The one battle lost
One corporate battle which Dhirubhai did not win was the battle for control of Larsen & Toubro. In 1988, L&T was in bad shape, and the Ambanis thought that the time was ripe for an acquisition. Having secured the support of L&T's chairman, who saw Dhirubhai as a white knight in the battle against the raider Manu Chhabria, Mukesh and Anil Ambani became directors of L&T. By April 1989, Dhirubhai became chairman of L&T.
Reliance, L&T's biggest private-sector customer, bought 12.4 percent and got two nominees on the L&T board. L&T later won a substantial contract to build Reliance's Hazira petrochemical plant. Meanwhile a state-linked financial company bought L&T shares from India's biggest mutual fund and largest insurance company. It then sold the shares to a little-known investment company connected with Reliance. Desai surprised the L&T board by stepping down, and Ambani took over as chairman. Bombay's clubby corporate world was shocked at what seemed to be a behind-the-scenes takeover.
Unfortunately, things didn't go smoothly. In December Reliance's old bete noire, VP Singh, became prime minister. The Indian Express once again did the muck-raking, and found that the takeover had been effected by financial institutions like the Life Insurance Corporation and the General Insurance Corporation selling their shares. Since the institutions were not allowed to sell to private parties, the Indian Express alleged that the whole operation was a fraud.
The matter moved to the courts. Sensing defeat, the Ambanis reversed the transaction, taking a substantial loss. An extraordinary general meeting was called to decide whether the Ambanis would remain on the L&T board. Dhirubhai resigned. Eleven years later, Reliance sold its holdings in L&T to Grasim. Even that transaction was not free of controversy, as the Securities and Exchange Board of India felt that Reliance should not have bought L&T shares from the market a few months before deciding to sell its stake. The insider trading charge was settled with Reliance paying a nominal fine.
Throttling the bears
In March 1982, the Reliance scrip was the target of a bear raid organised by a Kolkata based industrialist. They picked the wrong target.
While the share was being hammered down by the bears, Dhirubhai organised a rescue operation, with friendly brokers buying up every share being sold. Then, knowing fully well that the brokers did not have possession of the shares they had sold, he demanded delivery.
The bear cartel was thrown into a panic and desperately started buying Reliance shares. When cartel members asked for time to deliver the shares, Dhirubhai asked his friends to refuse. The upshot - the Bombay Stock Exchange had to be shut for three days. But the bears had been taught a lesson - do not meddle in Reliance shares.
It wasn't long, however, before Dhirubhai's enemies raised a simple question -where did he, till recently a yarn trader and only a budding industrialist, get hold of the money needed to stop the bears in their tracks?
The answer was delivered by the then Finance Minister Pranab Mukherjee, who announced in Parliament that non-resident Indians had invested over Rs 220 million in Reliance during 1982-83. These investments had also been made by companies with names like Crocodile, Lota and Fiasco.
Investigations by journalists revealed that these companies had been registered in the Isle of Man, the tax haven, by several people sporting the surname Shah. Who did these companies belong to? Questions were raised and fingers pointed, but a Reserve Bank of India enquiry could not find any wrongdoing by Reliance.
Tuesday, April 3, 2007
About Ambani
The 66-year-old Indian tycoon is one of Asia's most successful entrepreneurs. The Polyester Prince: The Rise of Dhirubhai Ambani (Allen & Unwin, St Leonards, Australia, 296 pages, $19.70) is a fine addition to that body of work. In telling Ambani's story, journalist Hamish McDonald also lays bare the complex and often corrupt regime in India which he manipulated so brilliantly.
The tycoon-to-be grew up in northwestern Gujarat state in the village of Chorwad, known as the "settlement of thieves."The son of a petty trader, Ambani cut his eyeteeth as a clerk in a British trading company in Aden. By his 20s, he was making handsome profits on the side. One sterling idea was to buy silver riyal coins and melt them down into ingots. Ambani had noticed that the riyal exchange to the British pound was lower than its worth on the silver market.
In 1957, Ambani returned to India with his wife and an infant son. Armed with about $3,000 in savings, he set up as a trader in polyester yarn. He quickly learned to negotiate his way around India's suffocatingly regulated business regime.
