Monday, February 21, 2011

The difference between the two Ambanis

I have written two posts on Anil Ambani in the last month or so. This one is again on the Ambanis, but this time to highlight the difference between the two brothers.

Today's story in the papers should make the difference between the two brothers stark. On the one hand, you have Anil Ambani struggling to get his empire running.....his flagship Reliance Communications plummetting to new lows in the stock market virtually on a daily basis.....he being personally interviewed by the CBI for his company's alleged involvement in the 2G issue.....all his stocks taking a beating.....and in general, people talking about him (in whispers of course) in a very negative....almost humiliating way. And on the other hand, you have Mukesh Ambani.....the guy who's hardly in the news.....the silent operator....the guy who builds a billion dollar home in Bombay almost without attracting any who is clear of all political parties, though involved with all.....not involved in any scam either.....and now the one who strikes one of the biggest FDI deals in India. The contrast is stark.

Elder brother Mukesh has clearly shown that even when the two brothers were together, it was Mukesh who was driving the growth of the combined group. Like his father, he continues to demonstrate his larger than life vision for his group. He aims big; and executes his plans well. One hasnt heard about him facing trouble with financial closures for his one does about his younger brother. There is no doubt that Mukesh is as savvy and as involved in managing the government (a key requirement even today in India).....the key difference is that he does it smoothly and smartly. He dives in....gets his work done....and gets out. Makes no splash at all!

Sometimes we lose sight of the numbers in the hurly burly of daily routine. But just look at where the two brothers' companies stand in the stock markets. The four major companies of Anil Ambani (Reliance Power, Infra, Capital and Communications) have a total market cap of just about Rs 80000 crores. In contrast, Mukesh's RIL has a market cap of Rs 3.1 lac crores. See the difference? So Mukesh's empire is now 4 times Anil's empire. I would assume the two started at nearly the same point about 6 years back when they split.

What's the reason for this big difference between the two brothers? My own view is that Anil is confused. He is highly ambitious, but he has let his ambition lead him in multiple directions. One would argue about why a business of his size and stature would want to get into small spaces like media and entertainment. Anyone who's been in M&E knows that its a sector which is made up of many small companies. The biggest media group (my group, BCCL) hardly has a turnover of Rs 5000 crores (as reported in some newspapers). The next biggest (Zee or Star) probably has about Rs 3000 crores and the one after that drops to less than Rs 1500 crores. Why would an Ambani be interested in such a small business. In contrast, just one power plant that Reliance Infra puts up costs Rs 10-15000 crores. Every infrastructure project he picks up needs investments of the same size. This is what Anil should focus on. But Anil has let his personal ambitions get in the way of his group's growth. And that's why his shareholders are hurting.

Is it too late for Anil to recover? I dont think so. He's a very smart man.....for starters he needs to surround himself with some smart advisors. People who have his confidence and who he can listen to. Then he needs to discard small businesses that he has started or acquired. Any company which has a turnover of less than Rs 2000 crores....or a market cap of less than Rs 5000 crores should be either hived off or simply shut down. He cannot waste time on such small businesses. Then, he should realize (like Mukesh has) that consumer-facing businesses are not his forte. He should focus on businesses which require a) lots of money b) strong execution skill-sets and c) governmental approvals. So infra, power, capital.....all are fine. But telecom, media, banking (I heard he's considering this) are not OK. If he were to just bring this focus to his group, he would re-emerge as one of India's biggest industrialists. He has to understand that his group can be like L&T (infrastructure largely) but not like the Tatas (industrial + consumer facing).

The real truth is that most of Anil's shareholders are hoping and praying that Mukesh acquires his companies. That the two brothers patch up. Not because they care for the two to patch up.....but only to protect their own investments. They have been badly let down. I have personally lost loads on ADAG's companies. They look up to Mukesh for a rescue!


  1. Facts put well sir !!

  2. Prashant, Anil wants to be everywhere and as you said highly ambitious!!! Am sure Mukesh is no less ambitious but he has a subtle & mature way of managing business and he seems to be using his own instincts much more than depending on his associated, whereas Anil seems to be depending too much on his managers/consultants rather than the old principles adopted by his father....Systems and processes in ADAG companies sucks, accountability is superficial driven by few top men...down the line its pressure only without a sense of belongingness...anyways thats different aspect...He needs to check his priorities in line with his current strengths and build up from there, rather than picking up any growing business opportunity....