by Ashutosh
Sharma
Dhirajlal Hirachand
Ambani ( 28 December 1932 – 6 July 2002) was an Indian industrialist who
founded Reliance Industries, a petrochemicals, communications, power, and
textiles conglomerate and one of the 3 privately owned Indian companies in the
Fortune 500. Ambani took his company public in 1977. Dhirubhai has been among
the select few to be figured in the Sunday Times list of top 50 businessmen in
Asia.[1] His life has often been referred to as a true "rags to
riches" story.
Dhirubhai started off
as a small time worker with Arab merchants in the 1950s and moved to Mumbai in
1958 to start his own business in spices. After making modest profits, he moved
into textiles and opened his mill near Ahmedabad. He founded Reliance
Industries in 1966, and today, the company, with over 85,000 employees,
provides almost 5% of the Central Government's total tax revenue. Ambani was
credited with introducing the stock market to the average Indian investor, and
thousands of investors attended the Reliance annual general meetings, which
were sometimes held in a football stadium, with millions more watching on
television.
In 1985 after a heart
attack Dhirubhai handed over the Reliance empire to his sons Mukesh and Anil.
After his death, the group was split into Reliance Industries Limited, headed
by Mukesh Ambani, and Reliance Anil Dhirubhai Ambani Group (Reliance ADAG),
headed by Anil Ambani
Early
Hirachand Ambani was a
low wage villager. Hirachand and Jamnaben had two daughters - Trilochanaben and
Jasuben - and three sons - Ramnikbhai, Dhirubhai and Natubhai. Dhirubhai was
the second son.
Life in Aden
(1949-1958)
Just after Dhirubhai
was through his annual matriculation examination and even before the result was
out, Hirachand called him home (to Chorwad). Hirachand had been unwell for
quite some time and had grown extremely weak and frail.
Hirachand asked his son
the very night he reached home. "Well, I'll tell you. You know I have been
unwell for past several months. I cannot work any more. I know you want to
study further but I can't afford that any more. I need you to earn for the
family. I need your money. The family needs it. You must work now. Ramnikbhai
has arranged a job for you in Aden. You go there.
Dhirubhai had really
wanted to study for a bachelor's degree, but his ambition melted when he looked
into the anxious eyes of his sick father. "I'll do as you say," he
said, and the very next morning he left for Rajkot to get his passport. Those
days Indians were exempt from obtaining a visa for entering Aden, but there
were rumors around that the No Visa regime was about to end any day. So he
needed to hurry up before the visa rules changed. In a few days he was in
Bombay to board the ship to Aden. It was on board the ship that Dhirubhai
learnt from a Gujarati newspaper that he had passed his matriculation
examination in second division.
On reaching Aden,
Dhirubhai joined office on the very day of his arrival. It was a clerk's job
with the A. Besse & Co., named after its French founder Antonin Besse.
Those days Aden was the second busiest trading and oil bunkering port in the
world after London handling over 6,300 ships and 1,500 dhows a year.
And, there in Aden, A.
Besse & Co. was the largest transcontinental trading firm east of Suez. It
was engaged in almost every branch of trading business - cargo booking,
handling, shipping, forwarding, and wholesale merchandising. Besse acted as
trading agents for a large number of European, American, African and Asian
companies and dealt with all sorts of goods ranging from sugar, spices, food
grains and textiles to office stationery, tools, machinery and petroleum
products. Dhirubhai was first sent to the commodities trading section of the
firm. Later, he was transferred to the section that handled petroleum products
for the oil giant Shell.
"I learnt business
at Besse which was then the best trading firm this side of the Suez," he
used to tell friends in later years. He was quick on the uptake. He learnt the
ways of commodity trading, high seas purchase and sales, marketing and distribution,
currency trading, and money management. During lunch breaks he roamed the
[[souks]] and bazaars of Aden where traders from numerous different continents
and countries bought and sold goods worth millions of pounds sterling, the then
global currency, during the day. He met traders from all parts of Europe,
Africa, India, Japan and China. Aden was the biggest trading port of the times,
a trading port where goods landed from all parts of the world and were
dispatched to the farthest corners of different continents. Speculation in
manufactured goods and commodities was rife all over the Aden bazaars.
