Mukesh Ambani (L), Chairman & Managing Director, RIL, and Anil Ambani, Vice Chairman & Managing Director, RIL: Working on a global blueprint

WHAT SETS RELIANCE APART

» Clarity of vision over the long term. No deviance from integration, backward or forward, and value-addition. » Precise understanding of project implementation. » World-class, world-scale plants, which ensure that Reliance is competitive on a global scale. » Aggressive growth backed by conservative financial management. » Empowerment of the workforce, and spotting the best talent for a particular project.

DATE: Monday, July 24, 1989. LOCATION: Patalganga, in the Raigad district on Maharashtra's Konkan coast. Eight hours of relentless overnight rain, accompanied by 80 km per hour winds, results in 20-plus inches of rain. The town, which is home to 87 industrial units, including Reliance's Rs 1,500-crore petrochemical complex, is flooded. Close to 400 people are dead, and 1,500 families lose their homes. The Reliance plant is submerged. It's crisis time for the Ambanis.

By 6.45 AM the Reliance brass gets into action. The entire complex, spread over 200 acres, is shut down in 30 minutes. A special emergency cell, comprising senior and middle management, is set up. People are mobilised from all parts of India and the world over the next 72 hours. In 96 hours 6,000 skilled people are in Patalganga, trying to put the Reliance house in order. Telephone connections are restored in a day, utilities in another 8-12, the polyester units begin humming in two weeks, and in another five days the plant is operating at normal capacity.

Date: Monday, 8th June 1998. Location: Jamnagar, Gujarat. A storm warning's put out. 16 hours later, for four straright hours western Gujarat is lashed for four hours by high-velocity winds. 550 people are missing, and Jamnagar looks like a war-struck zone. As does the site of the world's largest grassroots refinery, where 50,000 people are working round the clock in a bid to commission the Rs 24,000 crore, 27 million tonnes per annum plant in less than 36 months.

Overnight the Ambanis along with cousin Hital Meswani establish a central command. A 100-line telephone exchange is shifted from Mumbai in 24 hours, and in 15 days, 60,000 workers are back at work. Start-up isn't affected. By December 1999, the refinery is commissioned. In less than 36 months.

Be it the flood in Patalganga or the cyclone in Jamnagar, or even the plague at Hazira (home to another Reliance polyester unit) or the more recent earthquake in Gujarat, Reliance Industries isn't exactly stranger to natural calamity. Over the years the Ambanis haven't just managed 13,500 people and assets worth Rs 63,737 crore. They've also mastered the art of dealing with unprecedented crises. "People at Reliance have developed the mindset and skills needed to meet challenges and transform adversities into opportunities," says Anil Ambani, Vice Chairman and Managing Director, Reliance Industries.

At a time when huge question marks are being drawn over the Ambanis' Rs 18,000 crore grand Infocomm blueprint, which has had a false start, the Reliance top brass' experience in dealing with adversity will clearly come to the fore. Even as sections of analysts wonder whether with Infocomm the Ambanis have bitten off more than they can chew, the promoters themselves don't appear to be fazed. After all, this isn't the first time Reliance is at the receiving end of sceptics. Way back in 1981, when Dhirubhai Ambani-then running a textiles company-approached DuPont for technological assistance to build a world-scale polyester plant, they wondered aloud about his ability to do so; 22 years on, DuPont has forged an R&D alliance with Reliance for developing polyester processes and product technologies. Similarly, at least one financial institution and one of the lead constructors of the Jamnagar refinery were sceptical about the unit coming on stream in less than 36 months. It did. "At the end of the day, it is the inherent obsession to beat the world-on capital costs, schedules and operational parameters-that carries us through," says RIL Chairman Mukesh Ambani.

At Reliance Infocomm, after encountering problems with customer service and with the distribution strategy, the Ambani wagon appears to be once again finding the rails. Mukesh Ambani claims to have acquired over a million customers for the Reliance IndiaMobile service, and some 70,000-80,000 customers are being added every week. "By early next year, when we roll out the consumer broadband revolution, we expect to see a greater fillip in customer acquisition," says the Chairman.

