The two faces of Dhirubhai Ambani


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HE achieved what almost everybody would consider impossible. In a life spanning 69 years, he built from scratch India’s largest privately controlled corporate empire. Dhirajlal Hirachand – better known as Dhirubhai – Ambani would often say that success was his biggest enemy. He was a man who aroused extreme responses in others. Either you loved him or you hated him. There was just no way you could have been indifferent to this amazing entrepreneur who thought big, acted tough, knew how to bend rules or have rules bent for him. He was a visionary as well as a manipulator, a man who communicated with the rich and the poor with equal felicity, who was generous beyond the call of duty with those whom he liked and utterly ruthless with his rivals – a man of many parts, of irreconcilable contrasts and paradoxes galore.

Dhirubhai Ambani expired on Saturday July 6, roughly ten minutes before midnight, at Mumbai’s Breach Candy Hospital where he had been admitted after he suffered a vascular stroke on the evening of June 24. This was his second stroke – the first had occurred more than sixteen years earlier, in February 1986, leaving the right side of his body paralysed. At his cremation, the well-heeled rubbed shoulders with the ordinary. No Indian businessman ever attracted the kind of crowd that Dhirubhai did on his last journey. After his cremation on the evening of Sunday July 7, his elder son Mukesh reminded those gathered on the occasion that in 1957, when Dhirubhai arrived in Mumbai from Aden in Yemen, he had only Rs 500 in his pocket.



He was not exactly a pauper since Rs 500 meant much more than what the amount means in this day and age. Nevertheless, one could not ask for a more spectacular ‘rags-to-riches’ tale. The second son of a poorly paid school-teacher from Chorwad village in Gujarat, he stopped studying after the tenth standard and decided to join his elder brother, Ramniklal, who was working in Aden at that time. (Not surprisingly, Dhirubhai ensured that his two sons went to premier educational institutions in the US – Mukesh was educated at Stanford University and Anil at the Wharton School of Business.)

The first job Dhirubhai held in Aden was that of an attendant in a gas station. Half a century later, he would become chairman of a company that owned the largest oil refinery in India and the fifth largest refinery in the world, that is, Reliance Petroleum Limited which owns the refinery at Jamnagar that has an annual capacity to refine up to 27 million tonnes of crude oil.

When he died, the Reliance group of companies that Dhirubhai led had a gross annual turnover in the region of Rs 75,000 crore or close to US $ 15 billion. The group’s interests include the manufacture of synthetic fibres, textiles and petrochemical products, oil and gas exploration, petroleum refining, besides telecommunications and financial services. In 1976-77, the Reliance group had an annual turnover of Rs 70 crore. Fifteen years later, this figure had jumped to Rs 3,000 crore. By the turn of the century, this amount had skyrocketed to Rs 60,000 crore. In a period of 25 years, the value of the Reliance group’s assets had jumped from Rs 33 crore to Rs 30,000 crore.

The textile tycoon’s meteoric rise was not without its fair share of controversy. In India and in most countries of the world, there exists a close nexus between business and politics. In the days of the licence control raj Dhirubhai, more than many of his fellow industrialists, understood and appreciated the importance of ‘managing the environment’, a euphemism for keeping politicians and bureaucrats happy. He made no secret of the fact that he did not have an ego when it came to paying obeisance before government officials – be they of the rank of secretary to the Government of India or a lowly peon.



Long before Dhirubhai entered the scene, Indian politicians were known to curry favour with businessmen – licences and permits would be farmed out in return for handsome donations during election campaigns. The crucial difference in the business-politics nexus lay in the fact that by the time the Reliance group’s fortunes were on the rise, the Indian economy had become much more competitive. Hence, it was insufficient for those in power to merely promote the interests of a particular business group; competitors had to simultaneously be put down. This was precisely what happened to the rivals of the Ambanis.

Who remembers Swan Mills? Or Kapal Mehra of Orkay? Even Nusli Wadia of Bombay Dyeing is a pale shadow of what he would certainly have liked to be. The undivided Goenka family that used to control the Indian Express chain of newspapers – which carried on a campaign against the Reliance group in 1986-87 – is currently divided into three factions. Whereas the multi-edition newspaper has not entirely lost its feisty character, it is yet to fulfil its late founder Ramnath Goenka’s cherished dream of becoming a market leader in at least one of its many publishing centres.



