Mumbai: Shares of Mukesh Ambani-controlled Reliance Industries Ltd (RIL) gained on the expectation the company is close to resolving a dispute over the supply of natural gas to Reliance Natural Resources Ltd (RNRL), controlled by his estranged younger brother Anil Ambani.
The shares rose 6.6% to a one-week high of Rs1,217.35 each at close on Friday on the National Stock Exchange. They gained because “there is an expectation that Reliance Industries may settle the dispute over natural gas supply”, said R.K. Gupta, a fund manager at Taurus Mutual Fund in New Delhi.
Three years after they separated, speculation is rife that the Ambani brothers, Mukesh, 51, and Anil, 49 may be burying the hatchet.
The latest rumour to do the rounds claims that a settlement could be announced as early as Sunday. This rumour also claims that ICICI Bank Ltd’s current chief executive K.V. Kamath, a longtime confidant of the Ambani brothers and their father the late Dhirubhai Ambani, and its incoming CEO Chanda Kochhar are playing mediators. It goes on to say that the two ICICI Bank executives met Mukesh Ambani on Thursday at the ICICI Securities office in south Mumbai in connection with this.
Together we stand? A file picture of Reliance Industries chairman Mukesh Ambani (right) and his younger brother Anil of Reliance-Anil Dhirubhai Ambani Group observing a two-minute silence in memory of their father Dhirubai Ambani at an AGM in Mumbai. Sebastian D'souza / AFP
Kamath, the rumour goes, met Anil Ambani separately earlier in the week. Kamath played a significant role in mediating between the brothers before the 2005 split.
Both Kamath and Kochhar declined comment.
A spokesperson for the Reliance-Anil Dhirubhai Ambani Group said it wasn’t the group’s policy to comment on “market rumours and speculation”.
An external spokesperson for RIL said: “We categorically deny any rumours of an out-of- court settlement or negotiation of any nature. Any such rumour or reports are unsubstantiated and completely baseless. It is highly presumptuous to speculate or attribute motives on the nature of meetings of senior management of the company. We appeal to you as a responsible media house to abstain from publishing any hearsay, speculative and planted rumours by vested interests.”
This isn’t the first rumour about the brothers getting back together doing the rounds.
Another rumour has it that in late December, Anil and Mukesh met at the wedding anniversary celebration of their sister Dipti Salgaocar.
And still another has it that Mukesh Ambani has fallen out with his key lieutenants Manoj Modi and Anand Jain, who aligned with him in his fight against Anil Ambani.
Interestingly, the rumours first surfaced as the legal battle between RNRL and RIL over the supply of gas from the latter’s finds in the Krishna-Godavari (KG) basin intensified. RIL is weeks away from producing gas, but cannot sell it this till the case is resolved.
The rumours have been strong enough for RIL to issue a clarification on Wednesday dismissing them.
So, why does everyone want to believe that the Ambanis are even thinking of getting together?
One, it makes great press and is the Bollywoodish brothers-split-brothers-reunite kind of story everyone wants to read in these tough times.
Two, it is replete with economic possibilities.
After all, if the brothers hadn’t been scrapping, the merger of South Africa’s MTN and Anil Ambani’s Reliance Communications Ltd (RCom) would have likely happened, creating a global telco (one reason the merger fell through was because of legal complications that could have risen from a right of first refusal enjoyed by RIL in case RCom wanted to sell). And RIL would likely have been pumping gas from the KG basin.
An oil and gas analyst with a foreign brokerage, who declined to be named, said that the settlement would be a clear “positive” for RIL, which can begin to monetize its gas reserves from the KG basin. And it would benefit the Anil Ambani group as well, either through the supply of gas or cash compensation.
And the two groups would stop coming in each other’s way, added the analyst, referring to the aborted RCom–MTN deal.
Still, for all the buzz about a possible rapprochement, it can’t be denied that the two groups have done well for themselves since separating.
In June 2005, when the split happened, the combined market value of the group’s listed entities was Rs82,827.81 crore.
On Friday, the aggregate value of all listed companies controlled by Mukesh Ambani was Rs228,031.14 crore and that of all listed firms controlled by Anil Ambani was Rs94,301.72 crore.
Shares of companies belonging to both the groups saw a strong rally on Wednesday after Mumbai-based brokerage firm Avendus Capital Pvt. Ltd put out a report stating that a settlement was in the making. It added that as part of the resolution, Mukesh Ambani would take over RNRL and Anil Ambani would receive cash and control of RIL’s retail arm Reliance Retail Ltd.
RIL reacted sharply and on Thursday sent the brokerage a notice asking it to withdraw the report as well as tender a written apology, saying the report was “without any basis” and “completely false”.
Bloomberg’s Saikat Chatterjee and Sumit Sharma contributed to this story.