Articles of Dhirubhai Ambani.....

ULTIMATELY, success is all that matters. That was the credo firing the spirit of Dhirajlal Hirachand Ambani.

Dhirubhai’s life was, indeed, a thumping success story of a small town boy building a giant corporation that propelled him into the ranks of the world’s richest men by the time of his death.

In Dhirubhai’s view of the world of business, the end justified the means. Not something that everyone would agree with. But Dhirubhai swore by this dictum and he proved the point in his own lifetime. He built a $12-billion company from scratch. He was the prime force in introducing the equity cult in the country.

His biggest achievement, however, is something that cannot be quantified — he infused the spirit of business among an entire generation of Indians who were inspired by his rags-to-riches story. He was a living motif for how inspiration coupled with hard work and the “can-do” spirit can take one to great heights.

Being a Kathiawari, Dhirubhai was endowed with sharp business acumen and a spirit of adventure. But more than this in-born trait, there were three characteristics that set Dhirubhai apart in the conservative world of Indian business.

First, his phenomenal risk-taking ability that was far higher than other contemporary businessmen. He was a born risk-taker and believed in taking on and managing calculated risks.

When he founded Reliance Commercial Corporation in 1958, the forerunner of Reliance Industries as we now know it, Dhirubhai had just returned to India from Aden, Yemen, with his toddler-son, Mukesh, and his wife, Kokilaben, who was expecting their second child, Anil (born in 1959). It required a man of immense guts to sink his life-time savings of about $3,000 in the business of trading spices, betel nuts, cotton and viscose textiles.

In fact, Dhirubhai showed early signs of his risk-taking ability back in Aden when he was an employee of Besse & Co. Legend has it that the young Dhirubhai once took a bet that he could dive off the ship on which he was working in the harbour and swim to the shore in shark-infested waters. The bet? An ice-cream. He got it.

It is this same risk-taking ability that helped him when he ventured into textile manufacturing in 1966 within a year of buying out his original partner in the yarn business, Champaklal Damani. Ditto when he ventured into the backward integration project of setting up a plant to produce fibre intermediate, purified terephthalic acid (PTA) in the mid-80s — he was taking on established businesses and businessmen. In fact, much of his fund-raising for the large capital-intensive projects that his group was involved in the 80s and 90s was underlined by tremendous risk.

Second was his firm belief that business is nothing but a web of relationships and obligations. Success depended on the right contacts in the right places and Dhirubhai perfected this to a fine art. This was a pre-requisite in the India of controls and permits where the bureaucrats and politicians sitting in New Delhi determined the fate of your business down in Kanyakumari. Dhirubhai understood this early and directed his energies in cultivating the powers that be. His was the Indian version of American business lobbying.

He believed in proactive moves rather than reacting to Government policy which is what his contemporaries were doing. This capacity to “manage the environment” would be responsible for the dark spots that any chronicler of the Reliance group’s evolution would encounter.

Finally, his ability to see the larger picture and think big. Even in the laid-back 80s, Dhirubhai could see that he needed to integrate himself across the entire petrochemical chain to survive and grow. But for this vision, Reliance Textiles (as Reliance Industries was then known) would have remained just another textile company and would have vanished along with several others of its ilk in the liberalised nineties. He not only set up a PTA plant but ventured further backwards into naphtha cracking to enter the lucrative commodity plastics business.

The conception of the 7.5-million-tonne Hazira petrochemicals complex of Reliance Industries can only be termed as audacious for its times. It was done in the late 80s/early 90s when India had seen very few projects of such scale and genre. It is a tribute to the vision of the man that the Hazira project has been rivalled only by yet another of his own creations, the 27-million-tonne refinery project at Jamnagar.

If today Reliance Industries strides as a colossus across the petrochemical sector it is due to just that early vision of Dhirubhai. The ways and means he adopted to achieve that vision may not be something everybody would agree with but the dream itself was faultless.

Dhirubhai introduced innovative funding strategies such as the $100-year loan or the ingeniously designed triple option convertible debentures for the refinery project. The projects generated tremendous number of jobs, by themselves and in downstream sectors. The petrochemicals project made the country almost self-sufficient in plastics and synthetic fibre even as the refinery obviated petroleum product imports.

Dhirubhai’s life was as colourful as the turbans and sarees of his native Kathiawar. In media discussions and talk-shows, in stock market circles and in the industry, the mention of his name and his creation, the Reliance group, generates tremendous passion and will continue to do so.

It is sad indeed that Dhirubhai did not live long enough to see Reliance’s own retail petrol outlets come up. To operate the pump in one such outlet would have been the ultimate achievement for the man who began his life managing the Shell refuelling operation at a military base in far-off Aden 46 years ago.

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Mohandas Gandhi and Dhirubhai Ambani were the two most famous scions of the Modh Bania, a Hindu commercial caste based in the arid Saurashtra peninsula of India’s western Gujarat state. The Mahatma idealized traditional village ways, passive resistance, and homespun cotton. Ambani, a billionaire industrialist, preached prosperity to a burgeoning Indian middle-class via a business empire built on polyester.

Each changed India. Ambani’s public wore his textiles as durable suits and glittery saris. Indians invested by the millions in his Bombay-listed Reliance Industries, a sprawling conglomerate with $12.3 billion in annual sales that recently became India’s first privately owned entrant to the Fortune 500. When Ambani died on July 6 at age 69 after nearly two weeks in a stroke-induced coma, the country’s media recounted his rags-to-riches life as an Indian morality play.

Dhirubhai Ambani, Indian businessman, was born in Chorwad, Gujarat, on December 28, 1932. He died in Bombay on July 6, 2002, aged 69. Dhirubhai Ambani is survived by his wife, two sons and two daughters. His two American-educated sons have been in day-to-day control of the company since he suffered a stroke in 1986. He suffered a further stroke 12 days ago from which he never recovered.

Dhirubhai Ambani - Entrepreneur who built up the only Indian business to feature in the Forbes 500 One of India’s most dynamic and flamboyant entrepreneurs, Dhirubhai Ambani was head of the multibillion-dollar Reliance group of industries with extensive interests in textiles, petrochemicals, energy and telecommunications. Combining a keen sense of business with a razor-sharp ability to negotiate his way through the labyrinth of the Indian political establishment, Ambani single-handedly built a business empire that in just three decades outgrew corporate houses such as the Tatas and Birlas which had dominated the country’s industrial landscape for nearly a century.

Reliance is the only Indian private company to make the Fortune 500 list of the world’s largest corporations, and Ambani was listed by Forbes as the 138th richest person in the world this year.

The son of a petty trader from a remote village in rural Gujarat, Dhirajlal Hirachand Ambani — known as Dhirubhai — moved to Aden as a teenager in order to seek his fortune. He started work as a petrol station attendant before taking up a clerical position for an oil company that was the sole distributor of Shell products there. While in Aden, home to many Gujarati expatriates, he realised that a discrepancy between the rial-sterling exchange rate and the intrinsic value of the silver content in Aden’s coinage afforded an excellent opportunity to make money. This arbitrage generated some $3,000 in seed money for the modest trading enterprise that Ambani set up when he returned to Bombay in 1958.

The trading house Reliance Commercial Corporation began by importing polyester yarn and exporting spices. This was the era of India’s infamous “licence-permit raj”, when businessmen with political connections could corner export, import and manufacturing licences and accumulate huge fortunes.

Sensing an opportunity in the textile industry — higher disposable incomes were leading to Indians buying better, more expensive clothes — Ambani sought and received the necessary clearances to manufacture cloth from polyester fibre. He opened his first textile mill in Naroda, near Ahmedabad, in 1966 and then concentrated on quietly building up his business. Vimal, the textile brand he established, flourished and remains a household name in India today.

Though Reliance was a profitable enough concern, Ambani quickly calculated that further expansion — especially into related sectors — would depend on access to a cheap source of capital. Rather than turning to the banking system, he decided to tap Bombay’s fledgeling stock exchange, pioneering an equity cult that was to transform the corporate financing system in India. Reliance’s initial public offering in 1977 saw 58,000 investors buying shares; eventually, the number of Reliance shareholders was to climb to some three million.

To Indian middle-class salary-earners, Ambani held out the promise of instant enrichment through the stock market. But he was no fly-by-night operator: Reliance shares offered genuine value, and those fortunate enough to have had faith in the company in the early years eventually became millionaires. Annual general meetings were held in sports stadiums where Ambani would be treated by shareholders with adulation and even reverence.

In 1982 Ambani began the process of backward integration, setting up a plant to manufacture polyester filament yarn. He subsequently diversified into chemicals, gas, petrochemicals, plastics, power and telecom services.

By the late 1980s the Reliance group was one of India’s most influential and profitable concerns. However, the phenomenal growth of Reliance owed as much to Ambani’s acumen as to the ease with which he was able to get official rules and regulations — including import tariffs — introduced, amended or scrapped in order to undercut his rivals and push his own business interests. His methods earned him many bitter enemies in India’s corporate world. Ambani nevertheless forged ahead, cultivating friends in virtually every Indian political party and managing the media in such a way that critical stories about Reliance’s unconventional business methods seldom made it into the newspapers.

