“No one likes to lose his company. Unfortunately, RCom has fallen on bad days. I tried to save it, but couldn’t,” said senior lawyer Mukul Rohatgi, read out from Anil Ambani’s statement during the Ericsson hearing in the Supreme Court this February, even as the younger Ambani brother stood and watched the proceedings. The National Company Law Appellate Tribunal has passed the order for Anil Ambani to pay the Swedish telecom gear maker its remaining dues of Rs 453 crore by Tuesday. It is either that or jail for the business tycoon. A decade ago a man who was the sixth wealthiest person on the planet is now out of the billionaire club, reeling under debt, struggling to keep his businesses afloat and to avoid jail time. All is not well for the younger Ambani brother.
Once a constant face on the list of world’s most wealthy individuals, Anil Ambani is now sitting on a heap underperforming companies reeling under debt. Over the past decade, the total worth of Reliance Group of Companies (top 5) has eroded dramatically from Rs 2,36,354 crore in 2008 to just Rs 24,922 crores in February 2019. Just a few years after the death of Dhirubhai Ambani, the multibillion-dollar business empire was split between the Ambani brothers after a long and emotional family rift. While the elder brother, Mukesh Ambani was given the group’s petrochemical business, the younger sibling Anil, managed to get the new-age telecom business, along with the financial services and energy business.
The potential of the Indian mobile telecom revolution was surely behind Anil’s push to grab the telecom operations, ready to tap in the enormous potential Anil Ambani was all set to take his business group to greater heights than it stood then. However, what followed were a series of ups and downs which ultimately reduced Reliance Groups’ telecom business to a debt-ridden liability as we know it today.
Reliance Communications (RCom), Anil’s mobile telephony venture, is all but defunct: the company owes its lenders Rs. 48,000 crores and RCom has just been reduced to fixed-line communications, data centre services and enterprise solutions with revenues of Rs 4,684 crore in fiscal 2018, a massive drop from the Rs 19,000 crore bagged in 2008. Market capitalization has plunged from a peak valuation of Rs 1,65,917 crore in January 2008 to just over 1 percent of that value at Rs 1,687 crore on February 18, 2019.
The fall of Anil Ambani’s’ telecom business was the main burden that dragged down the entire business group itself. RCom which looked promising in its initial years flaunted a 20 percent market share, but the group was losing out to the competing GSM technology while the group operated on CDMA. However, Anil Ambani acted swiftly and shifted his bets to GSM and laid out services within 12 months. With an aggressive pricing strategy and investment of around 8,500 crores to buy 3G spectrum in 11 circles, RCom pushed to become the second largest Telecommunications Company in India with a massive 125 million customer base by December 2010, which was a fourfold jump for the telecom just five years after the family settlement.
The sudden surge of new players in the Telecom space unleashed a price war and eroded margins for all. Consequently, RCom lost its number two spot to Vodafone in 2012 and slipped further down to number four in 2016. With growing debt-burden due to massive investment in Spectrum acquisitions Company’s ability to make investments, especially in 4G, were hindered. The firm’s debt doubled from Rs 25,000 crore in 2010 to the current figure of around Rs 43,000 crore. The launch of the aggressively low priced Reliance Jio by Anil’s elder brother, Mukesh Ambani certainly dealt a final blow and there was no recovering from it. Meanwhile, Reliance Group also made investments in the entertainment industry. However, in 2014, Reliance Entertainment sold its once acclaimed multiplex chain, Big Cinemas to pare off its debts.
While Mukesh Ambani’s Reliance Industries Limited (RIL) group stood at a market cap of around Rs. 7, 70,592 Crore, younger brothers Group’s market cap was just pegged at 24,922 Crores, in February this year. However, this stark contrast between brothers is not just limited to business empires but also seeps in on a personal level. Anil Ambani has been known for his larger than life living. Close relations with several politicians and Bollywood personalities have been a constant part of Anil Ambani‘s life, right from the days he took charge as chairman of the Reliance group. In contrast to his elder brother, Anil Ambani focused more on appearances, flamboyance instead of keeping his ear to the ground, the very tenet which had made Dhirubhai and his elder son’s rapid rise possible.
Other subsidiaries of the Reliance Group like Reliance Infrastructure, Reliance power and others have also suffered huge losses over the past few years and may follow the same insolvency path taken by RCom. The only business of the Reliance Group that seems to be doing relatively well is the financial services business under Reliance Capital, consisting of firms dealing with asset management, life and general insurance, home finance and wealth management. However, it remains to be seen how Anil Ambani steers the group out of its financial problems.