Indeed, the Ambanis have made it a habit to prove their critics and detractors-and there are plenty of them-wrong. Ask Anil about the perceived differences between him and his brother, Chairman Mukesh, and he'll end that conversation with a line straight out of his father's book. "Jab haathi ki sawari jaati hai to kutte bhokte rehte hai (When the elephant is marching forward, all the dogs can do is bark)." Yet, the Infocomm setback coupled with the ongoing case against the Ambanis for violating the Official Secrets Act as well as concerns about the declining profit margins of the Rs 79,000 crore behemoth have given enough fodder for Reliance baiters to have a field day. "The Ambanis created plenty of wealth in the eighties, but they haven't done anything spectacular in the past five-six years. Their new businesses-infocomm and oil & gas-is a lottery," says the head of research at an Indian broking firm.

RIL's Jamnagar facility: The world's largest grassroots refinery, it was commissioned ahead of schedule

But you have to be silly to write off the Ambanis at this stage. It would also be foolish to ignore the skills, mindset, strategy and vision that have made them India's largest business house, and propelled it into the Fortune 500 global league. Some of the statistics are awesome: Reliance's turnover is 3 per cent of India's GDP, its exports of Rs 11,500 crore are 5 per cent of the country's and its market cap is roughly 7 per cent of the BSE's. In polyester Reliance is the second largest player in the world, the third largest in paraxylene and fifth largest in PTA. Its huge 3.6 million family of shareholders has been rewarded at a compounded annual rate of close to 23 per cent for the past 25 years. And yes, it made 2002's largest gas discovery, of 7 trillion cubic feet, India's biggest gas find in nearly three decades.

A Consistent Vision

So there must be something about Reliance, right? A lot, to be sure. Enough to make it BT-A.T Kearney's Best Managed Company. What emerges loud and clear about the Reliance strategy since the eighties is the consistency of vision. The focus on integration (either backward or forward), the quest for value-addition, quality implementation, and the obsession with size and economies of scale. Dhirubhai started as a textiles manufacturer; today textiles accounts for less than a percentage of RIL's revenues. The rest comes from systematic backward integration initiatives: Petrochemicals, refining and, up the stream, oil and gas exploration. Then, to hedge against the downcycles of the oil-based businesses, Reliance diversified into power, the acquisition of BSEs-soon to be re-christened Reliance Energy- now providing the springboard for further build-up of capacity in this sector. Power also completes the picture of an integrated energy conglomerate, with infocomm's nationwide broadband network bringing in the convergence of gas, power and voice and data, thereby giving the Ambanis an opportunity to grab a large share of the consumer's wallet and fulfil the "well-head-to-wall-socket" vision. Then there are the insurance policies that Reliance hopes to cross-sell to its telecom and energy customers, in the process tapping a market of over 1 billion customers. Says Lalit Ahluwalia, Head, Oil & Gas Practice, Ernst & Young India: "Whether it's petroleum or power or broadband, Reliance's focus is on creating a value chain by building an integrated infrastructure. It's all about achieving economies of scale."

What's also notable about the Reliance vision is the creation of capacities much ahead of the market size prevailing at that time, right from textiles to polyester to, currently, infocomm. Tied in with the focus on size is the thrust on creating world-class assets, because Dhirbuhai believed that if the assets were world-class, being competitive wouldn't be an issue. That's why the infocomm infrastructure-which covers 90 per cent of India-is the largest being put together by a new entrant anywhere in the world. In exploration and production Reliance is the largest Indian operator with a total acreage of close to 3 lakh square km. The refinery, which will soon be expanded to 33 million tonnes, is the fifth largest in the world, and accounts for nearly a fourth of India's refining capacity.

If Reliance has made a name for successfully implementing large projects, one of the reasons for that achievement is its conservative financial planning. For the Ambanis don't resort to maverick financial maneouvring when chasing aggressive growth. Over the past decade, Reliance has created assets worth over Rs 50,000 crore with a conservative debt-equity profile that's never gone beyond 0.86, and which as of last year stood at 0.6. Credit ratings have been maintained at the AAA levels. And over the years, Reliance's capex as a percentage of cash profits has been decreasing-from 243 per cent in 1995 to a little under 50 per cent by 2003. That's largely because cash flows have increased, and as of last year they stood at Rs 7,500 crore per year.