Dhirubhai felt tempted
to speculate but had no money for that and was still raw for such trading. To
learn the tricks of the trade he offered to work free for a Gujarati trading
firm. There he learnt accounting, book keeping, preparing shipping papers and
documents, and dealing with banks and insurance companies., skills that would
come handy when he launched himself into trading about a decade later in Bombay.
At the Besse office during the day he polished his skills in typing and Pitman
shorthand, drafting commercial letters, and composing legal documents.
At the boarding house
where he lived with another twenty-five or so young Gujarati clerks and office boys,
he devoted long hours of the night mastering English grammar, essay writing,
current affairs and a host of subjects that took his fancy from week to week.
He was the first to snatch the English, Gujarati and Hindi daily papers and
weeklies as soon as they arrived by the ship every day. The Times of India,
Blitz, Janmabhoomi and Navajeevan formed his favorite reading material. He also
devoured all sorts of books, magazines and journals the passengers arriving
from various European and Indian ports left in the ships and at the offices of
various shipping agents.
After he thought he had
learnt the basics of commodities trading, Dhirubhai began speculating in high
seas purchase and sales of all sorts of goods. He did not have enough money of
his own for such speculative trading. So he borrowed as much as he could from
friends and small Aden shopkeepers on terms nobody had ever offered them.
"Profit we share and all loss will be mine" became his motto. During
lunch break and after office hours he was always in the local bazaar, trading
in one thing or the other.
Soon, those around him
found that he had an uncanny knack for such speculative trading. He seldom lost
money in any deal. "I think I had an animal instinct about such trading
but there was a lot of reading and understanding of market trends behind that
animal instinct of mine. I read every bit of paper I could lay my hands on
about what was happening around the world, I listened carefully to every word
uttered in the market, picked every bit of gossip in the shipping circles and
pondered long through the night in the bed about the pros and cons of every
deal I wanted to make."
Meantime, the Shell oil
refinery and the first oil harbor came up in Aden in 1954, the year Dhirubhai
returned home to Gujarat to marry Kokilaben. As expected, A. Besse & Co.
became the agents for distribution of Shell refinery products. Dhirubhai had
done well at the office during his first five years. Now he was sent on
promotion to the oil filling station at the newly built harbour.
He liked the new job,
though it was a lot more demanding than the desk job in the commodities
section. Here he had to service the ships bunkering for diesel and lubricants.
He enjoyed visiting the ships, making friends with sailors and the engine staff
I heard from them first hand accounts of their voyages in different parts of
the world of which he had until then read about only in books and magazines.
And, here it was that he first began dreaming of one day building a refinery of
his own.
"It was a crazy
idea for a petrol pump attendant to want to build a refinery of his own, but
that is the sort of crazy ideas I have been playing with all my life,"
Dhirubhai recalled at the time Reliance's 25 million ton oil refinery, the
largest grassroots refinery in the world, went on stream in Jamnagar in 1999.
"I have been able to build this refinery because I decided long years ago
not to settle for anything else," he said, "I had heard a Yemeni
proverb in Aden "la budd min Sana'a wa lau taal al-safr" (You must visit
Sana'a, however long the journey takes). I never forgot that saying."
By the late 1950s it
became clear that the British rule in Aden would not last long in the face of
growing Yemeni movement for independence supported by Gamal Abdel Nasser's
revolutionary government from across the Suez. The large Indian community of
Hindu and Parsee Gujaratis began preparing to move out of Aden. Some began
returning home to India, while some chose to settle in Britain. Aden Indians
those days were allowed to settle in Britain.
