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4Ps
2009 IS THIS THE DO-OR-DIE YEAR FOR Anil D. Ambani?
BIG can mean Bold, Innovative and Grand. BIG can also mean Boastful, Insecure and Grandiose. By the end of 2009, the verdict will probably be out on the BIG ambitions of Anil Dhirubhai Ambani. The crash of the Indian markets and the global meltdown couldn’t have come at a worse time for ADAG. But analysts say that he might stumble, only to soar again...
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 “Pursue your goals even in the face of difficulties, and convert adversities into opportunities.”
Dhirubhai Hirachand Ambani
Go to the home page of Reliance ADAG Group and these words of wisdom hit you gently. There is little doubt that the younger son of the legendary Dhirubhai Ambani must be mulling over these words of wisdom. Well and truly, after he split with elder brother Mukesh Ambani in 2005 and launched his own BIG dreams, Anil Ambani is finding the going tough. Almost all his BIG dreams in telecom, energy, entertainment, infrastructure and healthcare need huge investments. And the money is needed at a time when lenders and investors are holding on to money like a virgin holds on to her chastity. Sure, the man and his group will never be in serious trouble the way many other Indian entrepreneurs are. He sure has the chutzpah to overcome such hurdles. But there is no doubt that the year 2008 – that started so spectacularly well for him – has wounded him quite deeply. Says T. Jagganathan, Equity Head at SMC Capitals, “The year 2008 was
a completely forgettable year for Anil Ambani. As far as 2009 is concerned, there are no hopes whatsoever from the economy point of view as well as the capital markets point of view. The performance of Reliance group is closely benchmarked against their capital market performance.”
That has an uncomfortable ring of truth. For instance, there has been an almost 75% decline in the personal net worth of Anil Ambani to just about $30 billion (just see the use of words ‘just’ to describe $30 billion – that’s how one benchmarks the Ambanis!). In early 2008, the price of a Reliance Communications share was about Rs.800 while that of rival Bharti was about Rs.1,000. The gap was a mere Rs.200 a share and Anil Ambani was closing in. Then the script changes. By December 2008, the Reliance scrip has crashed to about Rs.200 while that of Bharti has tumbled to Rs.600. The gap has now widened to Rs.400; something that must be hurting the younger Ambani who is fiercely competitive and numbers driven. What must be hurting even more is the yawning gap between the number of subscribers corralled by Reliance and Bharti (Airtel). In January 2008, RCOM had about 37 million mobile subscribers while Bharti had about 52 million. By December 2008, the RCOM numbers had shot up to about 52 million while Bharti’s numbers had zoomed to about 85 million.
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 But it is the Reliance Power fiasco that has caused the maximum damage to the group. In early 2008, the RPower IPO to raise Rs.11,500 odd crores was hailed as the most successful IPO in Indian stock markets. Investors were delighted at the prospect of such manna from heaven. But the euphoria was short lived and the Great Expectations ended up in greater disappointment. The scrip listed on the stock exchange at Rs.547 in February, 2008. On January 15, 2009, the scrip was available for about Rs.98. Sure, you can say that the markets have tanked and shares of all business houses and entrepreneurs have suffered. But the fact of the matter is that RPower shares crashed by more than 74%, while that of rival Tata Power tumbled by a much smaller 54%. This hurts! Says Jagganathan of SMC capital, “Unfortunately, many people not very familiar with the markets still associate the crash of 2008 to the Reliance Power IPO itself!”
Such setbacks could have derailed entrepreneurs with less steel in their spine and less loftiness in their ambitions. Not Anil Ambani. Far from hunkering down, Anil Ambani launched four ambitious, strategic moves that would catapult the ADAG group into the top of the heap of India Inc. if they were successful. The first was the audacious move to acquire the South African telecom giant MTN through a complicated merger procedure. Just when victory was in sight, his elder brother Mukesh – at least if you believe bitter, off the record remarks of managers at ADAG – spoilt the party for Anil by taking the whole thing to a new legal plane. The deal was first stalled, and then eventually collapsed. But his second move in the telecom arena has been fairly successful. Anil Ambani successfully bagged pan Indian licenses for GSM services and is in the process of unleashing them across India this year. RCOM managers are confident that this move will pay rich dividends. Says S. P. Shukla, President, Wireless Business, “Entry into the GSM segment will allow us to benefit from ecosystem of GSM handsets, broader spectrum of value added services and in-roaming revenue potential.” Then again, there is not much that big brother turned rival Mukesh can do to stop the Anil juggernaut in telecom. But the same doesn’t hold true in his other strategic move viz. energy. With chutzpah and luck, the ADAG group could be sitting on close to 60,000 MW of power generating capacity in the next seven years. But there is a huge stumbling block right at the beginning. The Mukesh controlled Reliance Industries Ltd. has refused to supply gas to Anil controlled power plants at the price they had agreed to in 2005. The younger brother has taken the matter to the Bombay High Court where it is going through excruciating procedures and even more frustrating flip flops from the government of India.
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