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BW Businessworld

When The Brothers Met

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The fishing village of Chorwad in Gujarat is no stranger to celebrations. Nawab Saheb Mohabbat Khan, the governor of Junagadh in pre-Independence India, built a palace near the sea where he held royal banquets, processions and occasionally, wedding ceremonies for his dogs. On 27  December 2011, Chorwad hosted the 80th birth anniversary of the late Dhirubhai Ambani.

It also featured a family reunion of sorts, between the Ambani brothers Mukesh and Anil and their spouses; the estrangement of the two brothers — and speculation about their possible getting back into business together — receives the widest media coverage, and is one of the most followed stories in corporate India.

Both brothers remain tight-lipped on the issue, while their mother Kokilaben has said that there is a lot of love between the brothers.

It is for the first time the brothers have been seen together in public in this kind of family setting, after they agreed to a truce in May 2010 and called an end to their five-year battle. Reports say that it was a relaxed family luncheon; the brothers shared food, laughed together and their spouses — Mukesh's wife Nita and Anil's wife Tina — danced to the dandiya tunes, under the benevolent gaze of Kokilaben, who played a crucial role in the settlement between the brothers.

Speculation abounds about the potential outcomes of this get-together. Sources close to the family say Kokilaben has ambitions beyond just getting the two brothers back together at family gatherings. "She thinks that each son could serve on the board of the other's companies," says an insider. "If it happens, we will see Anil on the RIL board and Mukesh on the RCom board." That would require both board and shareholder approval.

The second item on her wish list is to get her bahus together in a charitable trust. "Both are already running separate charitable institutions," the sources say. "Bringing them together will strengthen ties between two brothers." Nita heads the Dhirubhai Ambani Foundation, while Tina is managing trustee of the Dhirubhai Ambani Memorial Trust.

What will bringing them all together achieve? The answer seems obvious. "Kokilaben may want Mukesh to help her younger son Anil, whose companies' valuations crashed as the economy slowed," the sources point out.  If the mother succeeds in pressing Mukesh to extend a helping hand to Anil, the much-touted collaboration between RIL and RCom in telecom may actually happen, they say.

Consider this: Older sibling Mukesh, 54, is preparing the ground for RIL's broadband and 4G business; RIL bought 95 per cent (with an investment of Rs 4,202 crore) of the Nahata family's Infotel Broadband Services in 2010 just after Infotel successfully bid and got broadband wireless spectrum licences in all 22 circles.

S.P. Tulsian, an independent analyst, says the first deal between the Ambani brothers could be in tower leasing. Mukesh may consider leasing RCom's 50,000 towers and optic fibre capacity for his 4G roll out. Anil has tried to sell the telecom tower business to help retire RCom's debt of about Rs 33,700 crore (as on September 2011), but has not yet found a buyer.
"RIL's entry will increase the tenancy rate of RCom's tower business," says Tulsian. "This could help RCom find a buyer; RIL will not be bothered about change in the ownership." Tulsian goes further, predicting that RCom could be sold to RIL in a year or two. RCom's subscriber base of 150 million is definitely an attraction.

In power generation too, Anil's companies may need RIL's help. Though he lost the law suit against RIL over the supply of natural gas from the Krishna-Godavari basin in the Supreme Court, market analysts still speculate that Mukesh could argue Reliance Power's case with the government, which is the ultimate authority, provided the brothers come closer.

Deven Choksey, managing director of KR Choksey Securities, says the reunion visuals are just about the family; the market will not read too much into it. "It is not a business reunion and that won't be possible; besides, they have very different styles, and ambitions."

Mukesh, says Choksey, likes high volume businesses, while Anil has different interests. They will be separate in business." That said, when news of the ‘reunion' broke, stock prices of the Anil Ambani Group companies, went up a bit, before falling back to old levels.

Some experts point to a certain similarity in circumstances between the two brothers. Both are under public and bureaucratic scrutiny. RIL's output from K-G D6 offshore basin is declining, even as prices of natural gas set by the government are lower than international gas prices. Questions have also been raised on the increase in investments by RIL on developing the gas fields.

Anil is embroiled in more complex problems: a mountain of debt in RCom, delays in Reliance Infrastructure projects and investigations related to the 2G spectrum allocation, to name three. His businesses like power, mining and infrastructure are cash-guzzlers. He may have been considered the financial wizard in the undivided RIL, but Mukesh is now considered as much an expert in raising money. Anil's last major fund raising effort was from Chinese banks for power plant equipment purchases.

RIL is now inching closer to becoming debt-free. From the market's perspective, RIL is worth five times that of Anil's seven companies put together. Since most of the companies run by the two brothers operate in largely different sectors, finding synergies is difficult, except in a few areas.

Market cynics see it like this: despite the air show of choppers and a rally of luxury cars at Chorwad, it's just a family affair, they say. And it was fun while it lasted.

(This story was published in Businessworld Issue Dated 09-01-2012)