A popular joke starts with a question: Which is the most powerful political party in India? Answer: the Reliance Party of India. Others divide the country’s politicians into two groups: a very large ‘R-positive’ group and a very small ‘R-negative’ section. It is hardly a secret that Dhirubhai’s support base would easily cut across political lines. Very few politicians have had the gumption to oppose the Ambanis, just as the overwhelming majority of journalists in the country preferred not to be critical of the Reliance group. The Indian media, most of the time, has chosen to lap up whatever has been doled out by the group’s public relations executives. The bureaucracy too has, by and large, favoured the Ambanis, not merely on account of the fact that many babus have got accustomed to receiving expensive hampers on the occasion of diwali.

While Dhirubhai did not have too many scruples when it came to currying favour with politicians and bureaucrats, what cannot be denied is the fact that perhaps no businessman in India attracted the kind of adulation he did. He was more than just a legend in his lifetime. He successfully convinced close to four million citizens, most of them belonging to the middle class, to invest their hard-earned savings in Reliance group companies. He was fond of describing Reliance shareholders as ‘family members’ and the group’s annual general meetings acquired the atmosphere of large melas attended by hordes.

What cannot also be refuted is the fact that the Reliance group believed in rewarding its shareholders handsomely. Much of the credit for the spread of the so-called ‘equity cult’ in India in recent years should rightfully go to Dhirubhai, even if the Reliance group was often accused of manipulating share prices. Two group companies that once carried the cumbersome names of Reliance Poly-Ethylene and Reliance Poly-Propylene – popularly called Ilu and Pilu – went to the extent of blandly stating in the fine print of their public issue prospectus documents that the value of the shares of the companies had been increased though thin and circular trading. On another occasion in January 1998, a functionary of Reliance Petroleum replied to a show-cause notice served on the company by agreeing to shell out a sum of Rs 25 crore to ‘buy peace’ with the income tax authorities.



When, after having spent eight years in Aden, Dhirubhai returned to Mumbai, his lifestyle was akin to that of any ordinary lower middle class Indian. In 1958, the year he started his first small trading venture, his family used to reside in a one room apartment at Jaihind Estate in Bhuleshwar. After trading in a range of products, primarily spices and fabrics, for eight years, Dhirubhai achieved the first of the many goals he had set for himself when he became the owner of a small spinning mill at Naroda, near Ahmedabad. He did not look back.

He decided that unlike most Indian businessmen who borrowed heavily from financial institutions to nurture their entrepreneurial ambitions, he would instead raise money from the public at large to fund his industrial ventures. In 1977, Reliance Industries went public and raised equity capital from tens of thousands of investors, many of them located in small towns. From then onwards, Dhirubhai started extensively promoting his company’s textile brand name, Vimal. The story goes that on one particular day, the Reliance group chairman inaugurated the retail outlets of as many as 100 franchises.



He had by then already succeeded in cultivating politicians. Indira Gandhi returned to power in the 1980 general elections and Dhirubhai shared a platform with the then prime minister of India at a victory rally. He had also become very close to the then finance minister Pranab Mukherjee, not to mention the prime minister’s principal aide R.K. Dhawan. He realised that it was crucial to be friendly with politicians in power, especially at a time when the group had embarked on an ambitious programme to build an industrial complex at Patalganga to manufacture synthetic fibres and intermediates for polyester production.

In 1982, Dhirubhai created waves in the stock markets when he took on a Kolkata-based cartel of bear operators that had sought to hammer down the share price of Reliance Industries. The cartel badly underestimated the Ambani ability to fight back. Not only did Dhirubhai manage to ensure the purchase of close to a million shares that the bear cartel offloaded, he demand physical delivery of shares. The bear cartel was rattled. In the process, the bourses were thrown into a state of turmoil and the Bombay Stock Exchange had to shut down for a couple of days before the crisis was resolved.

