What’s Next For The Reliance Group

Corporate Profile

By Sunil PuriWhat’s Next For The Reliance GroupFollowing the well-publicized feud between two
brothers, the Indian giant announces plans to restructure.The juicy tale of two brothers fighting
for their father’s empire may be coming to an end. In August, the $22.5 billion Reliance Industries
Ltd. (RIL) — India’s largest private corporation — announced that it will be restructured into
separate companies. This announcement ends the speculation that has surrounded the company since
the feud between the Ambani brothers became public a little more than two years after the death of
their father — Dhirajlal Hirachand Ambani, the legendary founder of Reliance.The senior Ambani
(also fondly known as Dhirubhai Ambani) started RIL in 1932 and almost single-handedly turned it
into one of the pillar companies in India. With his sons Mukesh and Anil, Dhirubhai expanded the
company’s activities — which today span oil and gas exploration, refining and marketing,
petrochemicals (polyester, polymers and intermediates), textiles, financial services and insurance,
power, telecom and infocom services.In July 2002, Dhirubhai Ambani died without a will, thus
leaving the brothers (both of whom are today well-recognized figures in their own right among the
Indian industrial elite) to battle for control of this massive conglomerate.The dispute between the
brothers first became public when Mukesh admitted that there were “ownership issues in the private

Dhirubhai H. Ambani (seated), founder of Reliance Industries Ltd., with his two sons, Mukesh
(standing, left) and AnilRestructuring PlansFollowing the long and public battle, the first sign of
a settlement came in June when the widow of Dhirubhai issued a statement to declare that an
“amicable” resolution between her sons has been reached.Details of the settlement were made public
by the company directors during the annual meeting. Under the agreement, RIL’s assets and
liabilities in telecommunications, coal-based energy, financial services and gas-based energy
undertakings will be restructured into four separate companies:1. Reliance Communication Ventures
Ltd2. Reliance Energy Ventures Ltd.3. Reliance Capital Ventures Ltd.4. Global Fuel Management
Services Ltd.Everyone except certain specified shareholders of RIL will be issued shares of the
restructured companies. The transaction is scheduled for September, after which, the separated
companies will be listed in the stock exchanges in India.Reliance currently owns 46 percent of
Indian Petrochemicals Corp. Ltd. (IPCL), the nation’s biggest maker of polymers; half of Reliance
Energy, India’s secondbiggest utility company by market value; 45 percent of Reliance Infocomm
Ltd., the nation’s second-biggest mobile phone company; and 42.6 percent of Reliance Capital, which
provides financial services. Mukesh Ambani, the current group chairman, will retain control of
Reliance Industries Ltd., the group’s petrochemicals flagship, and Indian Petrochemicals Corp.
Mukesh will essentially have control over the core businesses of oil, gas, polyester and chemicals.
These sectors together bring in close to $19 billion a year in revenues.Meanwhile, Anil Ambani will
take over Reliance Energy, Reliance Infocomm and Reliance Capital, plus an estimated $1 billion in
cash to equalize the division.FutureWith Reliance Industries under his belt, Mukesh Ambani is
looking for “exponential growth”in the future.Announcing a growth plan for the company, he said
“RIL will be increasing its polyester manufacturing capacity by 550,000 tonnes per year this
financial year. This would take RIL’s total polyester capacity to 2 million tonnes per year. This
capacity increase would address value-added differentiated polyesters such as microfilaments,
pre-colored and heavy denier yarns.”In addition, a new world-class purified terephthalic acid (PTA)
plant with a capacity of 630,000 tonnes per year is under construction, which is scheduled for
completion next year. This will take RIL’s total PTA capacity to 1.9 million tonnes. This and other
capacity expansions will further consolidate RIL’s global leadership in polyester and polyester
intermediates.Reliance already has experienced rapid growth in the past several years — it took
over the operations of IPCL and this year took over the Glycol division of SM Dyechem Ltd., which
has a monoethylene glycol (MEG) production capacity of 80,000 tonnes a year.

Editor’s Note: Sunil Puri is a Mumbai, India-based textile journalist.

September/October 2005