The final phase of Reliance’s diversification occurred in the 1990s when the company turned aggressively towards petrochemicals and telecommunications. But, like most business people, Ambani had rivals, the most bitter of whom was Nusli Wadia, of Bombay Dyeing, a patrician entrepreneur whose company was well established in the textile industry.

Ambani was also anxious to encourage the spread of information technology among India’s poor. Through Reliance Industries he arranged computer education and training for thousands of students in schools in Bombay. “You are getting an opportunity. Make the best use of it,” he told children in December during one of his last public speeches. “Be daring. Think big. You can be the best. If you believe in this, you will be the best.”

Ambani also saw the Indian Government’s privatisation programme as a means of further growth. Two months before his death, Reliance successfully bid for the giant public sector Indian Petro-Chemicals.

His two American-educated sons have been in day-to-day control of the company since he suffered a stroke in 1986. He suffered a further stroke 12 days ago from which he never recovered.

Dhirubhai H Ambani rose from humble beginnings to become chairman of India’s largest private sector company. In one of his more candid moments, the otherwise reticent tycoon summed up the secret of his remarkable success story. Even those who question his business dealings… readily concede that Ambani had a vision and matchless business acumen

Think big, think fast and think ahead. Born in 1932 to a school teacher father in the small village of Chorwad in western Gujarat state, Ambani followed this advice all his life. He dreamt big even as a small boy when he used to sell hot snacks to pilgrims outside a temple in his native village. And he did not stop dreaming big even when he went to Aden as a petrol pump attendant at the age of 17 to help support his family. It was this desire to make it big in life which prompted his return to India in 1958. Ambani came to Bombay and started his first company, Reliance Commercial Corporation, a commodity trading and export house.

The company was set up with an investment of 15,000 rupees (about $375). Forty-four years later Reliance has grown into a conglomerate with an annual turnover of $13.2bn. It is the only Indian private sector firm in the Fortune 500 list. In the process, the company has also acquired one of the world’s largest groups of shareholders, with over four million investors putting their faith in its stock. In 1966 the Reliance group opened its first textile mill in Naroda in Ahmedabad. The textile mill won accolades in 1975 from a World Bank technical team, who described it as “excellent by developed country standards”.

Two years later the company went public, evoking a tremendous response from investors. That made Ambani something of a revered figure among the stock investors’ fraternity, who held him in awe from then on. They credit the Reliance chairman with introducing a stock market culture in the country. In the 25 years since it went public Reliance has become more than just a textile industry player. It now has interests in power, telecoms, petrochemicals and life sciences as well. Under Ambani’s guidance it became one of the biggest first-generation success stories in Asia. Its founder will go down perhaps as the most controversial industrialist in India’s corporate history.

He was known for assiduously cultivating those in positions of power. Many observers attribute his phenomenal rise to his close contacts with the Congress leadership in the 1970s and 1980s. But even those who question his business dealings - especially in the earlier years of Reliance - readily concede that Ambani had a vision and matchless business acumen. While he and his family may have begrudged what they thought was insufficient recognition from his peers and the press till the 1980s, all that changed in the last decade, during which the Reliance family really flourished. Asiaweek magazine voted Ambani amongst the 50 most powerful men in Asia - not once but three times, in 2000, 1998 and 1996.

The federation of Indian chambers of commerce and industry (FICCI) conferred on him the Indian entrepreneur of the 20th Century award. A poll conducted by The Times of India in 2000 voted him “creator of wealth in the century”. And in December 2000 Ambani was honoured at a civic reception by the municipal corporation of Bombay. His sons, Mukesh and Anil, both of them groomed in business by their father, have turned into great business leaders in their own right. Rags to riches is click that is often applied to describe the climb up the ladder of even modestly successful businessmen. But it could hardly be more appropriately used than to trace the meteoric rise of Dhirubhani Ambani, Chairman of high flying Reliance Industries, rated among the top three business groups in India today.

From an initial investment of a mere Rs. 15000 in 1958 to start a trading house, followed by the setting up of his own tiny manufacturing facility in Gujarat in 1966, Ambani, Son of a rural school teacher, has managed to build up a synthetic yarn, textiles and petrochemicals empire that is today the third largest private sector mega corporation.

For the year ended March 1991, Reliance Industries is understood to have recorded a sales turnover of Rs. 2,300 crores ( more than US $ 1 billion), making it the third largest private corporation in the country to day. Those who predicted that he was a conman, a confidence trickster, have had to eat their words. “ I am the dubble that burst!” chortles Dhirubhai, sarcastically referring to the negative headlines that greeted his forays into the primary capital market in the early- 1980s.

Success on such a gigantic scale inevitable excites jealousy and enmity; and Ambani, today 58, has had to deal with his share. Reliance’s have been the subject of several exposes in the press. But these have neither fazed the tycoon extraordinaire, nor halted the inexorable progress of his march forward towards his goal of becoming the undisputed No.1 in the country.

To any sort of sniping in the press, Dhirbhai has responded with stoic silence. Rarely has he reacted to even the most stringent media criticism. In the last couple of years, though, he has taken a leaf out of industrialist-cum press baron Ramnath Goenka’s book. He has taken the precaution of shoring up his own strength in the media, not minding the expenditure of huge sums of money, and timing the launches of his products to a nicety.

Though not as physically hardy as before, Dhirubhai has not let the permanent handicap of the paralytic stroke blunt the edge of his razor-sharp brain. It is still from his fourth floor office in Maker tower IV at Nariman point that all major policy decisions which affect the future of the Reliance group are taken. The routine running of the organization is left to Mukesh and Anil, who nevertheless consult him in all key matters.

There are some opinion-makers, like well-known newspaper editor Vinod Mehta, who have referred in print to Dhirubhai Ambani as ‘the embodiment of evil; However, to the Gujarati business community, he has assumed the status of demi-god. To al aspiring small-time entrepreneurs, he has become a sort of benchmark they aim at. And so, with each succeeding day, the legend to Dhirubhai Ambani continues to gather spice.

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THE PASSING away of Dhirubhai Ambani, Chairman of the Reliance group on July 6, signals the end of an era in Indian corporate history. For the company, however, it raises some queries regarding the future of the group.

While there is no shortage of plaudits for the genius and financial acumen of Dhirubhai Ambani, his two sons — Mukesh Ambani (45), Vice Chairman and Managing Director, and Anil Ambani (43), Managing Director of Reliance — have inherited the reins of a Rs. 65,000 crore empire.

The reasons why Dhirubhai Ambani is touted as having the equity cult in the country are not far to seek. The company entered the capital market in 1977 with what was then a huge public issue of 28 lakh shares under the name of Reliance Textile Industries. Thereafter, it has approached the market on several occasions and the investing public have always responded heartily.

The stage was set in 1985 itself when the company’s annual meeting was held in the Cooperage grounds of Mumbai (a football stadium) and attended by no less than 12,000 eager investors.

First to tap GDR market

Reliance was also the first Indian company to successfully tap the Global Depository Receipt (GDR) market in 1992. It is also the only Indian company to raise 50 and 100 year bonds in the U.S. debt markets. Thus, it successfully raised cheaper funds overseas with lower borrowing costs to repay higher cost Indian borrowings.

The company also successfully dabbled in the stock market; often creating controversy and there is no shortage of accusations that it `managed’ the political environment and has often been seen to have influenced policy making.

In the years of the `Licence Raj’ — industrial policy declarations made periodically where public sector enterprises were given preference for licences, example, availability of raw materials, foreign exchange and quotas — a phenomenon that peaked in the late 1970s and the early 1980s but died out in the 1990s, Ambani’s skills were at their best. A senior industrialist, when asked what differentiated Ambani from other businessmen, said, “Everyone managed to get things done during that period; only Dhirubhai managed it better.”

Phenomenal growth An interesting fact is that the Reliance group has seen its most phenomenal growth in the last decade and a half; the period when Dhirubhai Ambani had already suffered his first debilitating paralytic stroke. Recall that when he suffered the stroke in 1986, the company’s assets were a mere Rs. 1,000 crores. Then, it had three major projects going on stream — PTA (purified terephthalic acid), PSF (polyester staple fibre) and LAB (linear alkyl benzene) — all inputs for polyester — in Patalganga. The Hazira mega complex was then only an aspiration.

The secret of the success post-1986 is buffeted by the transition of power from the father to sons Mr. Mukesh Ambani and Mr. Anil Ambani with a clear cut division of responsibility between the two under the supervision of Dhirubhai Ambani.

While one face of Reliance is its project implementation skills, the second is the financial wizardry. The project implementation team is kept away from all the happenings of the corporate team. The skills of the project team are borne out by the fact that it was able to implement the mega projects at Patalganga, Hazira and Jamnagar in record time.

