Mukesh Ambani: His control over Reliance is now absolute	Anil Ambani: Sidelined, wants his share of the pie

For nine days in a row in September, Seawind, the 19-storey residence of the Ambani family, played host to a Shanti Yagna, a Vedic ritual usually performed to reinforce the message of peace and harmony. Performed by the Ambanis' regular pundit from Porbandar, the Yagna was the idea of Kokilaben, the family matriarch and wife of the late Dhirubhai Ambani, the Founder Chairman of Reliance Industries Ltd. (RIL). Participating in the Yagna were family members, relatives and employees working closely with the family. Mukesh Ambani, Chairman & Managing Director of RIL, and Anil Ambani, Vice Chairman & Managing Director of RIL, made fleeting appearances, whenever their busy schedules allowed them to.

Now Shanti Yagnas aren't necessarily resorted to when tensions need to be resolved-in this case between two family members-but peace between Mukesh and Anil would have likely been one of the fervent prayers on the lips of Kokilaben. After all, as RIL insiders point out, by September 2004 the brothers had stopped talking to each other; this would have appeared unimaginable a few years ago. After all the brothers shared such a close relationship that they wouldn't call each other by name-Mukesh would endearingly call Anil "bhai" and Anil would respectfully address his elder brother as "bapu". "Anil is like a son to me..." is what Mukesh said in an interview in August 2002 after taking over as Chairman. As things stand today, a settlement between the brothers is in the realm of the impossible, and Anil is said to putting in place a comprehensive legal strategy, which will come to light once, or if, his elder brother makes a move to relieve him of his responsibilities and powers, and what Anil might believe he should rightfully control in the Reliance empire. After all, as Reliance insiders point out,

Anil and his family (wife Tina and their two sons) control just about 1 per cent in RIL, which gives the Vice Chairman little leverage to work towards a settlement.

Last fortnight, when increasing tensions between the Chairman and Vice Chairman of the Rs 75,556-crore RIL exploded into the public domain, with Mukesh admitting to "ownership issues", it also became fairly clear what the friction was all about. After spending two decades ostensibly as equals-as Managing Directors reporting to the board of RIL-Mukesh was now apparently preparing to make that significant leap forward, leaving his brother one step behind. As he succinctly put it to his employees: "Our Founder Chairman, Shri Dhirhubhai Ambani had taken all necessary steps to separate ownership from management and has settled all of them within his lifetime. There is no ambiguity in his legacy that the Chairman and Managing Director is the final authority on all matters."

This could mean two things, both not very pleasant for the Vice Chairman: One, that if Mukesh is "the final authority ", Anil would have little choice but to function as a Director in RIL under Mukesh's authority. And if he doesn't play ball, Mukesh could even contemplate getting him thrown out of the board. Materially, Anil would be left with little inheritance, certainly not RIL or pieces of it, and perhaps not even Reliance Energy-which is 50 per cent owned by RIL. A spokesperson for Mukesh denies any such moves to clip Anil's wings. "Problems arise in Indian family businesses because there's not enough to share. That's not the case here. There's enough to keep each of the brothers busy for the next 10 years. They have enough on their plate, and enough in their lockers."

"Enough" is a relative word, and sources close to the Vice Chairman point out that Anil would want a "fair division" of the assets, which would mean a 50:50 division or thereabouts, and he feels his late father too would have wanted it that way. For instance they point out both Anil and Mukesh got into RIL (in 1983 and 1980, respectively) as Executive Directors, by 1993-94, both became Joint Managing Directors (Mukesh was also christened Vice Chairman), and that Dhirubhai had also appointed Anil as Managing Director of Reliance Petroleum as well as Chairman of Reliance Polyethylene and Reliance Polypropylene (both since merged into RIL). "They were always equals, but now it seems like Mukesh is abusing his power," says a source sympathetic to Anil. Documents liberally circulating in the media last fortnight served to highlight the point that a supplementary agenda was introduced at the July 27 board meeting that proposed to "redefine the powers of the Managing Directors," with Anil expressing surprise that "some of the other RIL Directors, and several RIL employees," had been taken into confidence on the supplementary agenda... "while I, as VC & MD, was not even informed of the same!" Analysts, however, point out that it may not be possible for the board to dethrone Anil as Managing Director, and if matters do come to such a head, it will be in the hands of shareholders (at the annual general meeting) to decide. And that perhaps could explain why internal emails, letters to employees and confidential documents have conveniently been making it to the front pages.

BLOW BY BLOW

1980-81: Mukesh Ambani brought in as Executive Director at Reliance Industries. 1983-84: Anil Ambani brought in as Executive Director at Reliance Industries. 1991-92: Mukesh is appointed Vice Chairman, Anil appointed Joint Managing Director. 1993-94: Mukesh appointed Vice Chairman & Joint Managing Director, Anil appointed Joint Managing Director. 31 July 2002: Mukesh becomes Chairman & Managing Director, Anil becomes Vice Chairman & Managing Director. Side by side: The brothers in 2002 27 July 2004: At an RIL board meeting, powers and authorities of Mukesh and Anil redefined. Resolved that Anil will be under the overall authority of Mukesh. 29 & 30 July 2004: Anil requests the Chairman in his email communications to keep the item regarding the redefinition of powers in abeyance. 25 October 2004: Anil once again expresses his views on the draft minutes of the 27 July 2004 board meeting. "Nearly 3 months after my second email to the CMD...I have not received any acknowledgement...Instead it has been communicated to me on the CMD's behalf that the matter is final," writes Anil to the Chairman. 17 November 2004: Mukesh blurts to a business channel that "there are other issues, which are ownership issues, those are in the private domain". 22 November 2004: Mukesh clarifies that his remarks "were torn out of context. Dhirubhai has settled all ownership issues". 29 November 2004: As Business Today went to press, sources close to Anil revealed that he was putting in place a comprehensive legal strategy.

