Anil is like my son,” Mukesh Ambani had told a television channel about his younger brother Anil Ambani shortly after the death of their father, Dhirubhai Ambani, in 2002. That filial feeling lasted for a little over two years. In late 2004, Mukesh admitted to a television reporter that there were “ownership issues”, the first indication that all wasn’t well between the two. Since then, India has witnessed a corporate battle of the kind it probably will never see again, as two brothers, with considerable money, and more-than-considerable media and political influence, took each other on.
The backstory can be told simply enough: the two brothers fought in 2004, arrived at a settlement in 2005, and coexisted uneasily till 2006, when they went to court again. After almost four years, India’s Supreme Court (SC) has ruled in that same case, declaring Mukesh the winner and effectively scrapping the 2005 agreement that formed the basis of the settlement between the brothers.
Seen in the narrow context of the case the two were fighting, this means that Anil’s Reliance Natural Resources Ltd (RNRL) doesn’t get gas at the price at which it wanted from Mukesh’s Reliance Industries Ltd (RIL), a blow to the former’s aspirations for his power generation business. Whether RNRL gets any gas at all from RIL will have to be seen. In a broader context, it could mean that because the agreement isn’t valid, either brother is free to enter businesses in which the other has interests—the agreement, which has never been made public, was reported to have a strong non-compete clause.
It remains to be seen whether SC’s dismissal of the agreement between the brothers is absolute or relative, in the rock-scissors-paper sort of way—as in, where the agreement and a government contract are concerned, the latter wins, but if it is about the agreement and something else, than the agreement wins.
The court’s decision comes at a time when the groups headed by the brothers are in very different positions, in terms of the portfolio of businesses they run. RIL is generating a lot of cash; Anil’s R-Adag (Reliance-Anil Dhirubhai Ambani Group) isn’t, and its flagship Reliance Communications Ltd (RCom) will probably need a lot of money to fulfil its aspirations in the data-rich 3G (third-generation telecom services) space.
Yet, this writer is loath to club Anil along with other notable businessmen who have taken on a unified Reliance in the past, only to fail. The man, after all, has been in this position before, most recently in 2005, when the brothers divided the businesses of the unified Reliance empire between themselves. At the time, it looked like Mukesh would end up with most major businesses. But when the settlement was done, it was Anil who ended up with RCom, a business that Mukesh had nurtured.
Interestingly, that company’s marriage with South Africa’s still-single MTN was called off on account of the latter’s concerns about the rights of RIL over the telecom business, rights that had presumably been articulated in the same agreement that SC has dismissed.
This writer has a feeling we haven’t heard the last of that agreement. Maybe it should be made public.