The financial team has, over the years shifted from raising funds from domestic equity investors to financial institutions and overseas investors. Today, Reliance enjoys a high credit rating and has no problem convincing institutional investors. The project implementation and finance teams are considered worldclass and top of the line.

Today the Reliance group is the country’s largest enterprise in the private sector with revenues in excess of Rs. 60,000 crores, assets of Rs. 55,000 crores and a net profit in excess of Rs. 4,500 crores. Its sphere of activity span petrochemicals — up and down the value chain — including synthetic fibres, fibre intermediates, textiles and oil and gas. More recently, Reliance entered financial services, power, insurance, telecom, biotechnology and infocom.

Foray into telecom

The recent diversifications are unrelated and that is where Reliance will have to really pass the acid test. That the group does not lack financial muscle to power its way into these areas is a given, but each of the new areas is as unrelated to the other as it is huge. The telecom-infocom foray is a case in point. The Reliance group has committing to invest more than Rs. 25,000 crores in this sector that is beset with competition.

Reliance has a 26 per cent stake in Reliance Telecom which provides cellular services to over 3.50 lakh subscribers over 15 States. The group will also be investing in building a broadband backbone, to connect 115 cities with 60,000 kilometres of fibre. Reliance Infocom plans to have a national footprint in telecom with a presence in fixed line, mobile, national and long distance and international long distance telephony, data, image and value added services. This, however, goes against the recent international trend of choosing the more remunerative value-added services over building and renting telecom infrastructure.

Then there are new areas such as insurance and biotechnology that needed to be tackled. This is where the mettle of Mr. Mukesh Ambani and Mr. Anil Ambani will be tested or not.

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Dhirajlal Hirachand Ambani, 1932-2002.

IT did not take the throngs that gathered, the tears that were shed and the tributes that were paid at Dhirubhai Ambani’s funeral to prove that he had established himself as a legendary leader among industrial capitalists in India. Even when he lived he had taken on a legendary dimension.

Not surprisingly, fables about him abound, many of which were recalled by the media when he passed away on July 6. The most-quoted one was the familiar rags-to-riches story, of a determined individual who ostensibly arrived in Bombay (now Mumbai) from Aden in the late 1950s with Rs.500 in his pocket and went on to build a Rs.65,000-crore empire. He was also reportedly a man who learnt far more than others just by plying his trade, with instances of such knowledge varying from his reported ability to recognise the denier and quality of yarn by the sound of its twang when held to his ear to the capability to choose the best in technology in any sector he chose to invest in. Other tales were less complimentary, such as the one that he was a person who, though himself never a politician, could make and break both politicians and governments across the country to boot. There are stories of ruthlessness, when it came to bending the rules and winning the game, that made him the success that he was.

PAUL NORONHA

Fables such as these, built often on a modicum of truth and sometimes from thin air, were testimony to the success of Dhirajlal Hirachand Ambani. Needless to say, as is true of all winners, in Dhirubhai’s case too, individual qualities - an acute mind, a sense of the other, a degree of cunning, an element of ruthlessness and a large dose of gumption that is required to make the dash to victory - would have contributed to the end result in no small measure. But by focussing on the man and his entrepreneurial adventure, they denude his life of social context and divert attention from the specific way in which the road to success of Dhirubhai and his Reliance group was related to India’s post-Independence industrial history. Dhirubhai was, after all, as much a product of his times as he was one who recognised and exploited the opportunities those times offered. That strategy needs to be and will be studied and analysed. But the occasion demands that a beginning is made.

When Ambani began business, a few business houses whose names and history captured the progress of industrial capitalism in India monopolised Indian industry. With their organisational features, their diversified structure, their dominance of virtually every sphere of manufacturing and their control over finance, they were able to manoeuvre the regulatory system, especially the licensing system, in their favour. Their track record, their financial strength, and their ability to attract credible foreign partners and to access information from within the secretive portals of the state, ensured that they were in a position to garner more than a fair share of licences. They used these licences for new investments in areas that were expanding and were profitable. But they merely held on to them as a means to prevent the entry by others into areas which they already dominated and where the profitability of new investment was not in keeping with the high returns they had come to expect in India’s protected market.

This meant that the licensing system, meant to ensure that actual investments were in keeping with planned inter-sectoral allocations, and expected to curb monopoly and prevent excessive regional concentration, failed to realise these very goals. Rather, it served as a barrier to entry that protected the traditional bases of monopoly power of the business groups that had historically dominated India’s industrial scene. Combined with tariff and non-tariff protection against competition from imports, this barrier to entry ensured that these groups continued to flourish even though they spread their investments thin, invested in uneconomic plants even in areas where there were substantial economies to be gained from increases in scale, and saddled themselves and the economy with high costs of production relative to that in the world economy. For newcomers like Dhirubhai Ambani, therefore, accumulation had to occur in areas outside the traditional spheres of operation of established oligopoly. He chose the synthetic fibre trade, which carried synthetic yarn from the few producers of the commodity to the vast number of composite mills and burgeoning powerloom producers that were its users. It was an area where the margins, resulting from extremely high protection, were adequate to provide a decent return to the trader as well.

To many, the subsequent investment of the surpluses accumulated in trading in textile production and the synthetic fibre industry, beginning with the first plant established in 1966, was a “natural transition”. But there were many prerequisites that had to be met for that transition to be made. First, Dhirubhai needed to break through the barriers to entry that the licensing regime had put in place. Second, he needed to have at his disposal an adequate amount of own capital to ensure that he could obtain the necessary credit to make up the capital required for investment in a capital-intensive area. Third, after entry, he needed to survive the competition he would face from the established players with deep pockets operating in the field. Further, if initial success had to be built upon to generate the business colossus that Reliance is, this strategy had to be replicated in more areas than one without being marooned by wrong decisions and damaging investments.

In his effort, Dhirubhai and his team were helped by circumstances. His trading operations combined with thrift, one presumes, allowed him to muster the capital needed for his first foray into manufacturing. While this was being done, the licensing regime was itself losing its credibility, having failed to achieve its objectives of ensuring an optimal allocation of investment, of curbing monopoly and of reducing regional concentration. This made the licensing system completely ad hoc and arbitrary, enabling new entrants to manoeuvre the system in their favour. It was here that Dhirubhai exercised his acumen to win favour with, manipulate and benefit from the power of the bureaucracy and the political class. This ability, which allegedly was used to garner more than a few initial benefits, won him not only the licences he wanted but also a degree of notoriety.

Finally, Ambani’s success in breaking into and coming to dominate the synthetic fibre industry was related to his ability to exploit the weakness stemming from the uneconomic scales which the business groups had established in the synthetics area during the years of external and internal protection. Partly in order to protect the domestic raw cotton producer and partly because of a perception that synthetics are a luxury because they involve a drain of foreign exchange, polyester staple fibre (PSF) and filament yarn (PFY) were heavily protected areas. In January 1985, for example, the customs inclusive price of PSF (1.5 D) and PFY (76 D) were at Rs.38.59 and Rs.114.56 per kg, more than double the cost, insurance and freight (c.i.f.) prices of Rs.16.91 and Rs.44.25 respectively. It was that protection which allowed firms to manage with relatively small installed capacities of around 8,000-10,000 tonnes in the case of PSF and even less in the case of PFY as compared with international capacities exceeding 1,00,000-1,50,000 tonnes for PSF and 60,000-1,00,000 for PFY. At that time Reliance entered the industry with official capacities of 45,000 tonnes in the case of PSF and 25,125 tonnes in the case of PFY. This would have allowed it to operate at much lower costs and earn relatively high returns and surpluses at the prevailing domestic prices. According to a World Bank study of the synthetic fibre sector, the price per kg of PSF manufactured from dimethyl terephthalate (DMT) falls from $6.36 per kg to $4.76 per kg as capacity increases from 6,000 tonnes per annum (tpa) to 30,000 tpa. That is, the fact that Reliance chose to enter a sector where the benefits of scale are large would have both helped it outcompete existing players as well as enhance its surpluses and therefore its ability to expand into new areas substantially.

In the initial years the process of expansion reflected Reliance’s decision to integrate vertically and concentrate on petrochemicals and downstream products. Throughout this period there were a number of features that characterised the strategy of the group: (i) continuous vertical integration (a) from synthetic textiles into the manufacture of polyester fibre and filament yarn, (b) from yarn and fibres to intermediates like purified terephthalic acid and mono-ethylene glycol; and (c) further upstream into basic building blocks like paraxylene; (ii) consolidation of internal capabilities generated in this process through related horizontal diversification into petrochemical end-products such as detergent intermediates, for example, linear alkyl benzene (LAB), or thermoplastics like high density polyethylene (HDPE), low density polyethylene (LDPE), polyvinyl chloride (PVC), polystyrene (PS), polypropylene (PP) and styrene butadiene rubber (SBR - synthetic rubber) and their intermediates and basic building blocks; and (iii) efforts to complete this process of integration through investment in an NGL/naphtha cracker and in oil extraction itself.

