You can take this from the horse’s mouth. Just that I won’t tell you how it reached me. But this could be the closest you could get for a direct tete-a-tete in these uncertain times for the Ambanis. Mukesh Ambani wants it really big. So big, that you can hardly imagine. Now before your mind gets working, let me tell you I am talking of RIL, stupid. So, what’s it exactly that Mr Ambani wants? He wants RIL to grow so big that it gets to be a world-beater one day. It already is, in more ways than one, yet it’s not quite there when you measure up the real-world champs — GE, GM, IBM. True, at Rs 100,000 crore it’s as big as it gets out of India. But then, the real-world giants are many, many times bigger. And Mukesh Ambani thinks Reliance can be there one day.
“When I joined RIL some 25 years ago, RIL was a Rs 100 crore company. It’s Rs 100,000 crore today. When I joined RIL 25 years ago, RIL’s net worth was Rs 30 crore, it’s Rs 3,500 crore today,” Mukesh Ambani says. “When I joined RIL 25 years ago, Dhirubhai Ambani was 47. I am 47 today.” I have it from the horse’s mouth. But I won’t tell you how it got to me. Let me just tell you one more thing, 25 years from now, Mukesh Ambani wants RIL to be a Rs 50,00,000 crore company. And emerge a true world beater.
Unfortunately, time seems running out for him. And I don’t need to tell you why. Suffice to say there are merits in the argument. In the past 25 years that Mukesh has been talking of, RIL’s turnover has grown a thousand times. In the next 25 years or so, he anticipates that if RIL grows even a ‘modest’ 50 times than now, it will be a true world beater. And this doesn’t seem impossible.
The reason for that is the way Dhirubhai built Reliance ground up, forward and backwards. They call it vertical integration where every manufacturing process is linked to the other in an integrated whole, yet each is big enough to survive as an independent enterprise on its own. Right at the top of the chain, or the very bottom, depending on which way you look at it, is oil and gas production. At the other end is fabrics. In between rests as many as 33 independent manufacturing processes that turn out everything from LPG, motor spirit, kerosene, naphtha, propylene, ethylene and butene to polyester chips, PSF, PFY, texturised dyed yarn, twisted dyed yarn and spun yarn. Had Dhirubhai wanted, he could have settled for any one of these manufacturing processes and made money for himself. Instead, he knitted them into an elaborate web, each feeding off the other, and sustaining the other, to grow, grow, grow. Into an organic whole.
How did this chain that Dhirubhai built, help Reliance grow? Here’s how Mukesh Ambani loves to explain: If you look at Reliance’s product flow chart, most of its products are commodities that typically follow a cyclical price trend. This makes certain products reap huge profits during the boom time, and slump during a downturn. By getting so many products in the value chain, Dhirubhai insured Reliance against cyclical downfalls that regularly wounded so many other Indian commodity manufacturers. With Reliance, vertical integration ensured that a downturn in one segment was always offset by an upturn in another.
Integration also helped Reliance save taxes on various inputs manufactured in-house. He did it best by merging Reliance Petroleum with Reliance Industries, in the process, saving thousands of crores of rupees in sales tax on various products and raw material streams flowing between the petrochemicals and petroleum divisions. All this resulted in huge topline growth year after year. And huge bottom-line growth to boot. At a compounded annual growth rate, RIL’s bottom line grew 26% every year for the past 25 years, making it among the top 150 global companies in terms of net profit, and among the top 450 in terms of sales. On the stock market, the RIL scrip posted an average annual return of 39%. This, in turn, brought huge dividends for Reliance shareholders, who add up to a quarter of all equity investors in the country.
Mukesh Ambani is a worried man these days. He thinks Reliance’s massive growth built over the past quarter century now stands a real threat of being squandered. And should that happen, Reliance will no longer be a real-world beater 25 years from now. Mukesh Ambani is worried because he’s been fighting a bitter war of control with his younger brother Anil. So far there is no indication that Anil Ambani is not as much worried about the future of Reliance as Mukesh Ambani is. What the two don’t realise, perhaps, is that they are either in it together or they are not in it at all. For their future rests in the future of Reliance.
Then, are they ready to kiss and make up? I haven’t got a word from the horse’s mouth so far.
Will Mr Mukesh Ambani, please, come out in the open?
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