BUSINESS MAHARAJA DHIRUBHAI AMBANI:

Dhirubhai was born on December 28, 1932 to Jamna and Hirachand Ambani, the middle of five children, three boys and two girls. Hirachand was the local schoolteacher in a village called Chorwad, in Junagadh district, Gujarat. Nearby was Porbander, the birthplace of Mahatma Gandhi. Like his elder brother before him, as soon as Dhirubhai had matriculated, it was time to shut the books and get to work. Ramniklal was in Aden, a port city now part of Yemen but then a British crown colony, and he sent a message back that jobs were available. Dhirubhai joined him there At seventeen, Dhirubhai started working with Shell, who had set up a refinery in Aden in 1953, paid his first salary of Rs 300 a month. He learnt a lot about the oil business. He there worked in a petrol station, filling gas, collecting money. Then he rose to become a sales manager there. By the time he left Aden, his salary had risen to Rs 1,100. Dhirubhai lived and worked in Aden for almost eight years before calling it a day. I was very happy there. I had my own car and fiat, but a time came when I wanted to do something on my own. Yes, I could have done some business in Aden itself but I wanted to do something in my own country. So on December 31, 1958, he landed in Bombay to start his own business with a few thousand rupees. When Dhirubhai left Aden, he wasn't alone, he had a son and a pregnant wife. Kokila R. Patel and Dhirubhai were married in March 1954 at Chorwad. Dhirubhai took a loan and started the Reliance Commercial Corporation, a trading firm, with a capital of Rs 15,000 was an export house which dealt basically in commodities like ginger, cardamom, pepper, turmeric, cashew nut etc. Dhirubhai was not only exporting spices, he was also exporting sugar, ghee, and, soil, anything that had the potential. Soil? Apparently an Arab had asked Dhirubhai to send him a consignment of Indian soil in which to grow roses in the desert. Was this a legitimate business deal or one of Dhirubhai's creative schemes? The Arab sheikh opened the letter of credit and he got the money. Now if the sheikh dumps the soil into the sea or drinks it up, who cares? See the opportunity and strike.

As the money started flowing in, Dhirubhai shook off his village mentality and learnt to spend money, city-style. In his eyes, it wasn't extravagance, but a broadening of the mind. As a school kid, Dhirubhai's biggest ambition had been to own a jeep. "I was a member of the Civil Guards, something like today's NCC. We had to salute our officers who went around in jeeps. So I thought: one day I

will also ride in a jeep and somebody' else will salute me." In the mid'60s, the government introduced an export promotion scheme where earnings from the export of rayon fabrics could be used for the import of nylon fibre. Ambani's attention switched from spices to the textile trade. And he bought himself not a jeep but a Mercedes. In February 1966, at about the same time as the late Aditya Birla, BK's son, was negotiating the purchase of Indian Rayon, Ambani built a spanking new mill at Naroda, twenty kilometres from Ahmedabad. Both were spinning mills and produced roughly the same product. Birla paid Rs 3m to buy Indian Rayon while the capital cost of Ambani's mill was one tenth that at Rs 280,000, which he borrowed. Ambani registered Reliance Textile Industries with a paid-up capital of Rs 150,000 not as a composite mill but as a power loom unit. Ambani had been dreaming of integrating backwards of some time. He was constantly thinking of going in manufacturing, But, at the time, it was hard to raise the piffling Rs 280,000 he needed to get into manufacturing Turning down Dhirubhai's request for a Rs 400,000 loan, Shah told a friend this project will not fly. In the first year itself, Seventy workers manning four warp-knitting machines and a small dyeing section notched up sales of Rs 90m and a profit of Rs 1.3m. By 1977, the year Dhirubhai went public, the mill was earning a tidy profit of Rs 43.3m from revenues of Rs 700m. Each year he added to the mill, and every time a new piece of machinery was installed. By 1983, on the eve of its entry into petrochemicals, Reliance became India's largest composite textile mill, sprawling over 280,000 sq.m. producing three million square metres of fabric per month, and employing 10,000 workers. In building his industrial empire, Ambani shared Aditya Birla's view that when buying machinery, it must be the latest and the best. "Play on the frontiers of technology. Be ahead of the tomorrows," he kept telling his new team. In 1975 a World Bank team visited twenty-four leading textile mills and reported their judgement in relation to developed country standards, only one mill, Reliance could be described as excellent. The rest they described as slums. Reliances expansion was dictated by the exigencies (demand) of the export markets. When there was a very high demand in the international market for texturized and crimped fabrics, they decided to import texturizing machinery. The heftiest profits came from the

