Dhirubhai Ambani and Reliance
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POLITICAL BATTLES OF DHIRUBHAI AMBANIDhirubhai
maintained good relations with Mrs. Indira Gandhi and obtained several
licenses and permissions during her primeministership. However, after her
assassination in 1984, her son Rajiv Gandhi became the prime minister, and
things changed drastically. In May 1985, Vishwanath Pratap Singh (V.P.Singh),
the Finance Minister in Rajiv Gandhi's cabinet, decided to shift PTA imports
from the open general licence (OGL) category to the limited permissible
list.[9] This could be the beginning of a new problem for Reliance as it solely
depended upon PTA imports for its PFY plant.
Dhirubhai sniffed the news about the imminent change and moved very fast.
Between May 27th – 29th, he tied up with a host of banks, like the Bombay
branches of the Standard Chartered Bank, Société Générale and the State Bank
of India, the Canara Bank and the Banque Indosuez to issue letters of credit
for almost a year's supply of PTA, which was approximately 60,000 tonnes.
These banks issued LCs worth 1.1 billion. The last LC was opened just a few
hours before the government announced the changed policy. The Finance
Minister was not too happy with Dhirubhai and the result was a 50 per cent
import duty on PTA. This further nullified Dhirubhai's gains.
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In June 1986, Reliance was considering the conversion
of its non-convertible debentures into convertible ones for the second
time. This would help improve the company's debt equity ratio, reduce
the outflow of interest, and increase the inflow of funds. But V P Singh
was against it. But once V.P Singh was transferred from the Finance
Ministry to the Defence Ministry, the conversion of the debentures into
shares was permitted and the pending licenses were cleared. |
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October 1986 turned out to be quite favourable for
Reliance. The debenture conversion move proved highly beneficial. A secret
meeting between Dhirubhai and Rajiv Gandhi seemed to trigger off a series of
decisions in favour of Reliance. Some more pending licenses were cleared.
The customs levy of Rs 3 on each kilogram of PTA was abolished, and the
Patalganga complex was granted refinery status thus, enabling it to pay a
low level of excise duties for raw materials like naphtha.
RELIANCE WITHOUT DHIRUBHAI
In 2002, the Reliance group with a turnover of Rs 620 billion, assets worth
Rs 564.85 billion, and a work force of over 85,000 people accounted for 5%
of the Central Government's total revenue. It contributed 3 % of India's
GDP, 5 % of the total exports, and 9 % of the GoI's indirect tax revenues.
Reliance also accounted for 25 % of India's total private sector profits.
Reliance secured nearly 10 % of the profits of the entire corporate sector
in India. Moreover, one out of every four investors was a shareholder of
Reliance.
Reliance acquired IPCL[10] , the Indian petrochemical giant. This acquisition
gave Reliance a sound footing in the global petrochemicals market. By 2004,
it plans to take over more than 35 % of the global market. This would make
Reliance the 11th largest polymer producer in the world.
With the amalgamation of RPL with RIL, Reliance became the only company in
the world to have fully integrated world scale operations in oil and gas
exploration and production, refining and marketing, petrochemicals, power
and textiles. Presently Reliance enjoys global ranking in all major
businesses and its shares lead the domestic market. According to the global
Fortune 500 rankings, Reliance ranks amongst the top 200 companies in terms
of net profit, amongst the top 300 in terms of net worth, amongst the top
425 in terms of total assets, and amongst the top 500 in terms of sales.
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EXHIBIT I RELIANCE GROUP OF COMPANIES
EXHIBIT II THE AMBANI FAMILY TREE
EXHIBIT III CHRONOLOGY OF EVENTS
EXHIBIT IV THE BOMBAY DYEING AND MANUFACTURING CO. Ltd
EXHIBIT V BACKWARD INTEGRATION
EXHIBIT VI MANAGEMENT MANTRAS OF DHIRUBHAI AMBANI
EXHIBIT VII ACHIEVEMENTS OF DHIRUBHAI AMBANI
ADDITIONAL READING & REFERENCES
[9] To import an item on the
limited permissible list, one has to get a clearance from the director
general of technical development.
[10] Indian Petrochemicals Limited (IPCL), promoted by the GoI was
incorporated in 1969. It was the first petrochemical complex in India. It
commenced its operations in 1973, with an aromatic complex,
located at Vadodara (formerly Baroda). Till January 1992, Government
of India was the sole shareholder of IPCL. The government then
disinvested 20% of its holding in favor of mutual funds and financial
institutions. In May 2002, the GoI approved the sale of its 26 percent
equity stake in IPCL to Reliance Industries.
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