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Circa '04: Sensex overrules family feuds

Sibling rivalry marred India Inc in an eventful 2004 but stock market rose to dizzy heights as if discounting corporate wars.
PTI | By Press Trust of India, New Delhi
UPDATED ON JAN 01, 2005 07:57 PM IST

Sibling rivalry in India's largest corporate house Reliance and Birla blues over rank outsider carting away their silver fish marred India Inc in an eventful 2004 but stock market rose to dizzy heights as if discounting corporate wars.

While the mother of all corporate battles threatened to shake the foundation of Rs 90,000 crore Reliance empire laid by legendary Dhirubhai Ambani, the wrangling over the Rs 5,000 crore estate of the late Priyamvada Birla rattled the Birla clan and the Bajajs struggled to settle the family feud.

At the fag end of the year, the dispute over ownership issues in Reliance Industries came to the fore with company chairman and managing director Mukesh Ambani's candid confession that there were "some ownership issues" in the family.

The ensuing battle saw both Mukesh and younger brother Anil Ambani washing dirty linen in the public.

Shrugging off the battle of ownership in India's leading industrial houses of the Ambanis, Bajajs and Birlas, the industry posted robust growth, and capacity expansion became the buzzword in manufacturing sector.

Low interest rates and growing income of urbanites led to a surge in demand, propelling augmentation at the facilities of the major companies, who tapped foreign markets to generate funds for raising capacity and Tata Motors got listed on the New York Stock Exchange.

The saga of Reliance reached its crescendo this week. The warring brothers refused to mend fences and fought a relentless battle through the media, yet the Sensex crossed 6,600 points rising over corporates and tsunami disaster.

Hinting at insider trading and issues of corporate governance, Anil said "There is more than that meets the eyes in terms of what is happening in the market place".

With Mukesh Ambani's November 17 admission that there were differences on the ownership, millions of Reliance Industries' shareholders suffered due to erosion in the value of the blue chip scrip, forcing Reliance to announce a buy-back arrangement to boost the earning per share of its stocks.

The proposal, which came up in the Board, added fuel to the fire with Anil Ambani abstaining from voting on the issue and going public with allegations as serious as insider trading and breach of corporate governance.

Though Mukesh Ambani appeared to have won the first round with the entire Reliance Industries board backing him fully on the controversial issue of buy-back of shares, he relented by giving up his Rs 50 crore shares or 12 per cent sweat equity, estimated at the value of Rs 5,000 crore, in Reliance Infocomm.

The surprise move of Mukesh foregoing his personal stake in Reliance Infocomm came in the wake of mounting pressures from Anil, who questioned the shareholding pattern and investment in the pet telecom venture of his elder brother.

In the battle for supremacy, both Mukesh and Anil, a Rajya Sabha member with the backing of the Samajwadi Party, were seen courting political leaders, perhaps in a move to garner support.

Close on the heels of his assertion that he is the "final authority" on all matters concerning the company, Mukesh said his father and architect of the Rs 90,000 crore Reliance, Dhirubhai Ambani, obviated the necessity of a will.

The Reliance imbroglio and allegations of breach in corporate governance led Securities and Exchange Board of India (SEBI) Chairman GN Bajpai to announce that the market watchdog was keeping a close watch on the developments in India's largest corporate entity. However, Department of Company Affairs refrained from putting its foot down.

While Reliance remained embroiled the battle of ownership, the Birla family, in a show of solidarity, came together to fight Rajendra S Lodha, who produced a will purportedly written by the late Priyamvada Birla.

The whole clan came together to fight the confidante of MP Birla and his widow Priyamvada Birla, who passed at the age of 76, leaving behind the Rs 5,000 crore MP Birla group estate.

Stung by the claim of a rank outsider to the properties of MP Birla Group, the entire clan came together under patriarch BK Birla, who said he would not let Lodha cart away the silver fish.

Coinciding with the claims and counterclaims, Emerging Market Funds bought 5.65 per cent stake in MP Birla group flagship Birla Corporation, whose scrip shot up after the acquisition by the foreign fund.

Pilani Investment has stakes in a number of Birla group firms. It is 25 per cent owned Birla Corporation, an MP Birla Group firm.

Enraged over the claims of Lodha, a chartered accountant and former president of FICCI, the Birlas issued a joint statement that they did not want any money from the MP Birla group but it was their intention to secure the estate for charity as desired by MP and Priyamvada Birla.

Another important Indian industrial house - the Bajajs - remained in the quagmire of dispute triggered over two years ago and Bajaj Auto chairman Rahul Bajaj expressed hope of an 'early' truce.

Rahul Bajaj said he and warring brother Shishir were giving final touches to the settlement before March 2005.

The differences in the Bajaj family came to the light over two years back as Shishir Bajaj wanted to take full control of the companies he manages: Bajaj Hindustan and Bajaj Sevashram. In return, he was prepared to part with his stake in Bajaj Auto and another group firms.

The differences continued despite the intervention of Maharashtra politician Sharad Pawar and family friend Dhirajlal Mehta and Swadeshi Jagran Manch Convenor S Gurumurthy.

Undeterred by a slew of raging battles in top industrial houses, India Inc marched forward on growth trajectory and set the tone for the forward march.

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