Guest ColumnRetrofit: Of an insipid press conference, and the continuing saga of Brothers Ambani
Two big news events dominated headlines over the last couple of days. Like a bolt from the blue, the truce and sense of collaboration between the warring Ambani brothers on Sunday, followed the very next day by the most insipid and boring presser by the Prime Minister, his first in four years. Sandeep Bamzai takes stock.
Two big news events dominated headlines over the last couple of days. Like a bolt from the blue, the truce and sense of collaboration between the warring Ambani brothers on Sunday, which had everyone flummoxed, followed the very next day by the most insipid and boring presser by the Prime Minister, his first in four years. First the PM. I give you three words - drift, inertia, lassitude - which clearly mirror UPA II’s abysmal first year in office. Lurched as it has from one crisis to another - Shram el Sheikh, Telangana, IPLgate, Spectrum Raja, la affaire Shashi Tharoor-Sunanda Pushkar, Dantewada, Cut Motions, and of course, the overarching spectre of an incessant price spike, which has broken the back of everyone in the land. Though I must confess that the Government has done a commendable job in shepherding the economy out of the global meltdown induced crisis, which engulfed large swathes of the globe.
A combination of poor questioning eliciting equally nondescript responses from the PM ensured that the exercise was a damp squib. A bigger wet blanket was thrown over the event with the manner in which the entire process was conducted. The three newspaper biggies – The Times of India, Hindustan Times and Indian Express – couldn't get a word in edgeways as a phalanx of editors and reporters got tired of holding up placards, waiting for their turn. But it didn't come around. Dang, was there a conspiracy to silence them? Foreign media had a Japanese journo complaining of not being able to get PIB accreditation. Wow, weren't we plumbing the depths now? Nothing of relevance was thrown up other than a gag order on ministers speaking out of turn and the fact that PM wasn't ready to retire as he had a lot of unfinished business to complete. It was mismanagement at its best or was it worst. Sadder still was the line of questioning adopted by the journos. Boy, were they out of their depth and intellectually bankrupt? Some were congratulating the PM, others were asking inane questions, it was downright disappointing. Lots were written and much was said on the talking heads that carried on right through the day on the news telly stations.
But on rediff.com, Saisuresh Sivaswamy summed up the situation: "One year ago, when the second edition of the United Progressive Alliance came to power, one felt that we would be seeing a different government. There was unanimity among various groups that the first one was a holding operation; trammelled by its lack of Parliamentary numbers and a fire-breathing Left, it stumbled through five years of staying in office without really doing much. Apart from the Prime Minister's pet project, the nuclear deal with the United States over which much blood was spilt with the Left, that government did get some landmark legislations passed. Like the Right to Information Act and the National Rural Employment Guarantee Act. But throughout those five years, an impression was created, and the Left did little to correct it, that the UPA Government wasn't being given breathing space to do the things it really wanted to. Perhaps the voters too bought the argument last year, since Verdict 2009 cut the Left down apart from boosting the Congress's numbers. A year on, after it's clear that the Left was only UPA-I's whipping boy. A year on, despite getting rid of Prakash Karat and his band of fiery men, the UPA has been as sluggish as it was in its first term." On Monday, when asked if he missed the Left parties' support, Prime Minister Manmohan Singh said, “If wishes were horses beggars would ride.”
Sivaswamy went on to say, "The prime minister's Cabinet thus resembles a day-care centre where children are running riot, with the babysitter unable to maintain order. Cabinet posts are filled not on merit but based on allies' intransigence. So, a Muthuvel Karunanidhi is able to cock a snook at the Prime Minister, at the Congress party and its president Sonia Gandhi and retain a minister who caused pecuniary loss to the nation. We pilloried a prime minister for a scam worth a niggardly Rs 64 crore; but a mere minister who caused thousands of crores to vanish sits pretty."
