Dhirubhai Ambani: The man who would be prince
Our Correspondent in Mumbai
The news about billionaire industrialist Dhirubhai Ambani's death, who passed away at Mumbai's Breach Candy Hospital on Saturday night having battled for life for 13 days after suffering a stroke on June 24, spread like wildfire.
A host of businessmen, politicians, celebrities and bureaucrats thronged the hospital where the Reliance group chairman was undergoing treatment to pay homage to the departed entrepreneur and give their condolences to the Ambani family.
Dhirajlal Hirachand Ambani rose from humble beginnings to found India's largest industrial empire and one of its few Fortune 500 companies.
In the process he became one of the world's richest men, ranking 138th in Forbes magazine's latest list of ultra-rich, with a personal fortune of $2.9 billion.
He transformed the way big business operates in India, raising huge sums from the equity market to build world-class factories and refineries.
"Through his promotion of the equity cult and his world vision of manufacturing, Ambani impacted the economy as no businessman has done," Gita Piramal wrote in her book Business Maharajas, about seven of India's most powerful tycoons.
Dhirubhai was the only Indian have built a Fortune 500 corporation. On April 1, with the merger of Reliance Industries Limited and Reliance Petroleum Limited was formed India's largest-ever private sector company. The net worth of Dhirubhai Ambani and his family stands at Rs 331.39 billion.
His was an extraordinary tale of guts and gumption that spans over two decades, during which Dhirubhai laid the foundation of Reliance, the largest private sector group in the country.
When Dhirubhai started it all, he could not have dreamt of becoming this big. When Reliance Petroleum was building the refinery in Jamnagar, nearly everyone thought they were over-ambitious.
He had, however, restricted himself to playing a behind-the-scenes role after a heart attack he suffered in 1986. His sons Mukesh and Anil had taken over the baton from their illustrious father. Mukesh looks after the operational aspects, while Anil handles the financial matters of the company.
The duo have successfully managed to blend the interests of the old economy giant with the prospects of the new economy. The group's expansionary urges now find an outlet in the new economy.
The group staggering scale of operations at its Rs 250-billion integrated Jamnagar refinery complex in Gujarat which houses the world's largest greenfield project, with a capacity to refine 27 million tonne per annum of crude make it a truly global enterprise.
At the same complex, Reliance built the world's largest paraxylene project with a capacity of 1.4 million tonne per annum, a polypropylene project with a capacity of 6,00,000 tonne per annum, India's largest all-weather port, captive power plants and all related infrastructure.
The group provides almost 5 per cent of the Indian government's total revenues, apart from a considerable contribution to India's gross domestic product.
Ambani's fund raising methods ended the near monopoly of bank financing in India, restricted almost exclusively to a tiny clique of elite business families.
"He knew what it was like to be poor," Piramal said.
"Banks often turned him away when he badly needed money to build his factories. So he turned for support to the only other option he had: the public."
The Reliance group's phenomenal growth fuelled a cult-like attitude toward investment in its shares. About 3.5 million people own its shares, making the stock one of the most widely held in the world.
But such remarkable growth also prompted accusations Ambani's success owed as much to manipulation of government policy as to business savvy.
"The corporate world is sharply divided between those who feel he is a visionary and those who consider him to be a manipulator and a crook," wrote Piramal.
A review of the book The Polyester Prince: The Rise of Dhirubhai Ambani by journalist Hamish McDonald, praises the work for exposing "the complex and often corrupt regime in India which he manipulated so brilliantly."
Ambani attributed such attacks to his lowly beginnings.
"Controversy is the price to be paid for success," he told Piramal. "You must understand human psychology. Because, not so long ago, I was just a riff-raff boy and people would say: 'Who is this Dhirubhai? He was merely a hawker who used to wait outside my cabin.' This is the truth and I am not ashamed of that. My skin, fortunately, is very thick! However, the fact remains that when an elephant walks, dogs tend to bark."
Ambani never denied trying to influence government decision-making as allowed through legitimate lobbying.
"We cannot change our rulers, but we can at least help them learn how to rule us better," he once said.
But he bristled at suggestions success on the scale he has known could be bought.
"Just because the government gives you a piece of paper (licence), it doesn't automatically mean that you can raise money from the capital markets, or put up plants in record times. And give sensible returns to shareholders. That's 98 per cent of the work. The paper work is only two per cent," he had said.
Ambani (69), born on December 28, 1932, was the third child of a poor school teacher in a rural village called Chorwad in Gujarat.
At 17, he left India to join his oldest brother in Yemen, where he worked as a petrol station attendant in Aden, and later a clerk for a local affiliate of Burmah Shell.
Eight years later, late in 1958, he returned to India with a wife, first child and "a few thousand rupees."
He used that tiny sum to enter business exporting spices and nuts, but in the '60s entered the textile business. He bought plants and outfitted them with the latest spinning and weaving machines.
Ambani first raised money in 1977 through an initial public offering in Reliance Industries, a synthetic textile maker.
Over the next 24 years, the company's sales rose more than 400-fold to $6 billion, and net profit more than 900-fold to $567 million.
Ambani was lauded for a key role in shaping India's stock market culture by attracting hordes of retail investors to a market dominated by state-run financial institutions.
Reliance Industries was listed in 1977 in one of the largest public stock offerings of its time and its annual shareholders' meetings were so well attended they had to be held in a football stadium. Paying high dividends and bonuses at a time when equities were seen as a low-return, risky investment made Ambani a hero to shareholders.
Original investors in the 1977 initial public offering have earned a compounded annual rate of return of 43 per cent.
"His contribution to India's equity culture has been phenomenal," said broker Parag Parikh.
Ambani had a strong belief in the group's shareholders and went to them each time to fund his plans.
"If I need money, I'll raise it in India from my shareholders. If I need to borrow, I will borrow from an Indian bank or anywhere in the world. Why do I need a joint venture partner," Ambani once told a government minister.
Reliance Industries and Reliance Petroleum announced a merger on April 1, 2001 to create India's largest industrial group with a market capitalisation of nearly $9 billion. They will trade separately until the merger is completed.
The merged firms would account for about 15 per cent of the 30-issue Bombay index and the Ambani family interest would be reduced to about 34 per cent from over 44 per cent.
Though Ambani has passed on the baton, his presence in the group remains overwhelming and news of his illness brought a throng of top industrialists and politicians to the hospital.
His son Anil stepped out and appealed for calm as about 50 reporters and cameramen jostled at the hospital's gates. The Reliance group would make a statement later in the day, he said.
Starting off as a small-time trader in Aden, Yemen, at the age of 16, Ambani commands respect because he took on entrenched industrial giants.
"If power is measured in face time with the leader of the free world, then Ambani has it in spades. Bill Clinton spent 45 minutes with the 'Polyester Prince' on his recent visit to India. Prime Minister Atal Bihari Vajpayee got just 10," AsiaweekM magazine said in an issue two years ago, when it picked him for its list of 50 most powerful people of Asia.
Additional inputs: Agencies