Dhirubhai Ambani and Reliance

The Stock Market Adventure

Dhirubhai's biggest contribution to the nation was the development of an equity culture. Having understood the psychology of the Indian capital markets and the mindset of Indian investors, he was instrumental in introducing the equity culture in India. Dhirubhai gave importance to the small investor and his contributions, and by doing so, he involved millions of middle class investors. Reliance went public in 1977 and had its first annual general meeting (AGM) in 1977. Reliance Industries had 58000 investors in 1977. So large was Reliance's investor base that at times executives had to go to small cities, with the share certificates, annual reports and other such correspondence, as personal luggage, and post them locally.

Reliance holds the record for bringing out the single largest domestic issue of more than Rs 21 billion in convertible bonds for Reliance Petroleum in 1993. The market capitalization of Reliance was Rs 1.2 billion in 1980, which rose to Rs. 9.96 billion in 1990, and shot up to 96.2 billion in 1995, making Dhirubhai one of the richest men in the world. The end of the High Unit Value scheme of 1978 brought about a dip in the profits of Reliance. In spite of this, Dhirubhai declared a dividend of 27 %. Whenever Reliance needed money to fund its expansion purposes, Dhirubhai opted for a public issue. From 1979 to 1982, Reliance brought out several issues for different purposes like: financing a worsted spinning mill, modernizing its already existing textile mill, financing a PFY plant, and to overcome the bear syndicate crisis respectively.

The 1979 issue of Reliance introduced an innovative financial instrument, the partially convertible debentures. However Dhirubhai found it difficult to get permission from the controller of special issues. Dhirubhai argued that this instrument would give investors a guaranteed return and capital appreciation. He lobbied the government until it accepted the concept. This issue was over subscribed 6 times and soon convertible debentures (both partial and whole) became instruments of choice.

The 1982 issue generated Rs 500 million. It was the biggest issue in those days. In 1982, Dhirubhai faced threat from a Calcutta based bear syndicate. The bear syndicate sold 1.1 million Reliance shares worth Rs 160 million on March 18, 1982. This was all a part of their shortselling strategy wherein they planned to buy the same shares at a later stage for cheaper rates, making considerable profits.

Dhirubhai Ambani and Reliance - Next Page >>>

Case Details

Case Code : LDEN011
Themes: Corporate Social Responsibility, Great Leaders
Case Length : 17 Pages
Period : 1958-2002
Organization : Reliance India
Pub Date : 2001
Teaching Note : Not Available
Countries : India
Industry : Varied

Free Case Studies

Business Strategy
Finance
HRM
Insurance
IT and Systems
Marketing
Operations
Leadership
More Case Studies >>

Micro Case Studies

Business Environment
Business Ethics
Business Strategy
Human Resource Management
IT and Systems
Marketing
Operations
Micro Case Studies >>

Free Resources

Micro Case Studies
Free Case Studies
Articles
Interviews
Book Reviews
Glossary
Online Quiz
More Free Resources >>

Case Related Links

Best Selling Case Studies
Business Case Studies
Learning With Case Studies
Cases Used in Textbooks
Prize Winning Case Studies
More Case Studies >>

Case Studies and Management Resources