukesh won the battle.
Two weeks after the apex Court order, the Ambani brothers called a truce and scrapped the non-compete agreement, leading to Mukesh's re-entry into telecom through Reliance Jio Infocom. (It was he who conceptualised and implemented Reliance Infocomm during Dhirubhai's time.) It was peaceful after 2010, when both were pursing businesses separately and their coming together at any venue was celebrated by the media.
Out of the four companies that Anil got, RNRL became a shell company after it lost the court case and it vanished from the public domain. Reliance Infocomm went to the public in 2005 and was rechristened as Reliance Communications (RCom). The next one was big, the Reliance Power initial public offering in 2008. Meanwhile, Anil had won the bids for developing ultra mega power projects in the country, triggering the rise in valuation. During the infrastructure boom, Anil renamed Reliance Energy as Reliance Infrastructure and transferred power generation businesses to Reliance Power. The corporate expansion included Anil's purchase of controlling stake in Pipavav Defence about a year ago. It was recently renamed as Reliance Defence and Engineering.
Reliance Petroleum's IPO in 2006 (which later delisted and merged with the parent) was the one big initial move from Mukesh. He created the organised retail business and launched it in the same year amidst protests from kiranas and political parties. In parallel to expanding the retail business, he launched one of the huge investment programmes of around Rs 60,000 crore for two big projects - the second refinery at Jamnagar and development of KG D6 gas field. Both completed by 2009. Later KG D6 production fell, but British oil giant BP Plc picked 30 per cent stake in RIL's assets at around $7.2 billion.
After that his sole focus was launching the 4G business, though he also invested heavily to expand the traditional petrochemical business. RIL invested over Rs 1 lakh crore to build Jio. The service launch of Jio with three months of free-voice and free-data offer has been crazily picked up by the consumers, eventually disrupting the telecom industry. Full-fledged commercial operation of Jio will begin from next year.
On the telecom front, Anil's RCom was struggling because of its debts and lower margins. It tried to sell off its tower business to pay off part of the debts, but failed to fructify. The debt stands now at Rs 42,364 crore. Another step taken by RCom was the merger with Aircel for creating the country's fourth largest telecom operator. Russia's Sistema already holds 10 per cent stake in RCom. Reliance Capital was the best performer in Anil's stable (see above chart). Reliance Infrastructure has also performed on par with market.
RIL's market capitalisation stands at Rs 3,53,500 crore on September 29, 2016, compared to the combined market value of five group companies of Anil at Rs 57,200 crore.
The third generation of Ambanis has already joined both the groups. The next level of growth is in their hands.