The Reliance Group Saga - Break-up of the Largest Family-owned Business in India

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Case Details:

Case Code : BSTR182
Case Length : 19 Pages
Period : 2002-2005
Organization : Reliance
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Diversified

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Division of Reliance Group Businesses

The issue of division of Reliance group of companies between the brothers was a very complicated task as 34.11% equity stake in RIL was held by several investment companies. The Ambani family directly held only 5.13% of the shares.

Apart from this, there was a Petroleum Trust which owned 7.51% equity stake in RIL for the Ambani family (Refer Table I for the shareholding pattern in RIL). Before being named RIL, the company was known as Sanchitya Mercantile Private Limited., which was delineated through 77 investment companies. These companies provided tax and investment advantages but made division very difficult. Kokilaben made it clear that the ownership of Reliance brand would remain with both the brothers, there would be no competition between the brothers, and outsiders would not play any role in the family affairs, especially regarding the division of assets of the Reliance group...

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The Consequences

The rift between the brothers was a matter of concern to more than 3.3 million shareholders of Reliance group. Just before the rift was made public, the shares of RIL were trading at Rs. 546.50 on November 18, 2004, and their price fell to Rs. 488.90 by December 20, 2004. During this period, the BSE Sensex increased from 6025 to 6346.

Similarly, the share price of REL reduced from Rs. 628.45 on November 18, 2004 to Rs. 522.20 on December 20, 2004. IPCL shares which were valued at Rs.188.70 on November 18, 2004, fell in price to Rs.175.10 by December 20, 2004. RCL's shares which were trading at Rs. 138.90 on November 18, 2005, fell by December 20, 2004 to Rs. 131.95. On December 14, 2004 CLSA (a brokerage firm) commented about Reliance's "lack of transparency, board independence and relatively lower corporate-governance rankings." The credit rating agency, Standard & Poor's (S&P) also cautioned about downgrading RIL, if the dispute resulted in any major change in the company...


Exhibit I: Reliance Group Companies
Exhibit II: Reliance Milestones
Exhibit III: Reliance Dispute - Chronology
Exhibit IV: The Web of Ownership
Exhibit V: How They Did it?

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