Reliance, the trading company that he first set up, became the flagship of his empire. From trading in polyester fiber, Reliance ventured into weaving it. Its cloth factory in Gujarat was legendary for efficiency, and its Vimal brand became a household word. Reliance grew to become one of the top five companies in India within 10 years. Ambani then made the next logical step: into manufacturing polyester fiber.
By the time it was listed in 1977, Reliance was beginning to look like an equity cult. More than three million Indians bought shares in the company, helping to finance Ambani's move into oil-refining and other business. He ensured that his investors came out on top. Shareholder meetings were held in football stadiums and new issues had the hoopla of a circus coming to town. Reliance stock became so valued that it even formed part of the dowry in some families. Because of the scale of Ambani's operations, McDonald notes, no politician dared to move against him when he bent the rules. Market regulators were also afraid that a slide in Reliance would send local stock exchanges plummeting
But problems began to emerge when Rajiv Gandhi took over the premiership following his mother's assassination in 1984. Ambani's political influence was on the wane. At the same time, he became locked in a fierce battle with his business rivals, most notably Nusli Wadia, a textile tycoon and scion of a powerful Parsee family. The tussles got so bitter, the police had to investigate an alleged attempt to assassinate Wadia.
The tycoon-to-be grew up in northwestern Gujarat state in the village of Chorwad, known as the "settlement of thieves."The son of a petty trader, Ambani cut his eyeteeth as a clerk in a British trading company in Aden. By his 20s, he was making handsome profits on the side. One sterling idea was to buy silver riyal coins and melt them down into ingots. Ambani had noticed that the riyal exchange to the British pound was lower than its worth on the silver market.
In 1957, Ambani returned to India with his wife and an infant son. Armed with about $3,000 in savings, he set up as a trader in polyester yarn. He quickly learned to negotiate his way around India's suffocatingly regulated business regime.
Reliance, the trading company that he first set up, became the flagship of his empire. From trading in polyester fiber, Reliance ventured into weaving it. Its cloth factory in Gujarat was legendary for efficiency, and its Vimal brand became a household word. Reliance grew to become one of the top five companies in India within 10 years. Ambani then made the next logical step: into manufacturing polyester fiber.
By the time it was listed in 1977, Reliance was beginning to look like an equity cult. More than three million Indians bought shares in the company, helping to finance Ambani's move into oil-refining and other business. He ensured that his investors came out on top. Shareholder meetings were held in football stadiums and new issues had the hoopla of a circus coming to town. Reliance stock became so valued that it even formed part of the dowry in some families. Because of the scale of Ambani's operations, McDonald notes, no politician dared to move against him when he bent the rules. Market regulators were also afraid that a slide in Reliance would send local stock exchanges plummeting
But problems began to emerge when Rajiv Gandhi took over the premiership following his mother's assassination in 1984. Ambani's political influence was on the wane. At the same time, he became locked in a fierce battle with his business rivals, most notably Nusli Wadia, a textile tycoon and scion of a powerful Parsee family. The tussles got so bitter, the police had to investigate an alleged attempt to assassinate Wadia.
Wall Street & Aviator
Gordon Gekko: The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own.
I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
Gordon Gekko: What's worth doing is worth doing for money.
Gordon Gekko: You see that building? I bought that building ten years ago. My first real estate deal. Sold it two years later, made an $800,000 profit. It was better than sex. At the time I thought that was all the money in the world. Now it's a day's pay
AVIATOR
Jack Frye: You want me to bribe senators?
Howard Hughes: I don't want them bribed, Jack. I want this done legal. I want them BOUGHT.
I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
Gordon Gekko: What's worth doing is worth doing for money.
Gordon Gekko: You see that building? I bought that building ten years ago. My first real estate deal. Sold it two years later, made an $800,000 profit. It was better than sex. At the time I thought that was all the money in the world. Now it's a day's pay
AVIATOR
Jack Frye: You want me to bribe senators?
Howard Hughes: I don't want them bribed, Jack. I want this done legal. I want them BOUGHT.
Quotes
A person who never made a mistake never tried anything new. ---Albert Einstein
Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either.--Albert Einstein
Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either.--Albert Einstein
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