Vol. 12, No. 2,856W - The American Reporter - March 18, 2006


Reporting: India
BILLIONAIRE WHO SOLD STOCK TO INDIA'S MILLIONS DIES AT 69

by Aman Singh
American Reporter India Correspondent
New Delhi, India

NEW DELHI, July 7, 2002 -- Dhirajlal Hirachand Ambani, 69, the chairman of giant Reliance Group and India's best-known billionaire, died today at his home in Bombay after suffering a stroke on June 24. Dhirubha, as he was known, earned an annual salary of Rs 8.85 crore (U.S.$4.42 million) but made millions of middle-class shareholders wealthy after he became the first to raise capital from street-level sales of stock.

His sons, Mukesh Ambani, vice chairman and managing director, and Anil Ambani, also a Reliance managing director, performed the last rites.

Ambani had suffered a cerebral hemorrhage on June 24 and a heart attack on June 25, and was on life support until 11.50 p.m., when he died with members of his immediate family at his side.

Earlier in the day, the body was kept at the basement of his Bombay residence, Sea Wind, to enable friends, admirers, shareholders, politicians and industry leaders to pay their last respects. There was a steady stream of visitors, and among the thousands of well-wishers who turned out was a virtual Who's Who of policy- makers and corporate czars.

The Minister of State in the Prime Minister's Office, Vijay Goel, placed a wreath on the body of the deceased industrialist on behalf of the Prime Minister, Atal Behari Vajpayee. The Deputy Prime Minister, L.K. Advani, flew to Bombay, cutting short a tour of Gujarat. Ambani, he said, was the embodiment of initiative, enterprise and determination.

"He was one of the greatest achievers in the country and would remain an inspiration for others," Advani, recently named as successor to Vajpayee, said.

Among the stream of dignitaries were many from political circles film stars. The governor of Maharashtra, P.C. Alexander, said, "Mr. Ambani was a star which rose on the horizon of Indian industry three decades ago and remained on top till the end by virtue of his ability to dream big and translate it into reality."

Ambani, the founder of an over Rs. 65,000 crore (U.S.$32.5 billion) empire, was always known by his first name, an indicator of the man's down-to-earth personality. Everyone has a favorite story about Dhirubhai and his grassroots approach to life and living.

He was known for his informal ways which included sitting with his legs up on sofas and inviting his guests to do the same. A colleague who was summoned to Bombay to visit him for a day traveled around the city in Dhirubhai's personal six-door limousine as compensation for not being received at the airport by a company car.

People who have never met him, however, tell the best stories about him. These include ordinary middle class investors who bought Reliance Textiles shares for Rs. 10 (U.S.$0.25) each in 1977 and reaped a bonanza. There is no doubt that Dhirubhai Ambani single-handedly created an investors' revolution in this country.

Ambani literally changed the rules of the game in the industry in an era when the private sector was hampered by the Licence regime, even if he had attracted criticism that he did not always play fair. However, Ambani's huge success dwarfed the controversies that surrounded him. Since the beginning of his tryst with industries, he was known for his defiant spirit. As a recent college graduate, he started his career as a worker in a Shell service station in the Yemeni capital of Aden, but returned to India to build an empire that now boasts of a net worth of over Rs 300 billion with a net profit of over Rs 2,800 crore.

Ambani is credited with shaping India's equity culture; attracting millions of retail investors in a market until then dominated by financial institutions. More than the fact that he built India's largest private sector company from scratch, Ambani will be remembered for revolutionising capital markets. From nothing, he generated billions of rupees in wealth for those who put their trust in his companies.

His belief in mobilizing money from the public goes back to a time when the term "going public" was unfamiliar to most, as was the corporate world in general. Stock ownership was considered a novelty and Ambani, its leading light, made the Indian investment industry what it is today.

Ambani's genius lay in the innovations he made in a territory where established companies had a vise-like grip over the small slice of industrial equity owned by the private sector, and demonstrated that a rank outsider could force his way in and change the rules of the game.

Ambani's Reliance group is truly a global enterprise and is the largest private sector group in India. Its foundation was Reliance Petroleum and its refinery in Jamnagar, a district in the southern India state of Gujarat, which many early critics said was an overly ambitious project for the new company.

Over a period of two decades, however, Ambani's millions of investors lifted him from ownership of a fledgling Rs 20-30 lakhs firm in the 1970's to one that at last count had total revenues of more than Rs 60,000 crore. The company's flagship, Reliance Industries, has a market capitalization of nearly Rs 30,000 crore, while Reliance Petroleum commands a figure of nearly Rs 17,000 crore. The Reliance Group's assets add up to a humongous Rs 52,000 crore.

