Anil dissents on several items

Reliance board backs Mukesh, okays buyback at Rs 570; Anil alleges unusual scrip movement.

Both sides claimed victory after Reliance Industries Ltd board meeting held in Mumbai yesterday morning. The Mukesh Ambani side said the board stood solidly behind Reliance Industries' Chairman and Managing Director Mukesh Ambani.

It pointed out that the buyback proposal was carried despite the opposition to it by Reliance Industries Vice-Chairman and Managing Director Anil Ambani.

"The board reaffirmed that all Reliance group companies should get approval from Reliance Industries for any big project," a company statement to the Press said.

But sources close to Anil Ambani claimed "moral victory" because all the points he had raised had been taken up for discussion. Boardroom deliberations were dominated by issues raised by the junior Ambani for a good four-and-a-half hours.

Earlier in the day, Anil Ambani said the object of war is to make peace, quoting from "The Art of War" by Chinese philosopher Sun Tzu.

At the board meeting, Anil Ambani chose to abstain from voting on the buyback proposal "" the main agenda item for today's meeting "" and sources close to him said he had dissented on several items on the agenda.

They claimed that the other directors kept quiet all through the meeting (implying thereby that only the Ambani brothers spoke), that Mukesh Ambani sat through the meeting even when matters relating to Reliance Infocomm were discussed, unlike Anil Ambani who left the meeting when matters relating to Reliance Energy where discussed, and that no conditions were attached to Reliance Industries' investment in Reliance Infocomm, but this was not the case with Reliance Industries' supply of gas to Reliance Energy, which is subject to regulatory approvals for "additional pipeline linkages involving the government, GAIL and others.

As soon as it becomes feasible to do so, Reliance Industries would be in a position to supply gas" to Reliance Energy's power project in Uttar Pradesh.

But the Mukesh Ambani side said Anil Ambani opposed only the point that Reliance Industries would provide "reasonable" assistance to Reliance Energy, of which he is the chairman and managing director, and then left the meeting.

Asked whether the other directors merely sat through the meeting without saying anything or whether Mukesh Ambani was present when matters relating to Reliance Infocomm were discussed, a source said, "I have no idea."

Towards the end of the day, the company responded with a point-by-point rebuttal to each of the points raised against Mukesh Ambani by Anil in personal communications and elsewhere in the media.

In a tacit acknowledgement that corporate governance standards could be improved, the board decided to set up a standing committee of independent directors to "oversee all matters of corporate governance". Anil Ambani camp sources claimed "moral victory" on this one.

A spokesman of the Mukesh Ambani group said: "The key take-away from today's board meeting is that there is no battle for control as far as the board is concerned. The board stands solidly behind Mukesh Ambani, and all issues between Mukesh and Anil have to be settled outside the board."

The buyback proposal was cleared without opposition, save from Anil Ambani. Reliance Industries set a buyback price not exceeding Rs 570 per share.

Anil Ambani had said earlier, while entering Maker Chambers IV, the headquarters of the Reliance group, "I believe that considering a buyback at this stage is completely inappropriate as there are several other issues that the group faces and those need to be addressed. Also, if we look at the recent run-up in the stock prices post the announcement of the buyback, I believe that there is more than what meets the eyes in terms of what is happening in the market place."

But Anil Ambani formed a minority of one on the issue. The rest of the board voted unanimously in favour of the buyback, citing "larger investor interest".

Reliance Industries has earmarked Rs 2,999 crore for the buyback, making it the largest-ever tranche of funds set aside for the purpose in Indian corporate history.

Terming Anil Ambani's vocal dissent against the buyback proposal a "means to put personal interest over the interest of shareholders", sources close to Mukesh Ambani said after the board meeting "(The board) has taken a larger view of the whole issue."

But the "larger view" included all the issues raised by Anil Ambani in the recent past. Sources in the board said all the 20 listed agenda items were taken up for discussion.

The board has resolved to set up new practices and structures to "ensure corporate governance at all levels and to suggest remedial measures wherever necessary" and to provide gas to Reliance Energy's Dhirubhai Ambani Energy City power project in Uttar Pradesh.

An appropriate official joint group will be set up to work out the details on the operational and commercial aspects.

Reliance Industries has decided to appoint independent director YP Trivedi to the board of Reliance Communications Infrastructure Ltd (RCIL) and Manoj Modi to the board of Reliance Infocomm. Both companies have been in the news recently after Anil Ambani pointed out in several letters to the board the complex nature of Reliance Industries' investments in Reliance Infocomm, and the lack of proper disclosures in the company's annual reports.

In response, the board took on record all financial data related to Reliance Infocomm and further resolved to set up a second committee of the six independent Reliance Industries directors to consider all matters pertaining to the exercise of the company's option to convert 1.62 billion cumulative convertible/redeemable preference shares of the aggregate value of Rs 8,100 crore.

The committee will also consider appointing one or more valuers of international repute to determine the fair value of the equity shares of Reliance Infocomm.

On the most recent issue of Mukesh Ambani getting sweat equity in Reliance Infocomm, the board took on record that no laws or regulations had been infringed.

Since Mukesh Ambani had requested an annulment of the deal giving him the sweat equity, Reliance Communications's shareholding in Reliance Infocomm had reverted to its former pre-option level, the board was formally advised.

The Reliance Industries board committed itself to remaining the lead investor in Reliance Infocomm with a 45 per cent stake, implementing the Infocomm initiative in two separate companies, RCIL (infrastructure and data) and Reliance Infocomm (the voice business).