How Mukesh Ambani-led Reliance Jio drove Anil Ambani's RCom out of 2G business
Mukesh Ambani's story home Antilia, which has three helipads, six floors of with his mother and his estranged younger brother, Anil, and Anil's family. He asked not to be identified for fear of ruining his relationship with Mr. from a Muslim charitable trust that elsewhere operated an orphanage. mukesh The tale of the two brothers' diverging fortunes began 16 years ago, Meanwhile Anil Ambani, two years his junior, has had a difficult year, with some . by Anil Ambani and Reliance Communications in connection with . Vijay Singh, Venu Srinivasan appointed as vice chairmen to all Tata trusts. Anil Ambani-led Reliance Communications has decided to shut price war unleashed by elder brother Mukesh Ambani's Reliance Jio which is.
It was recently renamed as Reliance Defence and Engineering. Reliance Petroleum's IPO in which later delisted and merged with the parent was the one big initial move from Mukesh. He created the organised retail business and launched it in the same year amidst protests from kiranas and political parties. In parallel to expanding the retail business, he launched one of the huge investment programmes of around Rs 60, crore for two big projects - the second refinery at Jamnagar and development of KG D6 gas field.
Both completed by After that his sole focus was launching the 4G business, though he also invested heavily to expand the traditional petrochemical business. RIL invested over Rs 1 lakh crore to build Jio. The service launch of Jio with three months of free-voice and free-data offer has been crazily picked up by the consumers, eventually disrupting the telecom industry.
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Full-fledged commercial operation of Jio will begin from next year. On the telecom front, Anil's RCom was struggling because of its debts and lower margins.
It tried to sell off its tower business to pay off part of the debts, but failed to fructify. The debt stands now at Rs 42, crore. Another step taken by RCom was the merger with Aircel for creating the country's fourth largest telecom operator. Russia's Sistema already holds 10 per cent stake in RCom. Reliance Capital was the best performer in Anil's stable see above chart.
Reliance Infrastructure has also performed on par with market. RIL's market capitalisation stands at Rs 3,53, crore on September 29,compared to the combined market value of five group companies of Anil at Rs 57, crore.
The third generation of Ambanis has already joined both the groups. The next level of growth is in their hands. Even the Reliance group companies issued a denial to that effect to the stock exchanges last week. The reason is simple: Further, according to the existing rules of the Securities and Exchange Board of India, the buyer would also have to make an open offer to buy a further 20 per cent stake in the two companies at an additional cost of Rs 4, crore Rs 40 billion.
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Raising such large amounts of cash is out of the question. Even if the Ambanis were in a position to do so, it would immediately alert the taxman. That also explains why Mukesh cannot buy out Anil's stake in RIL, which would need similar amounts of cash.
Finally, cutting off the umbilical cord that connects Reliance Energy to RIL could prove detrimental. Energy is a huge growth avenue for the group, but it would continue to require investment from RIL's huge cash flows.
So how do you then carry out a separation that is equitable to both parties?
Any division of the empire could be equitable if it is based on two important parameters: At nearly Rs 11, crore Rs It also contributes 86 per cent of the group's market valuation. Apart from the huge pitfalls involved in splitting Reliance Industries, there's one good reason why the Ambani family would be loath to give up ownership of their 34 per cent stake in RIL.
So far, the Ambani family's stake in Reliance is held through a web of over investment companies, whose ownership is not clearly defined. As the head of the family, Mukesh Ambani exercises control over these companies and the dividend income goes into a family pool account from which expenses are drawn.
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The brothers have been withdrawing from the pool based on an unwritten understanding between them. As the brothers and their wives seek to run their families separately, Kamath is likely to propose that the ownership now be properly defined. That means splitting the family's stake proportionately, so that each of them receives his share of the dividend.
In other words, 30 per cent of the dividend will go to Mukesh, 30 per cent to Anil, and 40 per cent to their mother Kokilaben. Ten per cent of the mother's share could, in turn, be split between the two Ambani daughters.
After her death, her 30 per cent share would be divided between Anil and Mukesh. But while ownership may rest with the family, Mukesh will be allowed full control of the family's stake.
Anil and the rest of the family will sign away their voting rights in favour of Mukesh. At current market prices, Anil's So what does Anil gain from the deal?
Five facts about India's Ambani brothers' split | Reuters
How should he be compensated for giving up control of RIL? There are two possible approaches. Instead, Anil is likely to be given full operational control of the companies that he has run in the past. According to insiders as well as merchant bankers, RIL will have a new holding structure: As an unlisted company, it is easier to transfer stake without regulators raising questions.
Of course, inside DAKC, Infocomm employees are still coming to terms with Mukesh's decision to hand over control of his pet project. Even though Mukesh owns 45 per cent of Infocomm, it is believed that the stake was bought using the family's funds. Anil had contested that half of Mukesh's share should effectively belong to him.Mukesh, Anil Ambani to work together again!