Reliable Economy – Reliance Economy

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Dhirubhai Hirachand Ambani also known as Dhirubhai, an Indian business magnate and entrepreneur who founded Reliance Industries the petrochemicals, communications, power, and textiles conglomerate. It was the only privately owned Indian company until Ambani took his company public in 1984. His life is often referred to as a journey from rags to riches. Dhirubhai started off as a small time worker and then moved to Mumbai to start his own business in spices. After making modest profits, he moved into textiles. Dhirubhai set up Reliance Industries in 1958 and today it pays almost 5% of the Central Government’s total tax revenue. Ambani was credited with bringing the stock market within the reach of an average investor.

In 1982 it was rumored that Reliance Industries was making all efforts to prevent deflation of their stock prices. Sensing this, a Calcutta stock broker started to sell their shares to a company called “Friends of Reliance” at a higher price acting on a belief that they would run out of cash and according to the Bombay Stock Exchange, pay a fine. But the company, on the day of settlement demanded for “tangible” share papers, and according to BSE he had to pay a higher sum due to breach of agreement, this caused the share prices of Reliance to rise above Rs.180 creating an uproar in the market. It was later unveiled that the cash to FoR and the shares to Cartel was provided by none other than Dhirubhai Ambani who made a whooping cash in the time of crisis and gaining control over the stock market. An investigation made by RBI could find nothing unethical as such. Now Dhirubhai began the process of diversification into chemicals, petrochemicals, plastics, power and telecommunications with an estimated annual turnover of $12billion and later on turned it public.

In 1986 after a heart attack he handed over Reliance Group to his sons Mukesh and Anil. After his death, it was more or less certain that the company of India’s richest family would split. Indeed after seven months of a bitter public fight, the group was split into Reliance Industries (Infocomm, Reliance Energy Limited (REL) and Reliance Capital Limited) headed by Mukesh Ambani and Reliance Anil Dhirubhai Ambani Group (Reliance ADAG), led by Anil Ambani. The bitter battle had serious adversities on the national economy since this conglomerate strongly influenced the country’s import and export. It was indeed a moment of euphoria as the company’s share prices shot up having an incredible effect on the national economy.

The floodgates were opened by Mukesh who had brought to media notice about Ownership issues but the proposal scripted by Kokilaben D. Ambani must be more or less equally the same as it was accepted by both. A lot of reasons have been attributed to the discord, being Anil’s foray into politics with the Samajwadi Party but industry observers say that at the heart of the dispute were the divergent views of the brothers on certain key initiatives.

Clearly, if there is one part of his legacy that the sons are taking forward, it is to keep Reliance in the news and not always for the right reasons just as Dhirubhai was accused of price manipulation.

Cherry Agarwal

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