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Anil Ambani-The Fall of Reliance Group Sciences
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Who does not know Ambani? Reliance is one of the most profitable companies in India, one of the largest in terms of revenue. It is also the largest employer in India with over 3,00,000 employees.
But do you know how the largest private sector company started its journey? The Ambani brothers have set an example by becoming one of Asia’s richest men while the other has become a total bankrupt. Today we will discuss about the Ambani brother who went bankrupt due to his poor decision making – Mr. Anil Dhirubhai Ambani.
Who is Mr. Anil Dhirubhai Ambani?
Anil Ambani was born on June 4, 1959. He was born in Mumbai. His father is Mr. Dhirubhai Ambani and Mrs. Kokila Dhirubhai Ambani. Mr. Dhirubhai Ambani was an entrepreneur, Indian industrialist who founded Reliance Industries.
He formed Reliance Public Company in the year 1977. He died in the year 2002. After his death the Reliance group was split between two brothers namely Mukesh Dhirubhai Ambani and Anil Dhirubhai Ambani.
Anil Ambani Education and Early Life
Anil Ambani completed his B.Sc from Kishanchand Chelaram College, University of Mumbai in 1983 and MBA from Wharton, University of Pennsylvania.
He returned to India and joined his father in running the business as Chief Executive Officer. After Mr. Dhirubhai Ambani suffered a stroke, Anil Ambani took over the day-to-day management of the company’s financial affairs under the supervision of his father.
Anil Ambani family
Anil Dhirubhai Ambani married Indian actress Tina Munim in the year 1991 and they have two sons Jai Anmol Ambani and Jai Anshul Ambani. Anil Ambani has two sisters Nina Ambani Kothari and Dipti Ambani Salgavkar and a brother Mukesh Ambani.
Anil Ambani Biography
Name Anil Dhirubhai Ambani
Age 63 Years Old
Occupation Businessman
Date of Birth 4 June 1959, Mumbai
Spouse Tina Munim
Children 2Sons
Jai Anmol Ambani and Jai Anshul Ambani
Education
Bachelor of Science and Master in Business Administrative
Siblings
Mukesh Ambani, Nina Ambani Kothari and Dipti Ambani Salgaocar
Business career
After the death of business tycoon Mr. Dhirubhai Ambani, there was a will or plan as to how the property would be divided among the sons.
After the split, Anil Ambani found the Reliance Group and also has interests in entertainment, power, infrastructure, telecom and financial services. He was also credited with India’s largest Reliance Power IPO.
The IPO was subscribed in less than a minute in the year 2008. It was the fastest subscription in the history of the Indian capital market. He paid Rs. 11,563 crore raised. The purpose of which was to set up 13 gas, coal and hydro power projects. But the project required cheap gas which Mr. Mukesh Ambani was to provide.
Then Mr. Anil took special interest in the entertainment industry and hence decided to start it in the year 2005 with a majority stake in Adlabs Films.
The company worked in exhibition, production, film processing and digital marketing. After about four years in the year 2009, the company was renamed as Reliance Media Works.
Anil Ambani went ahead with forming a joint venture between Ambani Media Works and DreamWorks, which is the production company of Steen Spielberg. The aim of which was to bring Ambani Media to the world platform.
Ambani also produced several films produced by Steven Spielberg. One of the films he produced was Lincoln which won an Academy Award.
In the year 2008, Anil Ambani was ranked as the sixth richest person in the world by Forbes. At that time his net worth was estimated at 42 billion US dollars. Anil then acquired new businesses like power generation, financial services and telecom. Everything seemed like a silver platter but later Mr. Anil faced tough times. Here Jeevan started giving Anil lemon without sugar and water.
The power project never took off. Indian government-controlled gas prices sold it at $4.2 per million British thermal units. Mr. Mukesh Ambani could not supply gas to his family at the agreed price of $2.34 per million MBTU as promised.
The dispute went to court where the court held that a family agreement cannot be more important than government policy for gas prices. Thus the power project failed.
Some of the projects for which debts were raised exceeded their scheduled time and this led to a debt expenditure of 1,20,000 crores.
Reliance Communications failed to honor financial obligations
In 2006, Reliance Communications was the second largest telecom company in India. Anil Ambani had 66% stake in it. Global System for Mobile Communications widely known as GSM, and Code Division Multiple Access (CDMA) are the two dominant technologies for mobile communications and GSM is one of the most advanced and flexible technologies.
When Reliance Communications entered the communications business in 2002, it chose CDMA technology when competitors used GSM and RCom failed miserably. CDMA technology was limited to only 2G and 3G technology.
RCom later suffered a major blow when Mukesh Ambani launched Jio 4G and after this RCOM got into debt and the two got into a price war. RCom eventually sold its wireless business to Aircel in 2017 and RCom Cable filed for bankruptcy in 2019.