The financial prudishness isn't affecting Reliance's track record in any way. Over 10 years, sales have grown at a cumulative annual rate of 32 per cent and net profits by 29 per cent. The stock price over the past decade is up 207 per cent, even as the Sensex inched up by 38 per cent. And last fortnight, Reliance moved into FT's Asia-Pacific 500 rankings at No 27, with a market value of $8.37 billion; last year the Ambanis were at No 50. "We see management as an embodiment of shareholder trust," says Mukesh Ambani, a lesson he's learnt from his father.

A Nose For Value

The Ambanis' nose for value is sensitive when it comes to acquisitions, particularly of state-owned companies. They allowed VSNL to go to the Tatas, and for IBP their bid wasn't amongst the top three. "Capital productivity and global competitiveness are key issues and pure asset growth is not a sustainable strategy for growth," says Anil Ambani. That's why he's clear HPCL will make sense only if the price and timing are right. By 2004, Reliance plans to have 1,500 retail outlets of its own. If HPCL isn't yet disinvested by then, the Ambanis may decide they don't need it. Particularly when you consider that the Reliance game plan is to have one outlet doing three-to-four times the volumes of an HPCL outlet (HPCL has 4,800 outlets). Meantime, true to type, RIL is expanding its refinery from 27 million to 33 million tonnes at 20 per cent of the cost of setting up a 6 million tonne refinery.

At the one PSU that did come their way, IPCL, in May 2002, the Ambanis have sparked an increase in productivity: Make decisions, but be accountable for them. If they work out, you are rewarded, if they don't work out, well... The biggest change was to get people to make decisions. New challenges were thrown at the IPCL team. And they delivered: By producing 20 per cent more, by reducing interest costs by 25 per cent, and increasing sales realisations.

S. Sapra, President (Polyester): Heading the global #2

The Ambanis are also known to set pretty unusual targets when implementing projects. When the refinery was being built in Jamnagar, one of Mukesh Ambani's responsibilities was to ensure that the team was spending Rs 44 crore a day. Any expenditure below that was questioned. Above Rs 44 crore wasn't a problem!

Along with the capacity to smoothly bankroll its projects, Reliance's ability to also build the best teams, as well as to empower and motivate them, have contributed in no small way to their iconic status as project implementers. Notably, the leaders of such teams don't need to have the specialised skills. Rather, they should be able to find such people. For instance, the head of Reliance's upstream business, P.M.S. Prasad, started out in the company's polyester division and you could safely conclude he had little knowledge of what it takes to drill at 6,000 feet under the sea for gas. Instead, Prasad hired a crack team from the global energy majors like Esso and Exxon-Mobil, opened and office in Houston, and was given a free hand by the Ambanis. Today, the oil & gas division has the potential to change the profile of the company-and indeed the gas demand-supply equation of the country. Just kg-d6- the first well drilled in block D6 in the Krishna Godavari basin, in which Reliance discovered natural gas-has the potential to contribute15-20 per cent of Reliance's revenues in three-to-five years from under 1 per cent currently. And remember, Reliance has acquired a total of 32 blocks in India. "More than Infocomm, gas will be the most important attraction for potential investors in Reliance. The scope of the gas find is enormous," points out Mitesh Mehta, Director, KG Vora Securities, a Mumbai-based broking firm.

Clearly, whilst the Ambanis are the public face of Reliance, there's an army of professional talent fuelling their vision: 80 per cent of them are engineers, 12 per cent MBAs, 6 per cent CAs or ICWA, and 2 per cent Ph.Ds, with the average age of the 13,000-odd workforce a healthy 38. Anil Ambani points out that going forward, the gap between ownership and management will widen. "If my son wants follow a non-corporate career, that's fine by me. The family can be a financial investor in Reliance and we see a growing divorce in the future between ownership and management. Reliance is an institution and does not need an Ambani surname to grow."

What the Ambanis have proved over the years, is their ability to dream big (with eyes open), draw ambitious blueprints, raise the required capital to get them off the drawing board, and attract the right people to execute those grandiose plans at seemingly-unrealistic deadlines. "They have a vision. The expectations along with the motivation are very high," says Shailesh Haribhakti, CEO, Haribhakti Group and Independent Director, IPCL. In five years the group aims to double revenues, a quarter of those coming from "new economy and services businesses." After 25 years, the growth story has slipped into the next league.

-additional reporting by Dipayan Baishya