High Unit Value Scheme which the government introduced in 1971, through which polyester filament yarn could be imported against the exports of nylon fabrics. This was a game which Ambani already knew how to play. He admits that Reliance Commercial Corporation accounted for over 60% of exports under the scheme and was therefore its larges beneficiary. Rumours spread that the scheme had been devise solely for him. At the Mulji Jetha market, polyester was then called chamak. Ambani became the chamatkari. Fifteen years later, Reliance toppled (droped) Tisco as the most faded company in India. In 1993, Reliance's daily turnover was 386,000 shares or Rs 97.6m; Tisco's 161,800 and s 35.7m. Riding the crest n 1985, he ebulliently declared: "My holding is 16 per cent, but I can't keep control over the company by my shareholding. I keep control over the company by showing performance and winning the confidence of the shareholder. I have never been afraid to expand my capital base because I know that I have the confidence of the shareholders. I don't mind if my shareholding gets diluted and it is getting diluted because as you must be knowing, very few chief executives of a company are loved by their shareholders as I am loved." In 1979, Reliance needed money to finance a worsted (wool-blended) spinning mill and Dhirubhai picked up a forgotten financial instrument, the partly convertible debenture. Investors liked the idea so much that the 1979 issue was oversubscribed six times and convertible debentures (both partly convertible and fully convertible) became the instrument of choice for managements and investors. Work on the Rs 800m Patalganga plant had started in 1981. Right from the beginning Ambani had an ambitious vision. It would be a world class plant, with the best machinery, all well laid out. Indira Gandhi administration threw open the doors of this business to the private sector in early 1980 and Reliance applied immediately for a licence. So did forty-three others. The Tatas, the Birlas, the Bangurs, the Garwares, the Mafatlals and the Thapars. According to the grapevine (route by which gossip and rumors are spread), four business houses had been short listed during the first round, but Ambani's name was

not on it. However, when the selection process was finally over, the winner was Reliance. To help him build the PFY plant, Dhirubhai pulled his eldest son Mukesh out of Stanford where he was studying for his MBA and dropped the untried, untested twenty-four year-old chemical engineer from Bombay University into the deep end. In selecting technology for the plant, Dhirubhai and Mukesh honed in on USA's Du Pont de Nemours. After setting up our plant, their business with India has grown they've sold technology to five joint sector projects. By 1983, PFY had replaced textiles as the major revenue earner in Reliance's portfolio. Ambani kept adding to capacity, upgrading technology and modernizing. On the night of July 24, 1989, a vigorous monsoon downpour filled to overflowing the nearby 'apology of a river' and Reliance's Patalganga complex was damaged by flash floods. Technical experts from Du Pont flown in at considerable cost estimated a minimum period of ninety to a hundred days. Reliance had the entire complex fully functional in twenty-one days. This continuing growth allowed Reliance to emerge as the lowest cost polyester producer in the world in 1994, its conversion cost was 18 cents per pound as against the costs of 34, 29 and 23 cents per pound for West European, North American and Far Eastern producers. Ambani's philosophy of life is simple. Based on a loose interpretation of karma, he believes that every individual is born into an orbit in which he will probably remain for the rest of his life. The world is a series of orbits, hierarchically stacked up with peons and clerks at the bottom and leading industrialists and politicians at the top. To be successful, you must break out of your orbit and enter the one above. After a spin in that orbit, you must break into the next one, and so on until you reach the top. Even as a teenager, he knew he would graduate into new orbits. Ambani crashed through the first orbit when he graduated from being a petrol pump attendant to a clerk. He shot through the second when he chucked up the security of

a salaried job for a riskier life as a self-employed yarn trader. As a mill-owner, he invaded the fourth. He stormed the topmost orbit when he decided to invest in petrochemicals. In the winter of 1986, Larsen & Toubro, better known as LT, was in turmoil. A power struggle among its top executives had erupted as a result of which embarrassing skeletons started tumbling out irregularities in its shipping division, controversial resignations and financial fiddles (fraud)such as a company fiat(command) being sold at a throwaway price. LT was in dispute with the finance ministry over employee stock options and with the Company Law Board over its accounts. The Ambanis were tempted. It was India's biggest construction company (sales 1988: Rs 5bn; 1995: Rs 33bn) with an excellent track record, and promised considerable synergy with Reliance. Anil was coopted as a director on December 30, and after Desai' resignation on April 28, 1989, Dhirubhai became LT' chairman. In August 1989 the takeover ran into its second obstacle. S. Gurumurthy of the Indian Express started investigating the acquisition and was outraged by what he found. He argued that the takeover was effected by buying shares from financial institutions with a new company, BoB Fiscal, as the middleman. But, he said, the institutions were not allowed to sell to private parties, so a fraud had been committed. In September 1989, the matter moved to the courts. Two petitioners challenged LT's issue and questioned the role of the Fls in handing over LT to the Ambanis. Justice Kotwal of the Bombay High Court rejected the petition, ruling that the Ambanis didn't control LT despite large advertisements for the issue which referred to it as a Reliance Group company. The petitioners appealed and the case moved to the Supreme Court. They pointed out innumerable irregularities in the BoB Fiscal-Trishna transaction. They also demonstrated that the family of BoB Fiscal chairman Premjit Singh profited Rs 0.5m a year from the Ambanis. Sensing that the case was not going well, the Ambanis offered to sell the shares back to BoB Fiscal. At first they wanted a no profit-no loss transaction, but after the finance secretary (S. Venkitramanan had been replaced by

GopiArora) objected, they agreed to take a Rs 120m loss and by November the transaction had been reversed. had been replaced by GopiArora) objected, they agreed to take a Rs 120m loss and by November the transaction had been reversed. Dhirubhai set high targets for himself and those around him. "Motivated manpower is the most important thing," he once said. "At Reliance we work like anything, leave no stone unturned, work round the clock, to achieve something which is the best. I have a rapport with all my people, they can reach me any time they want. I myself do not give attention to anything except Reliance." In 1995, under Mukesh and Anil, Reliance is mulling over options such as power, telecommunications and insurance. It will be interesting to see the view they adopt. As Dhirubhai used to say, "There's no invitation to make profit. Assess the situation and make the best of it."