Backward and forward 'amalgamation' became the key word in the Ambani group's strategy of growth. Today, the group straddles every link in the petroleum and petrochemicals value chain, beginning with oil and gas production and extending to refining and making intermediates and finished products like fabrics.

Ambani is also credited with being the man whose efforts helped create an "equity cult" in the Indian capital market. With innovative instruments like the convertible debenture, Reliance quickly became a darling of the stock market in the 1980s. Today, the group has the backing of close to 5,000,000 individual shareholders.

In 1992, Reliance became the first Indian company to raise money in global markets, with bond sales limited only by India's sovereign rating. With the meteoric rise of the Ambanis came formidable power and clout. What distinguishes Reliance's growth is that much of it came not during the post- liberalization 1990s, but in the days of the 'License Raj' when there were stifling controls on virtually all industry.

Dhirubhai managed to get his way and created his empire with remarkable ease, a success his business rivals could not digest easily. They accused the group of subverting the system in its penchant for growth.

The stock markets suddenly came within the reach of the man on the street when Reliance Industries began its flurry of public and rights issues. From being the preserve of the wealthy alone, investing in company shares became a mass affair, with shareholding forms being sold on the pavements of metropolis. The ultimate expression of the expansion of the investing community came when he held an annual general meeting of the company at a stadium in Bombayi, then an unheard-of accommodation of the investing public.

Similarly, Dhirubhai created a storm within industry as his company expanded in a well-planned way, even though every complex step was thoroughly shrouded in political and corporate controversies. From trading in textiles, Ambani moved on to manufacturing synthetic textiles and then to producing synthetic raw materials and petrochemicals needed for these fabrics.

In a dramatic move towards complete vertical integration, Reliance then set up a petroleum refinery, which would produce the raw materials needed for their petrochemicals complex. What's more amazing is the speed with which the refinery was constructed - it took only three years, resulting in vast savings. The refinery's capital cost per metric tons remains 30 to 50 percent lower than that of other refineries recently set up in Asia. and accounts for over 25 percent of India's refining capacity.

In the process, Reliance became the barometer by which the stock markets measured themselves, and anything going right or wrong with the company tended to put the markets in a tizzy.

At the same time, Reliance Industries became a byword for all that is wrong with corporate governance and business ethics in the country. Allegations flew fast and furious over the extent to which the company influenced decisions in the petrochemicals and petroleum sectors of India.

Undoubtedly, the company wielded enormous influence (and still does), adespite vigorous anti-Reliance campaigners who regularly clash with with an equally staunch pro-Reliance lobby among politicians, bureaucrats and the media. In recent years, the selections of Vajpayee's Union cabinet's finance finisters and the toppling of State Governments have been attributed to the long arm of Reliance.

As far as industrial projects were concerned, however, Dhirubhai made no compromises on quality and created each plant as a state-of-the-art unit. Efficient operations led to sustained profitability, high dividends and happy small investors. Only in print media has Reliance faltered; the company's publishing arm, the daily Business and Political Observer (BPO). failed to make a mark as a business newspaper. Even so, the publication set new standards for journalistic salaries as Reliance laid out transportation, medical and vacation benefits that vastly outstripped those offered at most newspapers.

In his relentless run to the pinnacle, Dhirubhai also achieved the status of being the highest-paid CEO in India with a salary at Rs 8.85 crore, leaving his closest rival, Wipro's Aziz Premji, far behind at Rs 4.2 crore. Both are among the world's 500 richest people.

Over the last year, Reliance has sewn up dozens of remnants of the old economy. It has added over 75,000 metric tons per year of polyester manufacturing capacity to enhance its market share to 47 percent of the industry. Reliance has been awarded a total of 14 offshore oil and gas exploration blocks by the government. With this, the acreage for exploration now exceeds 1,00,000 square kilometers of the country's east and west coasts.

That makes Reliance one of the leading oil and gas exploration and production players in the private sector. Its utility, Reliance Power, is pursuing opportunities in the power sector with the objective of achieving an aggregate capacity of over 10,000 megawatts in the next decade.

Dhirubhai's empire now will be taken over by the two sons, Mukesh and Anil, who have effectively been running the show since their father's stroke. But Reliance is bound to miss the blood and guts approach of the entrepreneur who rose from nowhere to create a corporate monolith larger than any other in India that is now taking a struggling Indian economy into the global markets.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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