The Reliance story

Abstract

8am - January 18, 2006: This would have been just another day in the life of a trader in the Indian stock market where he would be attending sales calls and trying to figure out a strategy for the day. But, no January 18, 2006 was special. 8am in the morning opened a one hour special trading session for one of the largest Indian conglomerates which was soon to be split – yes, one of the biggest business houses in India was splitting – the Ambani brothers were parting ways. A special one hour trading session was conducted from 8am to 9 am ; 55 minutes before markets opened – a move unprecedented in the history of the Indian and many other economies, and likely to remain the sole such move for many years to come. The traded amount on the counter touched Rs. 4300 cr. during the day. The average trading volume octupled to 1.96 crores from 25 lakhs on an average day. This is how important Reliance Industries Limited is to the Indian Economy. The company’s market value a day before the split was a little over Rs. 1290 billion; or nearly 5% of India’s GDP1. This is Reliance Industries Limited. Through this paper the authors have attempted to trace and understand the growth of this company from the time it was last documented upto the split. Starting from a little before 1991, the year of the opening of the Indian economy, through this phase of Liberalization Privatization and Globalization, this paper is an attempt to study how one of India’s largest conglomerates coped up with this major change in the Indian company. The second major event in the life of Reliance was the split – the company so fondly nurtured by Dhirubhai Ambani could no longer be carried out under a single head and it was then that the two Ambani brothers – Anil Ambani and Mukesh Ambani decided to part ways. The underlying theme on which the company has been analysed is Diversification. There are various theories that have been proposed on diversification and the story of Reliance provides us with an opportunity to test those. The two major changes through which the diversification theories have been visualised are the liberalization and split. While it is still premature to talk about the post split scenario and where are they heading, based on the diversification theories there is a view which seems to be building up. Will it hold is a question the answer to which warrants more data for which some more time needs to pass. But while the two brothers shape up their respective business groups the authors to this paper look at the point from 1991 to the point in time which brought them to where they are now.