Sources in the Anil camp also add that since Dhirubhai did not leave a will, the assets have to be divided accordingly and equally between his heirs. The short point, though, is not whether Dhirubhai's inheritance will go two ways or three ways or five ways nor is it even whether the late Reliance founder actually left a will. Rather, it's whether the will matters. "The architecture of the ownership of Reliance has been configured by Mr. Dhirubhai Ambani in a framework of companies. Given this configuration, it obviates the necessity for a will...," is how one insider puts it.

That "configuration" could involve as many as 1,400 investment companies, which control some 34 per cent of the 46-odd per cent promoter stake in RIL, as "persons acting in concert". Whilst the brothers individually might own not more than 2-2.5 per cent each in RIL, it's this labyrinth of firms, which aren't directly owned by family members, which could well be owned by each other, and which have company employees as directors, that will decide the issue of control of RIL. Legal observers point out that these directors would be accountable to the Chairman of RIL, which in effect puts Mukesh in the driving seat. Anil would need to get the support of foreign investors who control 22.85 per cent of RIL shares, but that would need a minor miracle. Banks and financial institutions too are more likely to stay neutral in the matter.

Clearly, there are no easy solutions, and for this battle to end would require significant compromise from either brother. But, for a group that only two years promised that "500 per cent the brothers will stay together" how on earth did matters come to such a pass? Insiders point out that the first cracks began to appear way back in 1998 (when Dhirubhai was still alive), when the brothers apparently differed on Reliance Telecom's strategy for bidding for unprofitable GSM circles in the north-east. Observers also add that Anil managed to isolate a few senior executives, who would eventually become the core team of Mukesh. Anil sympathisers say he was left out of the Infocomm blueprint-something he was as passionate about as Mukesh-but the Mukesh camp insists that Anil just wasn't focussed enough. Perceptions also gained ground that it was Mukesh who was handling all the core functions. Anil meantime also appeared busier projecting himself in the media, and making a splash in his circle of socialites and politicians. Over the past year Anil has complained to friends that he was being increasingly sidelined, and perhaps that's why he thought a plunge into politics would keep him busy.

That move only worsened the situation. Anil's decision to enter the Rajya Sabha with support from the Samajwadi Party earlier this year was the final straw that snapped the bond. Not only does it leave room for a clash of ideologies in the family, it doesn't help the group when it comes to lobbying with the ruling government, as is evident in the huge penalties being slapped on Reliance Infocomm for various violations. Over the past six months, many of the common friends of the Ambanis have increasingly begun distancing themselves from Anil, and gravitating to Mukesh. Prominent amongst these is the Vice Chairman of a prominent four-wheeler manufacturer and the Chairman of a top 10 pharmaceutical major.

PURPOSEFUL STRIDES Except for power, Mukesh has been spearheading most of the group initiatives since 2002.

March 2002 Reliance Petroleum is merged into Reliance Industries, quashing speculation of each brother getting one company July 2002 Mukesh appointed Chairman of RIL; Anil appointed Vice Chairman December 2002 Reliance announces open offer for BSES; Reliance Infocomm launched January 2003 Anil becomes Reliance Energy (BSES) Chairman May 2003 Reliance & Du Pont sign strategic alliance for R&D October 2003 Reliance's wholly-owned subsidiary acquires FLAG Telecom January 2004 Reliance's associate company signs MoU to take over Nocil's petrochem and plastics products divisions January 2004 Reliance announces plans to set up world's largest gas-based power project in UP May 2004 Reliance Clinical Research Services goes to the US and Europe June 2004 Reliance announces acquisition of polyester major Trevira June-July 2004 Anil elected in Rajya Sabha elections as Independent candidate from Uttar Pradesh; sworn in as Rajya Sabha member

At the time of writing, Anil was still planning his strategy, but sources close to him insist that he's going to fight. The Mukesh camp meantime, after making the point that the Chairman is the final authority, maintains that little has changed. "Mukesh Ambani is the Chairman of the Board and Managing Director. Anil Ambani is the Vice Chairman of the Board and Managing Director...Since Dhirubhai Ambani's stewardship at the helm, Mukesh Ambani focusses on the project technology, operational and business aspects. Anil Ambani focuses on treasury and investment management interface aspects. This continues."

Anil of course would beg to differ. A year and a half ago, Anil had told BT, as he made the point about the professionalisation of RIL: "Reliance is an institution and does not need an Ambani surname to grow." That statement today takes on a slightly different meaning. Going forward it appears increasingly likely that Reliance will need just one Ambani surname to grow.

-additional reporting by Priyanka Sangani