Where to go on leaving
Aden was debated among the colony's settlers heatedly everyday. Some of
Dhirubhai's friends told him that he should migrate to London where,
considering his talents, acumen and guts, he could find better opportunities of
growth. At the port and on ships at Aden he often heard glowing accounts of
post-war Britain and the promises of a life of much greater ease there than one
could ever hope to find in India.
Dhirubhai weighed his
options.. By now he had saved some money and was thinking of setting up some
business of his own. Although Dhirubhai's father had died in 1952, he had in
the meantime been blessed with his first son, Mukesh D. Ambani, in April, 1957.
Kokilaben and Mukesh were back home in India.The choice of opening a shop
somewhere in London was tempting but he felt India was calling him home.
Those were exciting
years in India. The country was in the midst of implementing the Second Five
Year Plan which promised to build big industries, raise new big dams across
many rivers, lay new roads through the length and breadth of the country, boost
agricultural production to new record levels and set up a huge network of food
grains procurement centers.
Though by the end of
1958, the newspapers coming from India were painting a rather gloomy picture of
the country's finances and foreign exchange reserves, there was also a new
vigor and a new fervor in their reports of a new 100 billion Five Year Plan then under
preparation. The Plan promised to open massive new opportunities for growth for
the country's youth. Jawaharlal Nehru was daily exhorting the young to cast
away their old ways and help build a new India. His words were stirring and
roused the passions of every young Indian, especially of those living far away
from the country.
Dhirubhai was now 26
years (1957), full of youthful vigor and vitality, and filled with high hopes
for himself and for the new India of Nehru's dreams. He just could not miss the
excitement of being in India in such tumultuous times. He decided to return
home, instead of going to London to live a life of ease there.
Majin Commercial
Corporation
Ten years later,
Dhirubhai Ambani returned to India and started "Majin" in partnership
with Champaklal Damani, his second cousin, who used to be with him in Aden,
Yemen. Majin was to importpolyester yarn and export spices to Yemen. The first
office of the Reliance Commercial Corporation was set up at the Narsinatha
Street in Masjid Bunder. It was a 350 sq ft (33 m²) room with a telephone, one
table and three chairs. Initially, they had two assistants to help them with
their business. During this period, Dhirubhai and his family used to stay in a
one-bedroom apartment at the Jai Hind Estate in Bhuleshwar, Mumbai. In 1965,
Champaklal Damani and Dhirubhai Ambani ended their partnership and Dhirubhai
started on his own. It is believed that both had different temperaments and a
different take on how to conduct business. While Damani was a cautious trader
and did not believe in building yarn inventories, Dhirubhai was a known
risk-taker and believed in building inventories, anticipating a price rise, and
making profits. In 1968, he moved to an upmarket apartment at Altamont Road in
South Mumbai. Ambani's net worth was estimated at about 1 million by late 1970s.
Reliance Textiles
Sensing a good
opportunity in the textile business, Dhirubhai Ambani, along with Amit Mehra, a
Delhi-based chartered accountant and company secretary residing in Ashok Vihar,
Delhi, started the first textile mill at Naroda, in Ahmedabad in the year 1966.
Textiles were manufactured using polyester fiber yarn.[4] Dhirubhai started the
brand "Vimal", which was named after his elder brother Ramaniklal
Ambani's son, Vimal Ambani. Extensive marketing of the brand "Vimal"
in the interiors of India made it a household name. Franchise retail outlets
were started and they used to sell "only Vimal" brand of textiles. In
the year 1975, a Technical team from the World Bank visited the Reliance
Textiles' Manufacturing unit. This unit has the rare distinction of being
certified as"excellent even by developed country standards" during that
period. Amit Mehra had played a pivotal role in helping and supporting
Dhirubhai in this success
Initial public offering
Dhirubhai Ambani is
awarded with starting the equity cult in India. More than 58,000 investors from
various parts of India subscribed to Reliance's IPO (Initial public offering)
in 1977. Dhirubhai was able to convince large numbers of small investors from
rural Gujarat that being shareholders of his company would be profitable.