THIS strategy of committing all its investments in large capacities in closely related areas was indeed risky. But, in practice, adopting that risky strategy not only helped Reliance make major inroads into the industrial sector, but also provided it with handsome dividends. The point to note is that the strategy was not in the first instance one of becoming globally competitive. Rather, it was one of making inroads into the bases of traditional oligopoly. Even if this implied that Reliance had to set up world-class facilities, the latter were not used to support an export thrust. Reliance focussed on the domestic market where revenue opportunities were not lacking, and margins were much higher, permitting the generation of huge investible surpluses. In adopting this strategy, Ambani’s Reliance group acquired through outright purchase the best-practice technologies in the field. With world-scale plants, Reliance proved doubly competitive: not only was it able to displace both domestic producers and international suppliers from the market at prevailing customs duty rates, but in fact it could remain competitive even when duty rates were reduced. The strategy of ‘going it alone’, while investing in world-scale plants based on outright purchase of technology, obviously raised domestic financing requirements substantially.

It was here that Ambani exploited the other opportunity that the changing times offered. This was the possibility of mobilising money from households through the stock market. India’s stockmarkets were until the 1970s dominated by the financial institutions and a few large players, with trading activity being minimal and limited to a few shares. The first instance of equity serving as an option for investment of household savings arose when foreign companies, pressured by the Foreign Exchange Regulation Act (FERA), decided to dilute their equity through sale in small lots. With “respected” foreign corporates making an offer of equity with a credible promise of regular dividend payments, individual small investors made their first foray into the stock market. Seeing the opportunity this offered, Reliance under Ambani decided to enhance its equity strength to undertake new investments by tapping stock markets. Reliance made its first public issue in 1977, when it offered a chunk of Rs.10 shares to investors. The shares opened at Rs.23 reflecting the premium that Reliance was in a position to command. In the years to come, Reliance was to exploit the market through many routes to finance its breakneck expansion, garnering in the process huge premiums on the shares of existing companies. By the end of 1992, out of a total capitalisation of Rs.34,255 crores, share premium reserves and surpluses alone accounted for Rs.7,640 crores. Besides this, Reliance was to use the convertible debenture route and the American Depository Receipt (ADR) and Global Depository Receipt (GDR) issues to much benefit.

With large surpluses coming from its petrochemical operations and share premium reserves and additional equity and debt coming from the markets, Reliance was in a position to finance the rapid growth which took it to its current position as one among the leading business groups in India. Late in that process Reliance too decided to take the route of becoming a diversified conglomerate, entering unrelated areas like telecommunications, power and financial services.

It is indeed true that the growth and success of Reliance reflect the vision and the entrepreneurial skills of its founder. But they also epitomise the internal process of restructuring that Indian industry had begun to go through as the earlier system of regulation lost its credibility and was being gradually diluted. If Reliance had shown the way to others in that environment, India would perhaps have produced more globally competitive indigenous business groups. Unfortunately, before that process could gain momentum and be given a chance, the government opted for its current strategy of reform in which international rather than new or restructured Indian firms are coming to dominate the industrial sector.

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The two faces of Dhirubhai Ambani

PARANJOY GUHA THAKURTA

HE achieved what almost everybody would consider impossible. In a life spanning 69 years, he built from scratch India’s largest privately controlled corporate empire. Dhirajlal Hirachand – better known as Dhirubhai – Ambani would often say that success was his biggest enemy. He was a man who aroused extreme responses in others. Either you loved him or you hated him. There was just no way you could have been indifferent to this amazing entrepreneur who thought big, acted tough, knew how to bend rules or have rules bent for him. He was a visionary as well as a manipulator, a man who communicated with the rich and the poor with equal felicity, who was generous beyond the call of duty with those whom he liked and utterly ruthless with his rivals – a man of many parts, of irreconcilable contrasts and paradoxes galore.

Dhirubhai Ambani expired on Saturday July 6, roughly ten minutes before midnight, at Mumbai’s Breach Candy Hospital where he had been admitted after he suffered a vascular stroke on the evening of June 24. This was his second stroke – the first had occurred more than sixteen years earlier, in February 1986, leaving the right side of his body paralysed. At his cremation, the well-heeled rubbed shoulders with the ordinary. No Indian businessman ever attracted the kind of crowd that Dhirubhai did on his last journey. After his cremation on the evening of Sunday July 7, his elder son Mukesh reminded those gathered on the occasion that in 1957, when Dhirubhai arrived in Mumbai from Aden in Yemen, he had only Rs 500 in his pocket.

He was not exactly a pauper since Rs 500 meant much more than what the amount means in this day and age. Nevertheless, one could not ask for a more spectacular ‘rags-to-riches’ tale. The second son of a poorly paid school-teacher from Chorwad village in Gujarat, he stopped studying after the tenth standard and decided to join his elder brother, Ramniklal, who was working in Aden at that time. (Not surprisingly, Dhirubhai ensured that his two sons went to premier educational institutions in the US – Mukesh was educated at Stanford University and Anil at the Wharton School of Business.)

The first job Dhirubhai held in Aden was that of an attendant in a gas station. Half a century later, he would become chairman of a company that owned the largest oil refinery in India and the fifth largest refinery in the world, that is, Reliance Petroleum Limited which owns the refinery at Jamnagar that has an annual capacity to refine up to 27 million tonnes of crude oil.

When he died, the Reliance group of companies that Dhirubhai led had a gross annual turnover in the region of Rs 75,000 crore or close to US $ 15 billion. The group’s interests include the manufacture of synthetic fibres, textiles and petrochemical products, oil and gas exploration, petroleum refining, besides telecommunications and financial services. In 1976-77, the Reliance group had an annual turnover of Rs 70 crore. Fifteen years later, this figure had jumped to Rs 3,000 crore. By the turn of the century, this amount had skyrocketed to Rs 60,000 crore. In a period of 25 years, the value of the Reliance group’s assets had jumped from Rs 33 crore to Rs 30,000 crore.

The textile tycoon’s meteoric rise was not without its fair share of controversy. In India and in most countries of the world, there exists a close nexus between business and politics. In the days of the licence control raj Dhirubhai, more than many of his fellow industrialists, understood and appreciated the importance of ‘managing the environment’, a euphemism for keeping politicians and bureaucrats happy. He made no secret of the fact that he did not have an ego when it came to paying obeisance before government officials – be they of the rank of secretary to the Government of India or a lowly peon.

Long before Dhirubhai entered the scene, Indian politicians were known to curry favour with businessmen – licences and permits would be farmed out in return for handsome donations during election campaigns. The crucial difference in the business-politics nexus lay in the fact that by the time the Reliance group’s fortunes were on the rise, the Indian economy had become much more competitive. Hence, it was insufficient for those in power to merely promote the interests of a particular business group; competitors had to simultaneously be put down. This was precisely what happened to the rivals of the Ambanis.

Who remembers Swan Mills? Or Kapal Mehra of Orkay? Even Nusli Wadia of Bombay Dyeing is a pale shadow of what he would certainly have liked to be. The undivided Goenka family that used to control the Indian Express chain of newspapers – which carried on a campaign against the Reliance group in 1986-87 – is currently divided into three factions. Whereas the multi-edition newspaper has not entirely lost its feisty character, it is yet to fulfil its late founder Ramnath Goenka’s cherished dream of becoming a market leader in at least one of its many publishing centres.

A popular joke starts with a question: Which is the most powerful political party in India? Answer: the Reliance Party of India. Others divide the country’s politicians into two groups: a very large ‘R-positive’ group and a very small ‘R-negative’ section. It is hardly a secret that Dhirubhai’s support base would easily cut across political lines. Very few politicians have had the gumption to oppose the Ambanis, just as the overwhelming majority of journalists in the country preferred not to be critical of the Reliance group. The Indian media, most of the time, has chosen to lap up whatever has been doled out by the group’s public relations executives. The bureaucracy too has, by and large, favoured the Ambanis, not merely on account of the fact that many babus have got accustomed to receiving expensive hampers on the occasion of diwali.

While Dhirubhai did not have too many scruples when it came to currying favour with politicians and bureaucrats, what cannot be denied is the fact that perhaps no businessman in India attracted the kind of adulation he did. He was more than just a legend in his lifetime. He successfully convinced close to four million citizens, most of them belonging to the middle class, to invest their hard-earned savings in Reliance group companies. He was fond of describing Reliance shareholders as ‘family members’ and the group’s annual general meetings acquired the atmosphere of large melas attended by hordes.

What cannot also be refuted is the fact that the Reliance group believed in rewarding its shareholders handsomely. Much of the credit for the spread of the so-called ‘equity cult’ in India in recent years should rightfully go to Dhirubhai, even if the Reliance group was often accused of manipulating share prices. Two group companies that once carried the cumbersome names of Reliance Poly-Ethylene and Reliance Poly-Propylene – popularly called Ilu and Pilu – went to the extent of blandly stating in the fine print of their public issue prospectus documents that the value of the shares of the companies had been increased though thin and circular trading. On another occasion in January 1998, a functionary of Reliance Petroleum replied to a show-cause notice served on the company by agreeing to shell out a sum of Rs 25 crore to ‘buy peace’ with the income tax authorities.

