Anil spurns Mukesh's settlement offer

Anil offered control of REL, Reliance Cap, plus cash.

Mukesh Ambani has begun making overtures to his brother Anil Ambani, for splitting the Reliance group between them. Anil Ambani has so far rejected the offers made to him through their mother, Kokilaben. Informed observers said a settlement seemed unlikely at the moment.

According to an informed source, Mukesh Ambani offered to transfer the control of Reliance Energy and Reliance Capital to his brother Anil Ambani, plus cash (one source said the figure was Rs 1,000 crore, but a Reliance group official said the figure was incorrect), presumably to buy Reliance Industries' equity in both companies.

The Reliance group holds 50.15 per cent of Reliance Energy's equity, directly and through Reliance Power Ventures and Reliance Industrial Investments & Holdings. The group has a 48.16 per cent interest in Reliance Capital, almost all of it held directly by RIL.

Anil Ambani is said to have spurned the offer. A senior Reliance group executive said Anil Ambani wanted much more than this and that it would not be possible for his brother, Mukesh Ambani, to oblige.

At last week's average market prices of the shares of both companies, the value of the Reliance group's holding in both companies comes to Rs 6,115 crore.

So, the sum offered does not seem to have covered the cost of buying the parent company's shareholding. Besides, said an informed source, the offer amounted to much less than the value of RIL's investment in Reliance Infocomm, which is mostly owned and managed by Mukesh Ambani. It is also an offer in which Anil Ambani gets nothing out of the promoter holdings in RIL (46 per cent of the total), other than the small number of shares in his name.

It is reliably understood that Mukesh Ambani has made it clear that Reliance Industries as a company cannot be divided. Nor, after the war between the two brothers, can Anil Ambani stay on in Reliance Industries.

From Anil Ambani's perspective, the value of the two companies being offered to him is a small percentage of the Rs 42,794 crore that the promoter's shareholding in all Reliance group companies is valued at, at current share market prices. Anil Ambani, therefore, viewed the offer as inadequate and unfair.

In his two-page letter to Reliance Industries employees, Anil Ambani pointed out that he and his brother Mukesh Ambani along with their father, Dhrubhai Ambani, had built the company.

Also, Reliance Energy needs gas for its power projects. For its proposed projects in Uttar Pradesh, it is supposed to get gas from Reliance Industries.

But if Reliance Energy is spun off from the Reliance group, this arrangement need not continue. Even if it does, Reliance Industries can choke supply if it so wishes, as a source points out.

A Reliance Energy board member told Business Standard last week that the company was prepared to buy gas from other sources, but that would alter the economics of the business.