Reliance in defense sector
Anil Ambani-led Reliance Infrastructure Limited acquired Pipavav Defense and Offshore Engineering for Rs 2082 crore on 5 March 2015.
He was not aware of the fact that he was dealing with a debt of 7000 crores. The National Company Law Tribunal (NCLT) took legal action against Pipavav Defense by initiating insolvency proceedings to pay off debts owed to it by the Industrial Finance Corporation of India and the Industrial Development Bank of India.
Horrible performance of other countries
Reliance Capital showed a terrible performance. Financial debt as of September 2019 was around Rs 19,805 crore while Reliance Infrastructure for 2019 was Rs. The debt was over 5,960 crores. Reliance Capital has two subsidiaries namely Reliance Home Finance and Reliance Commercial Finance.
What went wrong for Anil Ambani?
Scams
The CBI-Central Bureau of Investigation suspected Mr. Anil Ambani’s involvement in the 2G scam. He was accused of setting up Swan Telecom to get the 2nd license. Anil Ambani owed arrears to Ericsson for services provided by Reliance Communications.
Here Anil Ambani got Rs. 580 crores can be jailed for three months. Mr. Mukesh Ambani saved his brother by paying money.
The next three Chinese banks were owned by Anil Ambani. These include Industrial and Commercial Bank of China Limited, China Development Bank and Exim Bank of China.
Including legal expenses on it Rs. 5,276 crore in debt following which a UK court filed an affidavit. This affected his reputation very badly.
Lack of vision and focus
The Reliance Power IPO which was oversubscribed 73 times and raised huge sums, the price per share has not recovered even close to the issue price. Roughly $9 billion in market capitalization was wiped out and billions in investor wealth evaporated.
Reliance Power was new to the market and the IPO was Rs. 450 which was overstated to Rs. 372.50 and investors lost money in this trade.
There is no specification for a career
Anil Ambani had a craze for Bollywood and the entertainment industry. And so in 2005 he borrowed Rs. Expanded its business into the entertainment sector by buying the multiplex chain Adlabs for 350 crores.
It later became the largest multiplex owner across India with around 700 screens. But as life shows, Reliance Entertainment piled up with debts and as a result had to sell off hundreds of screens.
Anil Ambani does business today
The business owned by Anil declined and the merger took place. The merger was to reduce debt. Reliance Power, formerly known as Reliance Energy Limited, had a subsidiary, Vidarbha Industries Power, which was later taken over by the Adani group. As a result it got an overall rating of D in Issuer Note Cooperating Category (ICRA) as on August 30, 2019.
Reliance Natural Resources Limited (RNRL) was merged with Reliance Power. As on 9th November 2010 the market cap of RNRL was Rs. was 6883.64.
Anil Ambani announced his resignation as director of Reliance Power and Reliance Infrastructure. He also got a seat in the Rajya Sabha, which he later resigned from
We can learn from Mr. Anil Dhirubhai Ambani
Dhirubhai Ambani had the perfect rags to riches story while his son Anil Ambani had the exact opposite. Anil Ambani faced all this, struggling to pay off his debts. Here are a few management lessons we should learn from their failure.
Investment decision
A good business man is one who can take quick and correct decisions on time. Anil Ambani saw his downfall only because of his wrong investment decisions. His investments in the entertainment industry, choosing CDMA over GSM technology and criminal cases against him are the consequences of his wrong investment decisions.
Cash hungry business
Patience and good relationships are very important for an entrepreneur. Anil Ambani was prone to take up capital guzzling projects soon after the family split. But his decisions did not turn out according to his strategy.
A fight with his own brother Mukesh Ambani over gas prices landed him in more trouble. Anil Ambani’s habit of seeking legal recourse at the drop of a hat made him enemies even outside his family. He had several lawsuits against journalists for defamation and accusations.
A glamorous lifestyle
Anil Ambani loved a flashy lifestyle and rarely managed his business at the micro level. His brother took meetings for hours without a break. Anil Ambani had no clear vision of what he really wanted from his business.
conclusion
We can say that if one has a deep vision about business then even failures can be easily fought. You plan yourself and be prepared with enough liquid funds to fight cash crunch.
But Anil Ambani somehow failed to understand his business and had no idea how to overcome the challenges.
Today, companies under Mr. Anil Ambani can opt for bankruptcy. He has bought his elder son Mr. Anmol as a director who hopes to take advantage of the opportunity that has come his way.
As of my last knowledge update in January 2022, there is no publicly known familial relationship between Azim Premji and Anil Ambani. Azim Premji is an Indian business tycoon and philanthropist known for his association with Wipro Limited, a leading IT services company. Anil Ambani, on the other hand, is a businessman and the chairman of the Reliance ADA Group, which is involved in diverse industries such as telecommunications, power, and financial services.