A tale of two brothers: Where does Anil Ambani go from here?

Life is a great leveller. Anil Ambani was once one of the richest businessmen in India and while his brother Mukesh continued to rise the wealth ladder, business people across the country wonder at why and how Anil Ambani landed in the financial mess that he finds himself in. The question is, where does he go from here?

The Supreme Court has held Anil Ambani and two of his company directors guilty of contempt of court in the Ericsson case for not clearing dues of Rs 550 crore they had pledged to pay. The apex court asked him to pay Rs 453 crore within four weeks or serve three months in jail.

Reports suggest that his lawyers have indicated that his companies have received or expect to receive ₹300 Crore by way of Income Tax refunds! And that this amount and sale of some real estate would be sufficient for him to pay up his dues.

While he would most likely be able to recover from this immediate crisis, he would find it difficult to get out of the hole that he finds himself in.

What started as a full-blown family drama in the early 2000s, has ended up in one brother emerging as the richest Asian while the other has moved from one controversy to the other, including Rafale, ending up in a mess of mammoth proportions.

While Mukesh Ambani is now in the $ 100 billion club, the younger Ambani is now worth only $ 1.5 billion. Mukesh Ambani’s wealth went up by $43.1 billion in the last one year, Anil Ambani’s wealth went down by half.

This has broadly been the trajectory for the two brothers over the last one and a half decades. Dhirubhai Ambani passed away in July 2002 but did not leave behind a will, distributing assets between his two sons. A family rift began to simmer in the years that followed and differences between the two brothers came out in the open in November 2004. That is when Kokilaben Ambani intervened and the group was split between the two brothers towards the end of 2005.

His friendship with Amar Singh and a brief stint in the Rajya Sabha indicated that he wanted to be close to the people in power to match the clout of his brother but somehow he ended up backing the wrong people.

As a part of the split, Mukesh Ambani got control over Reliance Industries and IPCL, while Anil Ambani was given control of Reliance Infocomm, Reliance Energy and Reliance Capital and the demerger was approved by the Bombay High Court after it was accepted by the BSE and the NSE. It was broadly expected that since Anil had control over ‘sunrise’ sectors, he would do better than Mukesh in the long run.

Reliance Communications, which Anil was now heading, was India’s second largest telecom company. In 2008, when Anil Ambani brought in an IPO for Reliance Power, it was subscribed in 60 seconds, a record for Indian capital markets. Things, however, did not go thereafter as planned.

In the five years that followed the demerger, the two brothers were up in arms against each other. While Mukesh broadly maintained silence, Anil Ambani addressed a letter to the then Prime Minister Manmohan Singh in 2009, accusing Mukesh of sabotage.

'Major power cuts, especially in north India, have become commonplace, causing grave hardship to hundreds of millions of consumers -- sadly, all a result of RIL's corporate greed,” he said and their mother had to broker peace between the brothers again in May 2010.

Anil Ambani was one of the first business leaders to stand behind Narendra Modi and used a series of superlatives to praise Modi. He was rewarded when his company was given offset contracts for the revised Rafale deal but even that could not save him from the decline of his business empire.

By March 2018, Bloomberg estimated the total debt on the group to be around Rs one lakh Crore as of March and an interest liability of nearly Rs 10,000 crore per annum. There was nothing much he could do except putting out a garage sale of his assets.

Mukesh Ambani was the first one to pitch in and gave him a Rs 23,000 crore lifeline on their father’s birthday in December 2017 to help him get over a mountain of debt in Reliance Communication, estimated to be close to Rs 43,000 Crore but this was after a series of deals that Anil Ambani was negotiating failed to come through. The term of the deal has now been extended up to June 28 this year and is one of the few silver linings for him at an otherwise dismal time.

In August 2018, he was forced to sell his Mumbai city power distribution business to fellow industrialist Gautam Adani for ₹ 18,800 crore which helped him repay debts of Rs 13,800 crore, bringing the debt on the company down to Rs 7,500 crore.

The Mint had reported that Ambani hoped that his remaining businesses, which included power distribution in Delhi with 4.2 million customers, 11 operational road projects with annual revenue of Rs 1,300 crore, the Mumbai metro project and 5,800 megawatts (MW) of coal-based power generation capacity, would contribute to steady revenue inflows. Ambani was quoted as saying that he believed that he would be debt free by 2019.

While taking risks is integral to life, more so in business, the last 15 years have been nothing short of a roller-coaster ride for Anil Ambani. While he was on a massive high during the early years, the Modi years have been full of controversies and a series of fire sales. Trouble is, things are not getting any better for him in the short-term.