Home / Opinion / Columns /  Mukesh Ambani’s succession plan for Reliance gets clearer

There was once a time that billionaire Mukesh Ambani and his younger brother, Anil, lived in the same Mumbai house with their mother even as they fought in Indian courts over their father’s empire. Dhirubhai Ambani had died in 2002 without a will—and thus the fraternal feud. As part of a 2005 family settlement, Mukesh had won control of deep-sea fields in the Bay of Bengal that had just started producing gas. But the agreement also required him to supply cheap feedstock at a fixed price for 17 years to Anil’s proposed power plant. Honouring that pact might have ended power outages in New Delhi, but it would have crippled Mukesh’s Reliance Industries. Luckily for the older sibling, a Supreme Court verdict in May 2010 went in his favour: The gas was held to be Indian sovereign property, not Mukesh’s to give. Two weeks later, the brothers agreed to live in “harmony" and end most of the non-compete clauses of their separation, including in telecom, where Anil ran a service. Mukesh entered the market, a move that would catapult him to his current standing as the world’s 10th richest tycoon with a net worth of $90 billion.

Since then, the gas discovery has proved to be a damp squib and many of Anil’s firms have gone bankrupt. It was symbolic, therefore, that when Mukesh Ambani put his own succession plan in motion this week, he started with Jio, his telecom service. His son Akash, 30, will succeed him as chairman at India’s top wireless carrier, though the patriarch will continue to helm Jio Platforms, which owns all digital assets. This may be a stopgap until Jio Platforms, whose investors include Meta and Alphabet Inc, concludes its much-awaited initial public offering. Akash’s twin sister Isha is widely expected to head Reliance’s retail business. Anant, 27, the youngest of the three children, may preside over the legacy oil-to-chemicals business. But with a twist: He must complete his dad’s pivot away from hydrocarbons towards cleaner energy.

Mukesh Ambani only began talking about the “momentous leadership transition" last December, at an employees’ event. It’s hard to say what the eventual arrangement will look like. But it wouldn’t be a surprise if retail, telecom and energy end up as professionally managed and independently listed companies, with equity participation—and operational support—from one or more strategic partners. In this scenario, the children, plus Ambani and his wife Nita, can exercise control through their shares in Reliance Industries, which will own stakes in Jio Platforms, Reliance Retail and the energy business, Reliance O2C. Such a structure won’t be without problems.

Separate stock-market listings for the units could saddle Reliance with a permanent holding-company discount: the tendency of the stock market to value a conglomerate at less than the sum of its parts. But de-merging them—so that Reliance investors would directly own proportional stakes of entities—may erode the might of the consolidated balance sheet. Fitch Ratings assesses Reliance’s foreign-currency creditworthiness at BBB, a notch higher than India’s sovereign debt. Reliance has a major cost-of-capital advantage as it has high operating profits and very little debt, an edge that may be of great value to the next generation.

If this is indeed the favoured template, then the model is in place for Jio Platforms minus an IPO: Google didn’t just invest in Jio, it also helped it with a cheap, Android-based phone; Facebook’s WhatsApp service could help local JioMart stores take customer orders and payments over phones. Ambani might have wanted to strike similar deals with Amazon in retail and with Saudi Aramco for his oil business. But instead of a partnership with Amazon, there’s now keen competition and Reliance’s courtship of Aramco collapsed. Worse, Bloomberg News reported that arch-rival Adani was flirting with Aramco. With so much going on, Mukesh Ambani will want as little boardroom drama as possible.

When Mukesh and Anil Ambani were taking their gas dispute to court in 2009, the combined stock-market value of their empires was $108 billion—five times what they were worth before the family settlement. Now, Mukesh’s Reliance Industries is worth $221 billion, while pretty much the only value left in Anil’s group, outside of power generation, transmission and distribution, is whatever creditors can get from bankruptcy proceedings against several of his firms.

For now, Ambani’s children will want to keep their ties to the Reliance mothership; which means they will have to accept the conglomerate’s capital-allocation policies even as they are free to do their own thing. That’s likely the best their father can do for them—and the group—without weakening the whole. It’s a better transition than what he had to endure.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.

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