Reliance Industries was
the first private sector company whose annual general meetings were held in
stadiums. In 1986, the annual general meeting of Reliance Industries had number
of first-time retail investors investing in Reliance. Ambani's net worth was
estimated at about 1 billion by early
1980s.
Dhirubhai's control
over stock exchange
In 1982, Reliance
Industries came up against a rights issue regarding partly convertible
debentures.[6] It was rumored that the company was making all efforts to ensure
that their stock prices did not slide an inch. Sensing an opportunity, The Bear
Cartel, a group of stock brokers from Calcutta, started to short sell the
shares of Reliance. To counter this, a group of stock brokers till recently
referred to as "Friends of Reliance" started to buy the short sold shares
of Reliance Industries on the Bombay Stock Exchange.
The Bear Cartel was
acting on the belief that the Bulls would be short of cash to complete the
transactions and would be ready for settlement under the "Badla"
trading system operative in theBombay Stock Exchange. The bulls kept on buying
and a price of 152 per share was
maintained till the day of settlement. On the day of settlement, the Bear
Cartel was taken aback when the Bulls demanded a physical delivery of shares.
To complete the transaction, the much needed cash was provided to the stock
brokers who had bought shares of Reliance, by none other than Dhirubhai Ambani.
In the case of non-settlement, the Bulls demanded an "Unbadla" (a
penalty sum) of 35 per share. With
this, the demand increased and the shares of Reliance shot above 180 in minutes. The settlement caused an
enormous uproar in the market.
To find a solution to
this situation, the Bombay Stock Exchange was closed for three business days.
Authorities from the Bombay Stock Exchange (BSE) intervened in the matter and
brought down the "Unbadla" rate to
2 with a stipulation that the Bear Cartel had to deliver the shares
within the next few days. The Bear Cartel bought shares of Reliance from the
market at higher price levels and it was also learnt that Dhirubhai Ambani
himself supplied those shares to the Bear Cartel and earned a healthy profit
out of The Bear Cartel's adventure.
After this incident,
many questions were raised by his detractors and the press. Not many people
were able to understand as to how a yarn trader till a few years ago was able
to get in such a huge amount of cash flow during a crisis period. The answer to
this was provided by the then finance minister, Pranab Mukherjee in the
Parliament. He informed the house that a Non-Resident Indian had invested up
to 220 million in Reliance during
1982-83. These investments were routed through many companies like Crocodile,
Lota and Fiasco. These companies were primarily registered in Isle of Man. The
interesting factor was that all the promoters or owners of these companies had
a common surname Shah. An investigation by the Reserve Bank of India in the
incident did not find any unethical or illegal acts or transactions committed
by Reliance or its promoters
Diversification
Ambani began the
process of backward integration, setting up a plant to manufacture polyester
filament yarn. He subsequently diversified into chemicals, petrochemicals,
plastics, power. The company as a whole was described by the BBC as "a
business empire with an estimated annual turnover of $12 billion, and an
85,000-strong workforce". The final phase of Reliance’s diversification
occurred in the 1990s when the company turned aggressively towards
petrochemicals and telecommunications.
Criticism
Despite his almost
Midas Touch, Ambani has been known to have flexible values and an unethical
streak running through him. his biographer himself has cited some instances of
his unethical behavior when he was just an ordinary employee at a petrol pump
in Dubai. He has been accused of having manipulated government policies to suit
his own needs, and has been known to be a king-maker in government elections.
Although most media sources tend to speak out about business-politics nexus,
the Ambani house has always enjoyed more protection and shelter from the media
storms that sweep across the country.
