When Ambanis lose Rs 5, their investors also lose Rs 4

Billionaire brothers Mukesh and Anil Ambani are taking a big hit on their wealth due to a slew of controversies and alleged scams, but the money put in by public investors in their companies is no less affected.

business Updated: Jul 10, 2011 15:52 IST

Billionaire brothers Mukesh and Anil Ambani are taking a big hit on their wealth due to a slew of controversies and alleged scams, but the money put in by public investors in their companies is no less affected.

For every Rs 5 lost by the two siblings in the past one year, approximately Rs 4 have been eroded from the coffers of their public investors also on an average, according to an analysis.

Once touted as India's poster boys for wealth creation, the two Ambani siblings have together lost an estimated USD 15 billion in past one year from their wealth derived from the value of promoter shares in their respective group companies. In the same time period, public shareholders of the two groups have collectively lost more than USD 12 billion, which is approximately 85 per cent of the promoters' loss. Separately, the loss for public investors in Mukesh Ambani group is larger than that of promoters, but the total loss is greater for promoters in the Anil Ambani group.

In the past one year, the promoters' stock market wealth has fallen by nearly USD 6.7 billion in the Mukesh Ambani group as against a loss of USD 8.3 billion for public shareholders. On the other hand, the promoters have lost USD 8.2 billion in Anil Ambani group, as against a loss of USD 4.5 billion for non-promoter or public shareholders. The promoter holding is generally higher in Anil Ambani group companies, which has led to bigger loss for promoters.

The value of promoter shares in family-promoted firms, including that of the two Reliance groups, are widely considered as the personal wealth of the main promoter in numerous rich lists such as those compiled by Forbes magazine. The valuations of the two Reliance groups have taken a big hit in the recent past amid concerns over their alleged involvement in certain irregularities such as those in the telecom spectrum allocation and the costs associated with exploration of certain gas fields. Mukesh Ambani was ranked as the second richest Indian by Forbes magazine in March this year, with a net worth of USD 27 billion.

In the same list, younger brother Anil was ranked eighth, with a networth of USD 8.8 billion. Mukesh was India's richest (USD 29 billion) and Anil was third richest (USD 13.7 billion) a year earlier in March, 2010. Amid falling market values of their groups, the networths of both the brothers have come down sharply from the peaks seen in March 2008 on Forbes' annual rich list. At that time, Forbes put Mukesh's networth at USD 43 billion, while that of Anil was close behind at USD 42 billion, ranking them as the two richest Indians in the world.

While the fall in market values of the two groups was mostly in line with the broader market trends till mid-2010, allegations of various controversies and scams have hit them harder thereafter. The combined market value of both the groups have plunged by nearly Rs 1,22,000 crore (about USD 28 billion) in past one year to Rs 3,65,000 crore at present. While Mukesh Ambani-led group has lost nearly Rs 66,500 crore (about USD 15 billion) of valuation, that of Anil Ambani group has fallen by about Rs 56,000 (about USD 12.5 billion) crore since July 9 last year. Out of this, the worth of promoter shares in the Mukesh Ambani-led Reliance Industries group has fallen by Rs 29,760 crore (USD 6.7 billion) to close to Rs 1,25,500 crore. On the other hand, the value of public holding in the group has fallen by Rs 36,775 crore (USD 8.3 billion) to Rs 1,55,000 crore currently.

The public shareholders include small retail investors and large high-networth individuals, as also institutional investors like mutual funds, FIIs and insurers, which invest money collected from a pool of small and large investors. In the Anil Ambani group, the promoters' worth has fallen by Rs 36,200 crore (USD 8.2 billion) in the past one year to Rs 56,350 crore at present. The value of public holding in this group has fallen by Rs 19,700 crore (USD 4.5 billion) since July 9 last year to Rs 28,150 crore.

The analysis is based on market value of six listed companies of Anil Ambani group, namely RCOM, Reliance Capital, R-Power, R-Infra, Reliance Broadcast and Reliance MediaWorks, which are present across sectors like telecom, power, financial services, infrastructure media and entertainment. The Mukesh Ambani group comprises of two listed firms Reliance Industries and Reliance Industrial Infrastructure.

The promoters held 44.72 per cent stake in RIL at the end of last fiscal, while they had 45.43 per cent in RIIL. In Anil Ambani group, the promoters owned 67.86 per cent in RCOM, 80.42 per cent in R-Power, 54.14 per cent of Reliance Capital, 47.73 per cent in R-Infra, 62.23 per cent in Reliance MediaWorks and 63.87 per cent in Reliance Broadcast. Barring Reliance Broadcast, all the companies of both the groups have lost value in past one year. However, the market value of Reliance Broadcast is minuscule in comparison to the entire group and has grown by Rs 71.5 crore in one year to Rs 665 crore at present.

First Published: Jul 10, 2011 15:49 IST