When, after having spent eight years in Aden, Dhirubhai returned to Mumbai, his lifestyle was akin to that of any ordinary lower middle class Indian. In 1958, the year he started his first small trading venture, his family used to reside in a one room apartment at Jaihind Estate in Bhuleshwar. After trading in a range of products, primarily spices and fabrics, for eight years, Dhirubhai achieved the first of the many goals he had set for himself when he became the owner of a small spinning mill at Naroda, near Ahmedabad. He did not look back.

He decided that unlike most Indian businessmen who borrowed heavily from financial institutions to nurture their entrepreneurial ambitions, he would instead raise money from the public at large to fund his industrial ventures. In 1977, Reliance Industries went public and raised equity capital from tens of thousands of investors, many of them located in small towns. From then onwards, Dhirubhai started extensively promoting his company’s textile brand name, Vimal. The story goes that on one particular day, the Reliance group chairman inaugurated the retail outlets of as many as 100 franchises.

He had by then already succeeded in cultivating politicians. Indira Gandhi returned to power in the 1980 general elections and Dhirubhai shared a platform with the then prime minister of India at a victory rally. He had also become very close to the then finance minister Pranab Mukherjee, not to mention the prime minister’s principal aide R.K. Dhawan. He realised that it was crucial to be friendly with politicians in power, especially at a time when the group had embarked on an ambitious programme to build an industrial complex at Patalganga to manufacture synthetic fibres and intermediates for polyester production.

In 1982, Dhirubhai created waves in the stock markets when he took on a Kolkata-based cartel of bear operators that had sought to hammer down the share price of Reliance Industries. The cartel badly underestimated the Ambani ability to fight back. Not only did Dhirubhai manage to ensure the purchase of close to a million shares that the bear cartel offloaded, he demand physical delivery of shares. The bear cartel was rattled. In the process, the bourses were thrown into a state of turmoil and the Bombay Stock Exchange had to shut down for a couple of days before the crisis was resolved.

The mid-eighties were a period during which the Reliance group got locked in a bitter turf battle with Bombay Dyeing headed by Nusli Wadia. The two corporate groups were producing competing products – Reliance was manufacturing purified terephthalic acid (PTA) and Bombay Dyeing, di-methyl terephthalate (DMT). Wadia lost the battle and reportedly became the source of information for many of the articles against the Ambanis that subsequently appeared in The Indian Express. In 1985, the Mumbai police accused a general manager in a Reliance group company of conspiring to kill Wadia, a charge that was never established in a court of law. Many years later, a newspaper owned by the Ambanis would accuse Wadia of illegally holding two passports and played up the fact that he was Mohammed Ali Jinnah’s grandson.

1986 was a crucial year for Dhirubhai. He suffered a stroke in February that year. A few months later, the Express began publishing a series of articles attacking the Reliance group as well as the Indira Gandhi regime for favouring the Ambanis. These articles were coauthored by Arun Shourie who, ironically, as Union Minister for Disinvestment in the Atal Behari Vajpayee government, presided over the sale of 26 per cent of the equity capital of the former public sector company, Indian Petrochemicals Corporation Limited (IPCL), to the Reliance group in May this year. By gaining managerial control over IPCL, the Reliance group would now be able to dominate the Indian market for a wide variety of petrochemical products.

Shourie’s coauthor for the famous series of anti-Reliance articles was Chennai-based chartered accountant S. Gurumurthy who happens to be a leading light of the Swadeshi Jagaran Manch, an outfit that espouses the cause of economic nationalism and is closely affiliated to the Rashtriya Swayamsevak Sangh (RSS), the ideological parent of the ruling Bharatiya Janata Party (BJP). The Express articles written by Shourie and Gurumurthy meticulously detailed a host of ways in which the government of the day had gone out of its way to assist the Ambanis. One article was on the subject of how the Reliance group imported ‘spare parts’, ‘components’ and ‘balancing equipment’ of textile manufacturing machinery to nearly double its production capacities. The article provocatively claimed the Ambanis had ‘smuggled’ in a plant.

Another story detailed how companies registered in the tax haven, Isle of Man, with ridiculous names like Crocodile Investments, Iota Investments and Fiasco Investments had purchased Reliance shares at one-fifth their market prices. Curiously, most of these firms were controlled by a clutch of nonresident Indians who had the same surname, Shah. Though Pranab Mukherjee had to change a reply he gave in Parliament on the investments made by these firms, an inquiry conducted by the Reserve Bank of India could not find any evidence of wrongdoing. Yet another article detailed how the group had been the beneficiary of a ‘loan mela’ – a number of banks had loaned funds to more than 50 firms that had all purchased debentures issued by Reliance Industries.

Vishwanath Pratap Singh was one of the few politicians who took on the Ambanis. In May 1985, as finance minister in Rajiv Gandhi’s government, he suddenly shifted imports of PTA from the OGL (Open General Licence) category. At that juncture, Reliance needed to import this product to manufacture polyester filament yarn. It was found that the group had ‘persuaded’ a number of banks to open letters of credit that would allow it to import almost one full year’s requirement of PTA on the eve of the issuance of the government notification changing the category under which PTA could be imported. It was hardly a coincidence that soon after V. P. Singh fell out with Rajiv Gandhi, various tax agencies of the Indian government raided the premises of the Express group.

Things got difficult for the Ambanis after V.P. Singh became prime minister in December 1989. In 1990, government-owned financial institutions like the Life Insurance Corporation and the General Insurance Corporation stonewalled attempts by the Reliance group to acquire managerial control over Larsen and Toubro, one of India’s largest construction and engineering companies. Sensing defeat, the Ambanis resigned from the board of the company after incurring large losses. Dhirubhai, who had become L&T chairman in April 1989, had to quit his post to make way for D. N. Ghosh, former chairman of the State Bank of India.

Once again, in an ironical twist of fate, more than eleven years later, the Reliance group suddenly sold its stake in L&T to Grasim Industries headed by Kumaramangalam Birla. This transaction too attracted adverse attention. Questions were raised about how the Reliance group had increased its stake in L&T a short while before the sale to Grasim had taken place. The watchdog of the stock markets, the Securities and Exchange Board of India (SEBI) instituted an inquiry into the transactions following allegations of price manipulation and insider trading. Reliance had to later cough up a token fine imposed by SEBI.

These are hardly the only controversies involving the Reliance group. Two senior executives of the Reliance group, including one who was known to be close to Dhirubhai, have been accused of violating the Official Secrets Act after a Cabinet note was found in their office during a police raid. One of these executives reportedly had links with a mafia don. Earlier, there had been a major uproar in the stock exchanges over alleged cases of ‘switching’ of shares and the issue of duplicate shares. Some of these transactions pertained to Dhirubhai’s personal physiotherapist.

More recently, last year, Raashid Alvi, a Member of Parliament belonging to the Bahujan Samaj Party, levelled a large number of allegations against the Reliance group. He distributed a voluminous bunch of photocopied documents to journalists that included the letter in which a Reliance group company had sought to ‘buy peace’ with the income tax department. The MP accused the Reliance group companies of manipulating their balance sheets and annual statements of account.

A week after Dhirubhai’s death, the Department of Company Affairs (DCA) confirmed that there was basis to some of the allegations raised by Alvi and that there were certain discrepancies in the balance sheet issued by Reliance Petroleum seven years ago. A group spokesperson sought to dismiss the discrepancy as a minor printing error that had been inadvertently committed. The DCA subsequently confirmed that different Reliance group companies had transferred interest income to one another in a questionable manner.

The plethora of scandals and controversies surrounding the Reliance group left Dhirubhai’s supporters completely unmoved. His supporters – and there was no dearth of them – would argue that there was no businessman in India whose track record was lily-white. Had the textile tycoon himself not acknowledged once to Time magazine that he was no Mother Teresa, they would ask. Even Hamish McDonald’s unflattering portrayal of Dhirubhai in his book The Polyester Prince – published in Australia by Allen and Unwin and not available in India – acknowledges his remarkable entrepreneurial talent that made him one of the few Indians on the Forbes list of the world’s wealthy and placed Reliance among the leading 500 companies in the developing world compiled by Fortune magazine.

Senior journalist T.V.R. Shenoy, in a tribute to Dhirubhai entitled ‘A Superman named Ambani’ posted on the rediff.com website, points out that the Reliance group accounts for three per cent of India’s gross domestic product (GDP), five per cent of the country’s exports, 10 per cent of the Indian government’s indirect tax revenues (excise and customs duties), 15 per cent of the weight of the sensitive index of the Bombay Stock Exchange and 30 per cent of the total profits of all private companies in the country put together. Another journalist, Manas Chakravarty, concluded his not-so-adulatory article in the Business Standard with the following sentence: ‘…it was (Dhirubhai’s) common touch combined with his uncommon vision that was the secret of his success.’