Tussle with Nusli Wadia
Nusli Wadia of Bombay
Dyeing was, at one point in time, the biggest competitor of Dhirubhai and
Reliance Industries. Both Nusli Wadia and Dhirubhai were known for their
influence in the political circles and their ability to get the most difficult
licenses approved during the times of pre-liberalized economy. During the
Janata Party rule between 1977–1979, Nusli Wadia obtained the permission to
build a 60,000 tons per annum Dimethyl terephthalate (DMT) plant. Before the
letter of intent was converted into a licence, many hurdles came in the way.
Finally, in 1981, Nusli Wadia was granted the license for the plant. This
incident acted as a catalyst between the two parties and the competition took
an ugly turn.
The Indian Express
Articles
At one point in time,
Ramnath Goenka was a friend of Dhirubhai Ambani. Ramnath Goenka was also
considered to be close to Nusli Wadia. On many occasions, Ramnath Goenka tried
to intervene between the two warring factions and bring an end to the enmity.
Goenka and Ambani became rivals mainly because Ambani's corrupt business
practices and his illegal actions that lead to Goenka not getting a fair share
in the company. Later on, Ramnath Goenka chose to support Nusli Wadia. At one
point of time, Ramnath Goenka is believed to have said "Nusli is an
Englishman. He cannot handle Ambani. I am a bania. I know how to finish
him"..
As days passed by, The
Indian Express, a broadsheet daily published by him, carried a series of
articles against Reliance Industries and Dhirubhai in which they claimed that
Dhirubhai was using unfair trade practices to maximise the profits. Ramnath
Goenka did not use his staff at the Indian Express to investigate the case but
assigned his close confidante, advisor and chartered accountant S. Gurumurthy
for this task. Apart from S. Gurumurthy, another journalist Maneck Davar who
was not on the rolls of Indian Express started contributing stories. Jamnadas
Moorjani, a businessman opposed to the Ambanis was also a part of this
campaign. Both Ambani and Goenka were equally criticized and admired by
sections of the society. People criticized Goenka that he was using a national
newspaper for the cause of a personal enmity. Critics believed that there were
many other businessman in the country who were using more unfair and unethical
practices but Goenka chose to target only Ambani and not the others. Critics
also admired Goenka for his ability to run these articles without any help from
his regular staff. Dhirubhai Ambani was also getting more recognition and
admiration, in the meantime. A section of the public started to appreciate
Dhirubhai's business sense and his ability to tame the system according to his
wishes. The end to this tussle came only after Dhirubhai Ambani suffered a
stroke. While Dhirubhai Ambani was recovering in San Diego, his sons Mukesh
Ambani and Anil Ambani managed the affairs. The Indian Express had turned the
guns against Reliance and was directly blaming the government for not doing
enough to penalize Reliance Industries. The battle between Wadia - Goenka and
the Ambanis took a new direction and became a national crisis. Gurumurthy and
another journalist, Mulgaokar consorted with President Giani Zail Singh and
ghost-wrote a hostile letter to the Prime Minister on his behalf. The Indian
Express published a draft of the President’s letter as a scoop, not realizing
that Zail Singh had made changes to the letter before sending it to Rajiv
Gandhi. Ambani had won the battle at this point. Now, while the tussle was
directly between the Prime Minister Rajiv Gandhi and Ramnath Goenka, Ambani
made a quiet exit. The government then raided the Express guest house in
Delhi’s Sunder Nagar and found the original draft with corrections in
Mulgaokar’s handwriting. By 1988-89, Rajiv’s government retaliated with a
series of prosecutions against the Indian Express. Even then, Goenka retained
his iconic stature because, to many people, he seemed to be replaying his heroic
defiance during the Emergency regime.
Dhirubhai and V. P.
