Reliance battle seen intensifying in days ahead

Friday, 26 November 2004, 08:00 Hrs
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MUMBAI: The much talked about family feud over the control of Reliance Industries, India's largest industrial house, is set to turn into a full-fledged boardroom battle that may entail a revamp of the management.

A day after six directors of a group company, Reliance Energy, submitted their resignations, experts say the possibility of a patch-up between the bickering Ambani brothers who control the mammoth Reliance empire seems remote at this stage.

"The recent developments clearly show that the basic differences between the two brothers over the functioning of the company are much deeper than earlier anticipated," said a city-based corporate watcher.

"I think it is now going to be a long-drawn battle, which will mostly be fought in the boardroom with both brothers trying to show their authority," the analyst, who didn't want to be named, told IANS.

"You can't call it a normal practice when six directors quit a company together without giving any official reasons. This is an indication that things are going to get more complicated in the days ahead."

Although Anil Ambani, who is locked in a feud with elder sibling Mukesh Ambani over the control of the $20-billion Reliance group, finally broke his silence late Thursday, he refused to make any comment on the raging controversy.

He didn't give any reason for the mass resignations from Reliance Energy, of which he is chairman and managing director, and said the board would consider these resignations at the appropriate time and take a decision.

Sources say the six directors were considered close to Anil and the younger Ambani sibling planned their departure from the company to put the ball back in the court of his elder brother.

Mukesh, 47, is chairman and managing director of the flagship Reliance Industries while Anil, 45, holds the vice chairman's office.

With the rift getting increasingly messier each day, legal experts say the battle may finally roll over to courtroom that may result in a split in the company with 800 billion ($17 billion) in annual sales.

Meanwhile, investors continue to fret over the possibility of the company's performance being affected in the long term. The resignations Thursday wiped off 24.52 billion in cumulative market capitalisation from the five listed group companies on the benchmark Bombay Stock Exchange.

"Investors are gradually turning jittery about the whole episode. They are not sure how the entire controversy will play out in the days ahead," said Deepak Shah, an analyst with Pranav Securities.

"Although the overall market sentiment is very bullish on sustained inflows of foreign funds, Reliance equities are putting significant negative pressure on the index," Shah told IANS.

Reliance Industries accounts for significant weightage on the benchmark 30-share Bombay Stock Exchange sensitive index or Sensex and the movement in the company share prices is indicative of the overall market mood.

Rumours of a rift between the two brothers, Mukesh and Anil, had been raging for the last few months.

Things took a dramatic turn when CNBC last Thursday quoted Mukesh as admitting to having "ownership issues" with his younger brother.

In an internal e-mail message to all the Reliance employees, Mukesh claimed Tuesday he was the final authority on all company matters and that the ongoing ownership controversy would have no impact on its functioning.

Source: IANS
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