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Will the Reliance Group Survive After Mukesh Ambani Steps Down from His Throne?

Editor, TRANSFIN.
Invalid date 4 min read
Editorial

Reliance Industries marked the 89th anniversary of its Founder, Dhirubhai Ambani, by observing "Family Day".

During the virtual event, Chairman and MD Mukesh Ambani gave an address highlighting the conglomerate's achievements over the past year. These included its ongoing green transition, the disruptions wrought by Reliance Retail, Jio providing fibre to nearly four million customers, and the company's pandemic-related aid efforts.

The key takeaway, however, was the revelation that RIL was "now in the process of effecting a momentous leadership transition from seniors belonging to [Mukesh Ambani’s] generation to the next generation of young leaders”.

Saying he would "like this process to be accelerated", Mr. Ambani confirmed that his $217bn energy-to-retail empire would pass on to his three children - Akash (30 years), Anant (26 years) and Isha Ambani (30 years).

Vision 2022

This news about an impending leadership transition doesn't mean India's largest company will have new hands on the wheel tomorrow. It will likely take some time before this process kicks off - there are rumours that it may only gather pace by April 2022, which is the deadline for SEBI's rule on separating the roles of Chairman and MD of listed companies (Mukesh Ambani is currently both of these for RIL).

The development also comes at a crossroads for the conglomerate, as it seeks to transform its energy vertical - its “largest growth engine" - from its legacy oil business by foraying into clean energy and materials. It also comes ahead of a possible hiving off of its retail and telecom verticals (a similar plan for Reliance O2C was temporarily on the table before the Saudi Aramco deal was called off).

 

All in the Family

Significantly, by signalling the transition well in advance, the 64-year-old Chairman (valued at $91bn as per the Bloomberg Billionaires Index) might be looking to ensure two things.

One, oversee the changes and avoid any near-term intra-family disputes over ownership (like the familial disputes currently threatening to tear apart the Hinduja Group).

And two, make clear-cut provisions for the transfer of power to the next generation so as to avoid a repeat of the 2005 schism that followed Dhirubai's death (sans a will), which saw brothers Mukesh and Ambani pitted against each other and a bifurcation of the Ambani empire. It took the failure of the younger brother's businesses to bring the two siblings together again.

Mukesh Ambani Starts Planning for His Successors at Reliance IndustriesNow, the revelation that the Ambani children were being groomed to take over the enterprise was no secret. Back in June, their father had unambiguously stated that they would play significant roles at the company. Moreover, the fact that he mentioned all three of his children - including his daughter - is also a refreshing shift from the way the business passed from the first Ambani generation: to only the sons.

The nature of the succession plan, however, is not yet known, but there are reports that the Ambani family is considering one akin to the Walton family (the owners of Walmart andthe richest family in the US). Such a plan could involve the shares of the holding company being put into a trust where all family members will own shares. High-level company executives and confidants may be on the trust's Board. Meanwhile, the actual day-to-day operations of the Group companies may be steered by professionals while the Ambani sons and daughter would have an oversight role in individual verticals. (Sounds very nepotistic, yes, but that's why they're called family-run businesses!)

 

As for the Inheritors…

Isha Ambani joined Jio and Reliance Retail as a director in 2014. She is also an additional director at Reliance Foundation and director at Jio. She was reportedly one of the lead negotiators in the landmark deal between Facebook and Jio last year (backed by seasoned loyalists such as Manoj Modi, allegedly Mukesh Ambani’s right-hand man), and is also involved in fashion portal Ajio and JioMart.

Akash Ambani, Isha’s twin brother, is the director and head of strategy at Reliance Jio, an executive committee member, and a part of the governing and operating body of the company. Given that the Ambanis own the Mumbai Indians IPL team, according to ESPNcricinfo, he also plays “a key role in player selection and getting videos of uncapped players so the team doesn’t miss out on any new talent”.

The youngest sibling is Anant Ambani, who in June was appointed as director of Reliance New Energy Solar and Reliance New Solar Energy. He also serves on the Board of Jio Platforms with Akash and Isha.

 

The Next Season of Succession

If he indeed steps down in 2022, Mukesh Ambani would be leaving on a high note. In his near-two decades at the helm of Reliance, Asia's richest man has transformed the conglomerate, accelerating its pivot from oil, boosting its retail presence, and fundamentally altering the Indian telecom industry.

But a lot of challenges and reinventions likely await “India’s most-valuable startup”. As the disruptor-in-chief said during his virtual address yesterday: “I would like the story of Reliance to be told in that book which has no final chapter.”

Looks like RIL’s next chapter is just a page away!

FIN.
 

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