Singh
It was widely known
that Dhirubhai didn't enjoy a cordial relation with Vishwanath Pratap Singh,
who succeeded Rajiv Gandhi as the Prime Minister of India. In May 1985, he
suddenly removed the import of Purified terephthalic acid from the Open General
License category. As a raw material this was very important to manufacture
polyester filament yarn. This made it very difficult for Reliance to carry on
operations. Reliance was able to secure, from various financial institutions,
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. In 1990, the government-owned
financial institutions like the Life Insurance Corporation of India and the
General Insurance Corporation of India stonewalled attempts by the Reliance
group to acquire managerial control over Larsen & Toubro. Sensing defeat,
the Ambanis resigned from the board of the company. Dhirubhai, who had become
L&T's chairman in April 1989, had to quit his post to make way for D. N.
Ghosh, former chairman of the State Bank of India.
Death
Dhirubhai Ambani was
admitted to the Breach Candy Hospital in Mumbai on June 24, 2002 after he
suffered a major stroke. This was his second stroke. The first one had occurred
in February, 1986 and had kept his right hand paralyzed. He was, latterly, in a
state of coma for more than a week. A number of doctors were used. He died on
July 6, 2002, at around 23:50 UTC+05:30.
His funeral procession
was not only attended by business people, politicians and celebrities but also
by thousands of ordinary people. His elder son,Mukesh Ambani, performed the
last rites as per Hindu traditions. He was cremated at the Chandanwadi
Crematorium in Mumbai at around 16:30 UTC+05:30 on July 7, 2002.
He is survived by
Kokilaben Ambani, his wife, two sons, Mukesh Ambani and Anil Ambani, and two
daughters, Nina Kothari and Deepti Salgaonkar. Dhirubhai Ambani started his
long journey in Mumbai from the Mulji-Jetha Textile Market, where he started as
a small-trader. As a mark of respect to this great businessman, The Mumbai
Textile Merchants' decided to keep the market closed on July 8, 2002. At the
time of Dhirubhai's death, Reliance Group had a gross turnover of 750 billion (US$15 billion). In 1976-77, the
Reliance Group had an annual turnover of
700 million (Note that Dhirubhai had started the business with just 150 000 (US$3500).
Reliance after
Dhirubhai
In November 2004,
Mukesh Ambani in an interview, admitted to having differences with his brother
Anil over 'ownership issues.' He also said that the differences "are in
the private domain." He was of the opinion that this will not have any
bearing on the functioning of the company saying Reliance is one of the
strongest professionally-managed companies. Considering the importance of
Reliance Industries to the Indian economy, this issue got extensive coverage in
the media.
Kundapur Vaman Kamath,
the Managing Director of ICICI Bank was seen in media, a close friend of the
Ambani family who helped to settle the issue. The brothers had entrusted their
mother, Kokilaben Ambani, to resolve the issue. On June 18, 2005, Kokilaben
Ambani announced the settlement through a press release.
With the blessings of
Srinathji, I have today amicably resolved the issues between my two sons,
Mukesh and Anil, keeping in mind the proud legacy of my husband, Dhirubhai
Ambani.
I am confident that
both Mukesh and Anil, will resolutely uphold the values of their father and
work towards protecting and enhancing value for over three million shareholders
of the Reliance Group, which has been the foundational principle on which my
husband built India's largest private sector enterprise.
Mukesh will have the
responsibility for Reliance Industries and IPCL while Anil will have responsibility
for Reliance Infocomm, Reliance Energy and Reliance Capital.
My husband's foresight
and vision and the values he stood for combined with my blessings will guide
them to scale new heights.
— Kokilaben Ambani
The Reliance empire was
split between the Ambani brothers, Mukesh Ambani getting RIL and IPCL & his
younger sibling Anil Ambani heading Reliance Capital, Reliance Energy and
Reliance Infocomm. The entity headed by Mukesh Ambani is referred to as the
Reliance Industries Limited whereas Anil's Group has been renamed Reliance Anil
Dhirubhai Ambani Group (Reliance ADA Group).
Reliance Institute of
Life Sciences, a Dhirubhai Ambani Foundation Initiative, was established to
promote higher education in various fields of life sciences and related technologies.
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