Now let us come to the other big event. The rapprochement and perhaps an end to the fratricidal war between the Ambanis. I had to give pole position to the PM's presser. The PM gets precedence over the Ambanis. Anyway, while a lot of people were taken unawares on Sunday with the suddeness of the statement issued by the two sides, the day Anil Ambani, accompanied by the matriach Kokilaben visited Badrinath, one knew that the game was afoot. When both brothers met the PM after the May 7 Supreme Court verdict, the air was pregnant with possibilities. Something was definitely cooking. It was served on Sunday. The father Dhirubhai Ambani was larger than life, he changed the rules of engagement in Indian business. Many question the manner in which he conducted his business, but the reality was that he understood the merits of asset creation and equally the importance of the equity cult. In fact, as the progenitor of the equity cult, he acquired a Gargantua like image in India's capital markets. The nuances of shareholder value are what Ram and Lakhan (Mukesh and Anil as the stock markets called them) imbibed. They took his legacy forward, till they squabbled and finally crossed the point of Rubicon. The split, which was decided under the aegis of the mother, was a fair and equitable settlement. So far, so good.
When the Reliance Industries demerger scheme was ratified as part of Asia's largest corporate transaction, shareholder wealth multiplied as new entities were created and people made piles of cash. Many remember that June 18, 2005, when the family MoU was inked by the mother Kokilaben Ambani, fashioned a new explosion on the bourses as the markets and RIL made their trek northwards. When the markets scaled their peak in January 2008, both sides were ruling the markets. Wealth creation was at its peak. But the sticking point over gas created consternation. This unresolved issue became a harbinger of wealth destruction rather than wealth creation. Even as boom went quickly to bust and all hell broke loose, the gas feud became a millstone around their necks. Let us understand how severely this internecine sniping impacted both brothers. After the government and RBI's credit induced rally began, unlike any market rally in the past, the R Word did not contribute to its ramp up. It was tech which was at the vanguard, followed by PSU counters, banks et al, but RIL began to contribute only in the rally's last leg, even as the Sensex doubled.
Somewhere this must have hurt both. Constraints and caps too must have stifled business plans. Take Reliance Communication, for instance, an undervalued scrip which tried in vain to enter into a gigantic merger with South Africa's MTN. A simple thing like Right of First Refusal (ROFR) lying with Mukesh Ambani's RIL tripped its ambition. Price warriors playing the bargain basement pricing game did incalculable damage in the meantime. The Bombay High Court and then Supreme Court overhang did not help RIL's scrip. It was like a tiger caged as it could not vault to the next level. I can give you more examples, but these will do. By signalling collaboration even as the non-compete clause is revoked, a message is sent out to all those people who exploited this ever growing chasm between the two brothers and their entities. By collaborating they once again present a formidable combine, a united face; the contours of this collaboration will reveal themselves in the days to come.
The mother Kokilaben's primacy in this second settlement cannot be underestimated. Her constant efforts at ensuring that both brothers are equal inheritors of Dhirubhai Ambani's legacy has once again ensured that shareholders will gain in the long run. As overhangs dissipate, Mukesh and Anil Ambani will once again make tracks with their business plans and not their jousts and sabre rattling with one another. Despite the condition of the markets right now - the Euro Zone has revived fears of a double dip crisis - I still believe that it is a win-win for shareholders of the enlarged Reliance family. Monday showed us exactly that with a Rs 18,000-crore spike in market cap of both sides. Maybe this model will work well – independent managements, independent business decisions, but common intent. A 'reunified' Reliance may be bad news for a lot of people, but good news for investors and shareholders.
Sandeep Bamzai’s Retrofit column will take a break from next week.
(Sandeep Bamzai is a well-known journalist, who started his career as a stringer with The Statesman in Kolkata in 1984. He has held senior editorial positions in some of the biggest media houses in three different cities - Kolkata, Mumbai and New Delhi. In late 2008, he joined three old friends to launch a start-up – Sportzpower Network – which combines his two passions of business and sport. Familiar with all four media – print, television, Internet and radio, Bamzai is the author of three different books on cricket and Kashmir. The views expressed here are of the writer’s and not those of the editors and publisher of exchange4media.com. )
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