No immediate fallout on Reliance empire seen
Our Correspondent in Mumbai
With the death of Reliance Group Chairman Dhirubhai Ambani, who passed away at the Breach Candy Hospital on Saturday night after suffering a stroke on June 24, an era in Indian entrepreneurship has come to an end.
However, even while Dhirubhai lay battling for his life in the hospital for 12 days, speculation swept through the markets as to what would happen to India's largest industrial group, which has over 3.5 million shareholders, if something were to happen to Ambani Sr.
In a knee-jerk reaction to the news of Dhirubhai's stroke, the shares of four listed companies of Reliance group tumbled 3 percent to 6 percent. On June 25, a day after Dhirubhai was hospitalized, shares of Reliance Industries, India's biggest petrochemicals maker, dropped 4.7 percent to Rs 270, while that of Reliance Petroleum, the largest private refiner, fell 3.8 percent to the day's low of Rs 24.20.
However, stockbrokers say that there will be no long-term impact on the share prices. Share prices have recovered partially since then, though trading in the Reliance stock remains subdued. Dhirubhai's death is expected to have little impact on the workings of the company. Sources say that it is business as usual at the Reliance headquarters in Mumbai.
A senior operator in the market swept aside the buzz about the Reliance group undergoing a major change in the wake of Dhirubhai's death. "There's no question of the group splitting up because of this tragedy. The Ambani family with close ranks and consolidate further," he said.
The Reliance group is India's largest industrial conglomerate and has a stake in textiles, synthetic fibers, petrochemicals, oil and gas financial services power and telecom sectors.
It has the fifth largest refinery in the world at Jamnagar, Gujarat and is India's largest private sector company in terms of sales. The group's revenues for 2001-02 were $13.2 billion.
While Dhirubhai single-handedly built the Reliance empire and is seen as one of India's most powerful businessmen, his successors are his sons, Mukesh and Anil.
The two have been working with the group for the last 20 years and now head the company. Mukesh is the vice-chairman and the managing director of Reliance Industries and Anil is the co-managing director.
"Mukesh and Anil have the required experience and they run the company now. Since his first stroke, Dhirubhai had handed over the reins to them and they have been managing the company very capably. Now that Dhirubhai is no more, the working of the group will not change," says an analyst, tracking the Reliance group, for a Mumbai-based financial institution.
Since Dhirubhai withdrew partially from the company's affairs, an informal power sharing agreement had been in place for the Ambani boys.
Mukesh, who has a Masters in Business Administration from Stanford University, handles technology, strategy and operations, while Anil, a former alumni of the Wharton Business School, is the public face of the company and looks at all matters financial.
However, Dhirubhai continued to be the chairman and attended offices regularly, keeping abreast of the company's activities. In fact, he was working at the office when he suffered the 'brain stroke' on June 24.
All the Ambanis still live together in an 18-storey apartment complex, Sea Wind, at Cuffe Parade in Mumbai, and the arrangement is not expected to change.
"Despite the family being in control, the group is run by professionals. Though it will be difficult for Mukesh and Anil to completely fill Dhirubhai's shoes, there is no doubting that the operations of the company will not be affected," said an analyst with another Mumbai-based brokerage firm.