Dhirubhai’s supporters like to recall instances of his ‘common touch’ and his ability to interact with individuals from different walks of life. In 1983, he had hosted a lunch for 12,000 of his company’s workers on the occasion of the marriage of his younger daughter Dipti. The departed Reliance group patriarch would often wonder aloud that if he could achieve what he did in a lifetime, why could a thousand Dhirubhais not flourish. He was sure that there were at least one thousand individuals like him in the country who would dare to dream big. And if all these entrepreneurs could achieve their ambitions, India would become an economic superpower one day, he would remark.

Dhirubhai’s managerial skills were undoubtedly exceptional and he would repose his faith in professionals, many of whom had earlier worked in much-maligned public sector organisations. Whether it was the building of the petroleum refinery at Jamnagar in three years at a capital cost that was 30 per cent lower than comparable projects, or the restarting of the Patalganga plant in one month’s time after sudden floods had occurred in July 1989, the Reliance management team displayed their competence on many occasions.

The Ambanis often scored because they stuck to their knitting or focused sharply on their areas of ‘core competence’. The group flopped when they entered new areas, be these the print medium or financial services. The group’s foray into power generation too has so far not yielded significant results. Dhirubhai’s sons, Mukesh (45) and Anil (43) are keen on effectively implementing their plans of diversifying into the ‘new economy’, into new areas like telecommunications, life sciences and insurance. The Reliance group intends proving telecom services in many parts of the country and is currently building an optic fibre based broadband internet network connecting 115 cities. Only time will tell whether Mukesh and Anil prove to be worthy successors to their father. But one thing seems certain: they will try their level best not to be as controversial as Dhirubhai was.

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THE MAN WHO WOULD BE PRINCE: ‘Dhirubhai will go one day. But Reliance’s employees and shareholders will keep it afloat. Reliance is now a concept in which the Ambanis have become irrelevant,’ said Dhirajlal Hirachand Ambani, arguably India’s greatest entrepreneur ever, years before his death on July 6, 2002.
His words have proved prophetic, as the Reliance juggernaut keeps rolling on towards excellence.

Dhirubhai rose from humble beginnings to found India’s largest industrial empire and, in the process, became one of the world’s richest men. He transformed the way big business operates and thinks in India.

His death marked the end of a golden era in Indian entrepreneurship, but his values continue to guide the Reliance group, now run by his two sons, Mukesh and Anil.

HE CHANGED THE INDIAN STOCK MARKETS: Dhirubhai was praised for his key role in shaping India’s stock market culture by attracting hordes of retail investors to a market dominated by state-run financial institutions.
The history of the Indian market, there are two distinct eras — ‘Before Dhirubhai’ and ‘After Dhirubhai’. In the first, people invested in gold or land; the stock exchange was an arena reserved for the rich.

But that changed forever when Reliance went public in 1977. Dhirubhai created a new class of Indians — middle-class investors. Buying into the Ambani legend was one of the wisest decisions they ever made.

THE AMBANI MAGIC: 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.

And Dhirubhai held his shareholders spellbound, paying high dividends and bonuses at a time when equities were seen as a low-return, risky investment.

This made Dhirubhai 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.

THE MASTER STRATEGIST: Dhirubhai’s is not just the usual rags-to-riches story. He will be remembered as the one who rewrote Indian corporate history and built a truly global corporate group.
He was not a conformist, but those who chose to back Dhirbubhai’s style of doing business came up trumps. For, the ‘Dhirubhai school of management’ firmly believed that the only thing which mattered at the end were results and the benefits which accrued directly to the shareholders. And that is what he passed on to his two sons — Mukesh (right), the current chairman of the group, and Anil, the vice chairman.

His biggest success was his ability to carry people with him. From brilliant technocrats to financial whiz kids and high flier managers to small time dealers and messenger boys.

Assisted by his sons, Dhirubhai, unlike some of the other corporates of India, never had to face any internal revolt.

EVER THE FAMILY MAN: The Reliance patriarch, although busy all through the day building India’s largest private conglomerate and interacting with the crème de la crème of the world’s political, entrepreneurial and social superstars, always had time for his family.
He loved to play with his grandchildren, passing on qualities to them that would mould their future.

On June 16, 1998, Dhirubhai Ambani became first Indian ever to be awarded the Wharton School Dean’s Medal.
A galaxy of politicians and entrepreneurs attended the ceremony. Seen in the picture are former defence minister of India Mulayam Singh yadav (from the left), former Indian prime minister H D Deve Gowda, Dhirubhai’s wife Kokilaben, Dhirubhai himself, and Thomas Gerrity, Dean of the Wharton School, University of Pennsylvania, United States.

Dhirubhai was conferred the Economic Times Award for Corporate Excellence for Lifetime Achievement in August 2001.
Seen in the picture are Bollywood superstar Amitabh Bachchan (extreme left), Finance Minister Yashwant Sinha (third from left), Dhirubhai himself, and Dr Verghese Kurien, Chairman of the Gujarat Cooperative Milk Marketing Federation.

He was conferred the lifetime achievement award by India HRD Congress in February 2002. He was thrice rated ‘India’s Most Admired CEO’ in the Business Barons-Taylor Nelson Sofres-Mode survey in June 2001, 2000 and 1999.

Dhirubhai was picked by Asiaweek magazine as one of the 50 most powerful people in Asia.
‘If power is measured in face time with the leader of the free world, then Ambani has it in spades,’ said the magazine.

When he visited India, former US President Bill Clinton spent 45 minutes with the ‘Polyester Prince’. That was the measure of the power of the man.

Dhirubhai and his sons, Mukesh (left) and Anil (right), strike a happy pose with the charismatic Bill Clinton.

THE PAST AND THE FUTURE: The question about the future of Reliance group in the post-Dhirubhai Ambani era haunted millions of small investors, after the legend passed away.
But Dhirubhai had moulded his sons well. Mukesh and Anil learnt the lesson from their father in the art of market management, coupled with the enhancement of shareholders’ value that had helped the patriarch build an investor cult — and in the process build a formidable business empire.

The Mukesh-Anil duo is carrying on Dhirubhai’s legacy, even as the Reliance group continues to attain new heights.

ONE YEAR AGO…: It will be one year on July 6, 2003 since the Reliance patriarch passed away. But his group continues to reach dizzy heights under the stewardship of his sons.
On July 6, President A P J Abdul Kalam will deliver the first Dhirubhai Amabni Memorial Lecture, instituted in the memory of the late chairman of Reliance Group of Industries, in Mumbai.

A host of distinguished businessmen, speakers and politicians will greet the function.

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Dhirubhai Ambani and the stories that need telling
Why aren’t there more accurate biographies about Indian leaders? Or rather, why are Indian biographies usually worshipful eulogies of their subjects? The answer probably lies in the fate of Hamish McDonald’s book on Dhirubhai Ambani titled The Polyester Prince.

Usually biographies in India are commissioned works — sanitised and censored. As McDonald says — ‘No one (the subject of the biographies) drank, cursed, cheated or philandered. Their workers were part of the family. Almost everyone lived an abstemious vegetarian life, accumulating wealth only to give it away to temples, hospitals and schools.’

That is indeed true. Forget about biographies, Indian journalists are normally very reticent about being critical unless their subject is caught in a scam or a scandal. Independent biographies do not pay because publishers claim that the market is too small to cover research, marketing and publicity costs.

Newspaper groups too are uninterested in helping their journalists in doing detailed reportage into books. Hamish McDonald’s experience with his book on Dhirubhai Ambani — one of India’s most controversial industrialists — is a good example of what would happen to authors who dare to be frank and independent.

Published in 1998, the book is still not available in Indian bookshops because the Ambanis have threatened legal action for anything they perceive as defamatory in the book. This ban of sorts has, in fact, increased the curiosity value of the book. A small but steady stream of books continues to be brought into India from friends or relatives living abroad. Those who know of its existence want to buy/borrow or photocopy it. In fact, the book probably made it to print only because the publishers — Allen & Unwin — are Australian and decided to take a chance selling the book outside India.

Why should Reliance work overtime to block the book? After all, the author, a senior journalist, was the Delhi bureau chief for the Far Eastern Economic Review for several years, and had written a responsible and painstakingly researched account that respects Ambani’s undoubted genius but is candid about his ethics and methods. Also, I know about Hamish’s persistent efforts to get the Ambanis to co-operate with its writing. He sent birthday greetings to the Ambanis and even tried to soften Kokilaben Ambani (Dhirubhai’s wife) by presenting her with a copy of a rare art book, which he thought would interest her. There was neither a reply nor acknowledgement.

Sources close to the Ambanis bluntly say the first book about Dhirubhai will be a pretty, airbrushed hagiography in the style of those published by all major industry houses.

The Polyester Prince is an accurate portrait of one of the most colourful, controversial and brilliant of Indian businessmen, who converted into an art; the bending and twisting of the stifling license-permit system to his advantage. It traces his humble beginnings at Chorwad in Gujarat to being in the Forbes list of the world’s richest men.