The mid-eighties were a period during which the Reliance group got locked in a bitter turf battle with Bombay Dyeing headed by Nusli Wadia. The two corporate groups were producing competing products – Reliance was manufacturing purified terephthalic acid (PTA) and Bombay Dyeing, di-methyl terephthalate (DMT). Wadia lost the battle and reportedly became the source of information for many of the articles against the Ambanis that subsequently appeared in The Indian Express. In 1985, the Mumbai police accused a general manager in a Reliance group company of conspiring to kill Wadia, a charge that was never established in a court of law. Many years later, a newspaper owned by the Ambanis would accuse Wadia of illegally holding two passports and played up the fact that he was Mohammed Ali Jinnah’s grandson.

1986 was a crucial year for Dhirubhai. He suffered a stroke in February that year. A few months later, the Express began publishing a series of articles attacking the Reliance group as well as the Indira Gandhi regime for favouring the Ambanis. These articles were coauthored by Arun Shourie who, ironically, as Union Minister for Disinvestment in the Atal Behari Vajpayee government, presided over the sale of 26 per cent of the equity capital of the former public sector company, Indian Petrochemicals Corporation Limited (IPCL), to the Reliance group in May this year. By gaining managerial control over IPCL, the Reliance group would now be able to dominate the Indian market for a wide variety of petrochemical products.



Shourie’s coauthor for the famous series of anti-Reliance articles was Chennai-based chartered accountant S. Gurumurthy who happens to be a leading light of the Swadeshi Jagaran Manch, an outfit that espouses the cause of economic nationalism and is closely affiliated to the Rashtriya Swayamsevak Sangh (RSS), the ideological parent of the ruling Bharatiya Janata Party (BJP). The Express articles written by Shourie and Gurumurthy meticulously detailed a host of ways in which the government of the day had gone out of its way to assist the Ambanis. One article was on the subject of how the Reliance group imported ‘spare parts’, ‘components’ and ‘balancing equipment’ of textile manufacturing machinery to nearly double its production capacities. The article provocatively claimed the Ambanis had ‘smuggled’ in a plant.



Another story detailed how companies registered in the tax haven, Isle of Man, with ridiculous names like Crocodile Investments, Iota Investments and Fiasco Investments had purchased Reliance shares at one-fifth their market prices. Curiously, most of these firms were controlled by a clutch of nonresident Indians who had the same surname, Shah. Though Pranab Mukherjee had to change a reply he gave in Parliament on the investments made by these firms, an inquiry conducted by the Reserve Bank of India could not find any evidence of wrongdoing. Yet another article detailed how the group had been the beneficiary of a ‘loan mela’ – a number of banks had loaned funds to more than 50 firms that had all purchased debentures issued by Reliance Industries.

Vishwanath Pratap Singh was one of the few politicians who took on the Ambanis. In May 1985, as finance minister in Rajiv Gandhi’s government, he suddenly shifted imports of PTA from the OGL (Open General Licence) category. At that juncture, Reliance needed to import this product to manufacture polyester filament yarn. It was found that the group had ‘persuaded’ a number of banks to open letters of credit that would allow it to import almost one full year’s requirement of PTA on the eve of the issuance of the government notification changing the category under which PTA could be imported. It was hardly a coincidence that soon after V. P. Singh fell out with Rajiv Gandhi, various tax agencies of the Indian government raided the premises of the Express group.

Things got difficult for the Ambanis after V.P. Singh became prime minister in December 1989. In 1990, government-owned financial institutions like the Life Insurance Corporation and the General Insurance Corporation stonewalled attempts by the Reliance group to acquire managerial control over Larsen and Toubro, one of India’s largest construction and engineering companies. Sensing defeat, the Ambanis resigned from the board of the company after incurring large losses. Dhirubhai, who had become L&T chairman in April 1989, had to quit his post to make way for D. N. Ghosh, former chairman of the State Bank of India.



Once again, in an ironical twist of fate, more than eleven years later, the Reliance group suddenly sold its stake in L&T to Grasim Industries headed by Kumaramangalam Birla. This transaction too attracted adverse attention. Questions were raised about how the Reliance group had increased its stake in L&T a short while before the sale to Grasim had taken place. The watchdog of the stock markets, the Securities and Exchange Board of India (SEBI) instituted an inquiry into the transactions following allegations of price manipulation and insider trading. Reliance had to later cough up a token fine imposed by SEBI.

