T N Ninan: Converging and diverging

Mukesh's new businesses like oil & gas, retail have not been great successes but he has abundant cash flow while Anil still has a pile of debt to clear

The tale of the Brothers Ambani has just had another twist. Reliance Communications, the company that younger brother Anil wrested from older sibling Mukesh during an acrimonious parting of ways in 2005-06, has just sold most of its assets to Mukesh’s Reliance Industries for Rs 240 billion (Rs 24,000 crore). In a way, this marks apogee and perigee for the two careers. Mukesh, 60, can look back on a year during which he has shaken up the telecom industry with the launch of his Jio service, whereas Anil (two years younger) has been selling one business after another to raise cash. Before RCom’s assets, it was the Mumbai electricity distribution business to Adani for Rs 190 billion (Rs19,000 crore). Smaller sales earlier had been of the direct-to-home (DTH) business, the radio and TV businesses, and Big Cinemas. And still there is big debt left to be paid off, so the next sale could be of RCom’s real estate assets.

When the father Dhirubhai was around, it used to be Anil who was all flash and smart deals, and the group’s quick-talking face to the media, while Mukesh laboured at putting hard assets in the ground. Once Dhirubhai had passed on, Anil found that he had little to do in the main company. In the inevitable parting of ways, he was offered little more than the smaller companies he ran: Reliance Capital and Reliance Energy (earlier BSES). It took an almighty fight, with much washing of dirty linen in public, before Mukesh reluctantly parted with his pet new project: what was then Reliance Infocomm, and is now Reliance Communications or RCom. That made the split less uneven than it otherwise might have been, but Mukesh remained by far the bigger player, with businesses valued then at Rs 1,181 billion (Rs 1,18,100 crore) compared to Anil’s Rs 763 billion (Rs 76,300 crore). The real imbalance was still greater, because Mukesh’s slice of the cake was 90 per cent or more of the total when it came to sales and profits.

Still, it was Anil who set the initial pace. Rapid customer acquisition saw the telecom business value reaching Rs 1,690 billion (Rs 1,69,000 crore) at one stage; today that is down to Rs 100 billion (Rs 10,000 crore) as market share has collapsed. Reliance Power did a spectacular public issue at the height of the stock market boom in early 2008: a company with virtually no revenue or cash flow was valued at Rs 1,018 billion (Rs 1,01,800 crore). Today, that is down to Rs 141 billion (Rs 14,100 crore). Along the way, both companies had faced a Mukesh block: RCom was prevented from leapfrogging in scale through the acquisition of MTN, a South African multinational, because Mukesh said he had a prior claim on any share sale; Mukesh also won a court case over the promise of gas supply to Anil’s power projects under the family settlement. But there were other reasons too for the change in fortunes. So while Anil’s businesses in their pomp were valued once at nearly Rs 4,000 billion (Rs 4 lakh-crore), the figure is down more than 80 per cent, to Rs 730 billion (Rs 73,000 crore)—compared to Mukesh’s Reliance Industries today at nearly Rs 6,000 billion (Rs 6 lakh-crore). In terms of personal wealth, Forbes ranks Mukesh as the wealthiest man in Asia, with $38 billion, while Anil is 45th in India, with $3.1 billion.

Mukesh’s new businesses—oil and gas, retail—have not been great successes, while telecommunciations will have to prove it can earn a good return on capital. The cash cows remain refining and petrochemical businesses. While investors in Reliance have had to play a game of patience for long stretches, for Anil the challenge is to do what used to be his brother’s forte—generating cash by putting assets in the ground and making things. Reliance Infrastructure is laying down roads, bridges and metro projects; Reliance Power is building a dozen power projects; and the defence business is into shipbuilding and aviation components. Even if he pulls off what is for him a relatively new game, Anil still has a pile of debt to clear. Meanwhile, Mukesh has abundant cash flow.