As McDonald says in the book, ‘Everything about the Ambanis, in fact, was a good magazine story.’ If Anil Ambani’s stormy courtship of Tina Munim, whom Hamish describes as ‘a girl with a past’ has all the ingredients of a Bollywood potboiler, then the saga of Dhirubhai’s rise to being among the most powerful men in India is significantly more dramatic and awesome. There is the fight-to-the-finish battle with Ramnath Goenka — the fiery and fearless proprietor of the Indian Express; then the war with industrialist Nusli Wadia of Bombay Dyeing; the much publicised allegations against some Ambani staffers over a plot to murder Wadia; Reliance’s travails during the V P Singh government, which almost brought the business house to its knees, and sundry other controversies over licensed capacities, export manipulation and share switching. It also narrates how Reliance created the equity cult which got the general public investing in equity and investors’ reciprocal adulation for the man for over a decade.

McDonald uses his skill as a journalist to paint an accurate picture and to bring in the unsavory aspects of Reliance’s dealing with business rivals without attracting charges of defamation. The book candidly traces Dhirubhai’s uncanny knack of tweaking and capturing political and bureaucratic power — Ambani’s equation with Indira Gandhi and her family and their powerful minions, as well as the suitcases of cash which Indian business houses used to engineer changes in tariffs and duties for specific products. At the same time, McDonald finally portrays Dhirubhai as a visionary with unconventional ways of fulfilling his mega plans.

India needs more books like The Polyester Prince to create a real record of business leaders and the corporate sector — warts and all. Personally, I believe that a market for such work already exists, but it would require publishers to do some hard selling.

While working on my own book, a biography of A D Shroff — a financial genius who straddled several banking, finance and insurance institutions, until his death in 1965, I realised how much was lost in presenting a sanitised picture. My book too was a commissioned job — by the Forum of Free Enterprise, but probably because of AD’s fiercely forthright personality, it allowed me a little more freedom to discuss his shortcomings. But a lot was kept out, and again the book was restricted to his brilliant career and not his equally colourful personal life.

The same goes for J R D Tata. I read all of R M Lala’s works on JRD and they are indeed detailed and fascinating works. But while researching the A D Shroff book I had an opportunity to sift through records of his interaction with JRD and Sir Homi Mody and others. Their correspondence brings alive the impish humor, caustic sarcasm, occasional pettiness, temper tantrums and other little shenanigans.

To me, for the first time in 16 years, JRD changed from a revered business leader into an extremely human and lovable personality. In fact a person with such a towering personality that he was able to attract brilliant people around him and allow them to grow without any sense of threat or insecurity.

I would personally like to see genuine biographies of several Indian businesspersons who are clearly fascinating subjects. Nusli Wadia of Bombay Dyeing, Homi Mody, Darbari Seth and Ajit Kerkar are others from the Tata empire whose lives need to be documented. Similarly there are stories to be told about organisations and institutions. Unfortunately, without a little awakening on the part of publishers all these will probably remain untold.

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Dhirubhai Ambani was no ordinary leader. He was a man who gave management a whole new “ism”.

There is a new “ism” that I’ve been meaning to add to the vast world of words for quite a while now. Because, without exaggeration, it’s a word for which no synonym can do full justice: “Dhirubhaism”.

Inspired by the truly phenomenal Dhirubhai H Ambani, it denotes a characteristic, tendency or syndrome as demonstrated by its inspirer. Dhirubhai, on his part, had he been around, would have laughed heartily and declared, “Small men like me don’t inspire big words!”

There you have it - now that is a classic Dhirubhaism, the tendency to disregard one’s own invaluable contribution to society as significant.

I’m sure everyone who knew Dhirubhai well will have his or her own little anecdote that illustrates his unique personality. He was a person whose heart and head both worked at peak efficiency levels, all the time. And that resulted in a truly unique and remarkable work philosophy, which is what I would like to define as Dhirubhaism.

Let me explain this new “ism” with a few examples from my own experiences of working with him.

Dhirubhaism No 1: Roll up your sleeves and help. You and your team share the same DNA. Reliance, during Vimal’s heady days had organized a fashion show at the Convention Hall, at Ashoka Hotel in New Delhi.

As usual, every seat in the hall was taken, and there were an equal number of impatient guests outside, waiting to be seated. I was of course completely besieged, trying to handle the ensuing confusion, chaos and protests, when to my amazement and relief, I saw Dhirubhai at the door trying to pacify the guests.

Dhirubhai at that time was already a name to reckon with and a VIP himself, but that did not stop him from rolling up his sleeves and diving in to rescue a situation that had gone out of control. Most bosses in his place would have driven up in their swank cars at the last moment and given the manager a piece of their minds. Not Dhirubhai.

When things went wrong, he was the first person to sense that the circumstances would have been beyond his team’s control, rather than it being a slip on their part, as he trusted their capabilities implicitly. His first instinct was always to join his men in putting out the fire and not crucifying them for it. Sounds too good a boss to be true, doesn’t he? But then, that was Dhirubhai.

Dhirubhaism No 2: Be a safety net for your team. There used to be a time when our agency Mudra was the target of some extremely vicious propaganda by our peers, when on an almost daily basis my business ethics were put on trial. I, on my part, putting on a brave front, never raised this subject during any of my meetings with Dhirubhai.

But one day, during a particularly nasty spell, he gently asked me if I needed any help in combating it. That did it. That was all the help that I needed. Overwhelmed by his concern and compassion, I told him I could cope, but the knowledge that he knew and cared for what I was going through, and that he was there for me if I ever needed him, worked wonders for my confidence.

I went back a much taller man fully armed to face whatever came my way. By letting us know that he was always aware of the trials we underwent and that he was by our side through it all, he gave us the courage we never knew we had.

Dhirubhaism No 3: The silent benefactor. This was another of his remarkable traits. When he helped someone, he never ever breathed a word about it to anyone else. There have been none among us who haven’t known his kindness, yet he never went around broadcasting it.

He never used charity as a platform to gain publicity. Sometimes, he would even go to the extent of not letting the recipient know who the donor was. Such was the extent of his generosity. “Expect the unexpected” just might have been coined for him.

Dhirubhaism No 4: Dream big but dream with your eyes open. His phenomenal achievement showed India that limitations were only in the mind. And that nothing was truly unattainable for those who dreamed big.

Whenever I tried to point out to him that a task seemed too big to be accomplished, he would reply: ” No is no answer!” Not only did he dream big, he taught all of us to do so too. His one-line brief to me when we began Mudra was: “Make Vimal’s advertising the benchmark for fashion advertising in the country.”

At that time, we were just a tiny, fledgling agency, tucked away in Ahmedabad, struggling to put a team in place. When we presented the seemingly insurmountable to him, his favourite response was always: “It’s difficult but not impossible!” And he was right. We did go on to achieve the impossible.

Both in its size and scope Vimal’s fashion shows were unprecedented in the country. Grand showroom openings, stunning experiments in print and poster work all combined to give the brand a truly benchmark image. But way back in 1980, no one would have believed it could have ever been possible. Except Dhirubhai.

But though he dreamed big, he was able to clearly distinguish between perception and reality and his favourite phrase “dream with your eyes open” underlined this.

He never let preset norms govern his vision, yet he worked night and day familiarizing himself with every little nitty-gritty that constituted his dreams constantly sifting the wheat from the chaff. This is how, as he put it, even though he dreamed, none of his dreams turned into nightmares. And this is what gave him the courage to move from one orbit to the next despite tremendous odds.

Dhirubhai was indeed a man of many parts, as is evident. I am sure there are many people who display some of the traits mentioned above, in their working styles as well, but Dhirubhai was one of those rare people who demonstrated all of them, all the time.

And that’s what made him such a phenomenal team builder and achiever. Yes, we all need “Dhirubhaisms” in our lives to remind us that if it was possible for one person to be all this and more, we too can. And like him, go on to achieve the impossible too.

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Dhirubhai Ambani leaves behind a strong legacy of thinking big and doing the impossible.

DHIRUBHAI Ambani, the entrepreneur who emerged as the tallest industrial leader in India in the last two decades, transformed the industrial landscape just as Jamshed Tata and G. D. Birla did in their times. Starting his career in Aden earning just $6 a month, he raised the Reliance Group from the scratch to a $13-billion empire and a Fortune-500 company.

Dhirubhai leaves behind a strong legacy of thinking big and doing the impossible. He was not just a visionary beyond par but also an achiever. He was the architect of the equity culture in India. His competitors feared and respected him alike. International media credits him for the competence he developed for `getting round the regulators’. Sure he did find a way to cut the bureaucratic labyrinth, but only to bypass restrictive licensing practices of those times.