These are hardly the only controversies involving the Reliance group. Two senior executives of the Reliance group, including one who was known to be close to Dhirubhai, have been accused of violating the Official Secrets Act after a Cabinet note was found in their office during a police raid. One of these executives reportedly had links with a mafia don. Earlier, there had been a major uproar in the stock exchanges over alleged cases of ‘switching’ of shares and the issue of duplicate shares. Some of these transactions pertained to Dhirubhai’s personal physiotherapist.



More recently, last year, Raashid Alvi, a Member of Parliament belonging to the Bahujan Samaj Party, levelled a large number of allegations against the Reliance group. He distributed a voluminous bunch of photocopied documents to journalists that included the letter in which a Reliance group company had sought to ‘buy peace’ with the income tax department. The MP accused the Reliance group companies of manipulating their balance sheets and annual statements of account.

A week after Dhirubhai’s death, the Department of Company Affairs (DCA) confirmed that there was basis to some of the allegations raised by Alvi and that there were certain discrepancies in the balance sheet issued by Reliance Petroleum seven years ago. A group spokesperson sought to dismiss the discrepancy as a minor printing error that had been inadvertently committed. The DCA subsequently confirmed that different Reliance group companies had transferred interest income to one another in a questionable manner.

The plethora of scandals and controversies surrounding the Reliance group left Dhirubhai’s supporters completely unmoved. His supporters – and there was no dearth of them – would argue that there was no businessman in India whose track record was lily-white. Had the textile tycoon himself not acknowledged once to Time magazine that he was no Mother Teresa, they would ask. Even Hamish McDonald’s unflattering portrayal of Dhirubhai in his book The Polyester Prince – published in Australia by Allen and Unwin and not available in India – acknowledges his remarkable entrepreneurial talent that made him one of the few Indians on the Forbes list of the world’s wealthy and placed Reliance among the leading 500 companies in the developing world compiled by Fortune magazine.



Senior journalist T.V.R. Shenoy, in a tribute to Dhirubhai entitled ‘A Superman named Ambani’ posted on the website, points out that the Reliance group accounts for three per cent of India’s gross domestic product (GDP), five per cent of the country’s exports, 10 per cent of the Indian government’s indirect tax revenues (excise and customs duties), 15 per cent of the weight of the sensitive index of the Bombay Stock Exchange and 30 per cent of the total profits of all private companies in the country put together. Another journalist, Manas Chakravarty, concluded his not-so-adulatory article in the Business Standard with the following sentence: ‘…it was (Dhirubhai’s) common touch combined with his uncommon vision that was the secret of his success.’

Dhirubhai’s supporters like to recall instances of his ‘common touch’ and his ability to interact with individuals from different walks of life. In 1983, he had hosted a lunch for 12,000 of his company’s workers on the occasion of the marriage of his younger daughter Dipti. The departed Reliance group patriarch would often wonder aloud that if he could achieve what he did in a lifetime, why could a thousand Dhirubhais not flourish. He was sure that there were at least one thousand individuals like him in the country who would dare to dream big. And if all these entrepreneurs could achieve their ambitions, India would become an economic superpower one day, he would remark.

Dhirubhai’s managerial skills were undoubtedly exceptional and he would repose his faith in professionals, many of whom had earlier worked in much-maligned public sector organisations. Whether it was the building of the petroleum refinery at Jamnagar in three years at a capital cost that was 30 per cent lower than comparable projects, or the restarting of the Patalganga plant in one month’s time after sudden floods had occurred in July 1989, the Reliance management team displayed their competence on many occasions.



The Ambanis often scored because they stuck to their knitting or focused sharply on their areas of ‘core competence’. The group flopped when they entered new areas, be these the print medium or financial services. The group’s foray into power generation too has so far not yielded significant results. Dhirubhai’s sons, Mukesh (45) and Anil (43) are keen on effectively implementing their plans of diversifying into the ‘new economy’, into new areas like telecommunications, life sciences and insurance. The Reliance group intends proving telecom services in many parts of the country and is currently building an optic fibre based broadband internet network connecting 115 cities. Only time will tell whether Mukesh and Anil prove to be worthy successors to their father. But one thing seems certain: they will try their level best not to be as controversial as Dhirubhai was.