Since liberalisation began about a decade ago, manufacturing has been facing a rough weather. While China has become a powerhouse of the manufacturing sector, Indian businessmen failed to take advantage of their entrepreneurial spirits to create wealth. India, therefore, needs courageous people who can follow Dhirubhai’s example to create internationally competitive industries. What sorts of businesses these could be and what would be the characteristics of people who are thought of worthy successors to Dhirubhai?

The future of Indian businesses largely depends on how far Indian businessmen would be able to compete in the international arena. While in the licence-permit-quota raj, family-owned businesses and conglomerates flourished, in the next decade, regulatory regimes would be further relaxed. Businesses would have to develop the competencies of dealing with the critical success factors in an atmosphere of de-regulation and lower import barriers, globalisation, rapid technological change and fast-changing customers’ preferences. Entrepreneurs would have to work overtime to align their practices, philosophies of conducting day-to-day affairs in tune with the international requirements and norms.

A look at the BusinessWeek’s latest list of `Global 1000′ indicates dominance of US companies (19 out of the first 25) and barring GE, all are dedicated to single lines of businesses. This is because Wall Street promotes focussed businesses. In the same list of `The Top 200 Emerging-Market Companies’, most companies including ONGC at 25, are single line businesses. Same is true of the list of `Most Admired Companies’ published by Fortune.

The recent corporate scandals in the US (and pay-offs by Xerox in India) further suggest that the markets and regulators would demand stricter standards of corporate governance. Companies would be evaluated by their qualities of management and products and services, innovativeness, financial soundness, use of corporate assets and long-term investment value and finally, corporate social responsibility. A global scale is also a sine qua non for creating a successful business.

Localisation of products or services to satisfy different tastes of customers in different markets will be one of the key assets to win the battle in the marketplace. In such circumstances, any ambitious Indian businessman will have to find a niche and confine himself to just one or two lines of businesses to create a globally competitive outfit. South Korea’s Chaebols, which have been shedding businesses, are no longer successful in the global market. Multi-business groups, such as ABB, Tyco, Fiat, Daewoo have all been in the news for the wrong reasons. They are having problems of one type or another.

Only GE remains at the top, as it has a philosophy of picking up and retaining businesses, which are either No 1 or 2 in their industry.

Depending on the ground realities, the changing landscape of business and opportunities in the domestic and international markets, a visionary like Dhirubhai will choose the right kind of business to enter, where he will develop a competitive advantage. Emulating personal qualities of Dhirubhai will also require developing a vision and a roadmap for creating a high-profile industry. He should be able to make a sound judgement of the approaching revolution and develop all the right strategies for growth.

Any examples to follow? Worth emulating are Finnish Nokia and South Korea’s Samsung Electronics, which have become world-class in the last decade, capturing markets around the world. Not all that long ago, Nokia manufactured diapers and rubber boots. But Jorma Ollila, the CEO, turned around the company and found a niche in electronics, manufacturing mobile handsets, with a global market share of around 40 per cent now.

Similarly, Samsung Electronics, which manufactured 12 inches Black & White TV sets under Sanyo label in the 1970s, is aggressively riding the technology wave and specialising in electronics business, which today constitutes 25 per cent of the turnover and 65 per cent of the profits of the Samsung group. Its objective is to become like Sony in the international market.

We are living in the age of Toyotas, Hondas, Microsofts and Canons, all focussed in their single lines of businesses and doing well, even in the downturn.

The real tribute to Dhirubhai would be paid, if India produces many entrepreneurs like him, who energise the manufacturing industry in India by setting personal examples and creating world-class businesses, worthy of Fortune 500 listing. Anybody listening?

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On Dhirubhai H Ambani again, unabashedly so, and for a very good reason.

I guess it must have struck many readers by now that I idolised Dhirubhai. They are right. I do. Every column I write on Dhirubhaism invites an outpouring of mail, some even requesting me to mail them the previous column on Dhirubhaism.

And I am glad that I have an opportunity to share what I’ve learned from Dhirubhai with you.

He was a one-in-a-million human being, and I was blessed to have had him as my boss. He taught me many things that have transformed an ordinary executive that I was, to be the founder chairman of an agency that grew from nothing to one of India’s largest.

I would have never achieved that without him. It would be a shame if I then let his extraordinary teachings gather dust. And judging by the response I receive, it looks like there are some really eager learners out there. So here goes.

Dhirubhaism: Leave the professional alone!

Much as people would like to believe, most owners (even managers and clients), though eager to hire the best professionals in the field, do so and then use them as extensions of their own personality. Every time I come across this, which is much too often, I am reminded of how Dhirubhai’s management techniques used to be (and still remain) so refreshingly different.

For instance, way back in the late 1970s when we decided to open an agency of our own, he asked me to name it. I carried a short list of three names, two Westernised and one Indian. It was a very different world back then. Everything Anglicised was considered “upmarket.”

There were hardly any agencies with Indian names barring my own ex-agency Shilpi and a few others like Ulka and Sistas. He looked at the list and asked me what my choice was. I said “Mudra”: it was the only name that suited my personality. And the spirit of the agency that I was to head.

I was very Indian and an Anglicised name on my visiting card would seem pretentious and contrived. No further questions were asked. No suggestions offered, just a plain and simple “Go ahead and do it.” That was just the beginning.

He continued to give me total freedom — no supervision, no policing — in all my decisions thereafter. In fact, the only direction that he gave me, just once, was this: “Produce your best.”

His utter trust in me was what pushed me to never, ever let him down. I guess the simplest strategies are often the hardest to adopt. That was the secret of the Dhirubhai legend. It was not out of a book. It was a skillful blend of head and heart.

Dhirubhaism: Change your orbit, constantly!

To understand this statement, let me explain Dhirubhai’s “orbit theory.”

He would often explain that we are all born into an orbit. It is up to us to progress to the next. We could choose to live and die in the orbit that we are born in. But that would be a criminal waste of potential. When we push ourselves into the next orbit, we benefit not only ourselves but everyone connected with us.

Take India’s push for development. There was once a time our country’s growth rate was just 4 per cent, sarcastically referred to as the “Hindu growth rate.” Look at us today, galloping along at a healthy 7-8 per cent.

This is no miracle. It is the product of a handful of determined orbit changers like Dhirubhai, all of whose efforts have benefited a larger sphere in their respective fields.

In a small way, I too have experienced the thrill of changing orbits with Mudra. In the 1980s, we leapt from the orbit of a small Ahmedabad ad agency to become the country’s third largest ad agency — in just under a decade.

However, when you change orbits, you will create friction. The good news is that your enemies from your previous orbit will never be able to reach you in your new one. By the time resentment builds up in your new orbit, you should move to the next level. And so on.

Changing orbits is the key to our progress as a nation.

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President A. P. J. Kalam was the chief guest at a sombre ceremony to mark the first death anniversary of Dhirubhai Ambani, founder of the Reliance Group of Industries. Also present were three chief ministers, two Union ministers and a former finance minister. Amitabh Bachchan was the distinguished master of ceremonies.

People from all walks of life showed up to honour the memory of the man whom Bachchan called India’s “first capitalist.” Mukesh Ambani, Chairman of Reliance Industries, said it sent out the message that “all Indians had united to honour Dhirubhai.”

President Kalam, with his impish sense of humour, said that he has taken his task of delivering the first memorial lecture very seriously and had prepared for it by “reading many books” and “even going to the Internet.” His lecture, ‘Growth is Life’, was illustrated with two couplets by the classical Tamil poet Thiruvaluvar. A true leader, he noted, would always defeat problems and never be defeated by them.

The Reliance Group founded by Dhirubhai is India’s largest business house with total revenues of Rs. 80,000 crore (US $ 16.8 billion), cash profit of over Rs. 9,800 crore, net profit of over Rs. 4,700 crore and exports of Rs. 11,900 crore. The group’s activities span exploration of production of oil and gas, refining and marketing, petrochemicals (polyester, polymers and intermediates), textiles, financial services and insurance, power, telecom and infocom initiatives. Reliance emerged as India’s “Most Admired Business House” for the second successive year in a TNS-Mode survey for 2002.

Reliance Industries Limited (RIL) is India’s largest private sector company on all major financial parameters with gross turnover of Rs. 65,061 crore, cash profit of Rs. 7,565 crore, net profit of Rs. 4,104 crore, net worth of Rs. 30,327 crore and total assets of Rs. 63,737 crore. RIL features in the Forbes Global list of the world’s 40 best big companies and in FT Global 500 list of the world’s largest companies.

RIL has emerged as the ‘Best Managed Company’ in a study by Business Today and A. T. Kearney. RIL was named in the World’s Most Respected Companies list published by Financial Times based on a global survey and research conducted by Price Waterhouse Copers. RIL also emerged as the most respected among Indian companies and amongst the 10 most respected energy and chemical companies in the world.

Credited with a number of financial innovations in the Indian capital markets, the Reliance Group today has one of the largest family of shareholders in the world. It is now India’s leading textiles-petroleum-petrochemicals-power-telecom player. And all this began in 1958 when Dhirubhai Ambani started his first company, Reliance Commercial Corporation, a commodity trading and export house.