Reliance Energy loses half its board

Reasons for quitting not yet known.

Six of the 12 board members of power major Reliance Energy resigned today. They are Executive Vice-Chairman Satish Seth, Finance Director KH Mankad, Director (operations) SC Gupta, Business Development Director JP Chalasani and two non-executive directors, J Ramachandran and Amitabh Jhunjhunwala.

In its note to the National Stock Exchange, the company did not mention why they had quit.

None of these directors was available for comment, which only fuelled speculation. Initially, many interpreted it as the outcome of a move by Reliance Industries Chairman and Managing Director Mukesh Ambani to oust those who were close to his brother, Reliance Energy Chairman and Managing Director Anil Ambani, from the board.

But an independent member of the board pointed out that many of them were not Anil Ambani's men. J Ramachandran, for instance, is a professor at the Indian Institute of Management, Bangalore. A senior member of the Mukesh Ambani camp, too, hotly denied that the Reliance Industries chairman was responsible.

Another independent member of the Reliance Energy board said the resignations had come as a "shock and surprise" even to other board members. The last board meeting was held on October 28. "As far as I know, none of the directors has been asked to resign," the member said. The next board meeting is scheduled for December 8.

Still, other observers held the directors had been asked to quit to pave the way for Anil Ambani to either reconstitute the board or re-appoint these directors as his nominees because these directors were originally nominated or placed by Reliance Industries when it took over Reliance Energy (then BSES).

Four of the six directors --- Seth, Gupta, Chalasani and Jhunjhunwala --- were deputed from Reliance Industries. Officially, Reliance Industries has only one nominee on the Reliance Energy board, namely, Jhunjhunwala. Reliance Industries has a 41.03 per cent stake in Reliance Energy.

As these observers saw it, the directors would then not be Reliance Industries nominees, but nominees of Anil Ambani. They could then renominate him as chairman when the board met. All this, of course, hinged on the belief that Anil Ambani had moved to pre-empt his ouster by Reliance Industries as Reliance Energy chairman.

A question immediately surfaces here. Will Reliance Industries step in to fill the vacancies that have now been created? A Reliance Industries source pointed out that on March 22, the Reliance Industries board had passed a resolution authorising Anil Ambani to appoint members of the Reliance Energy board, including himself.

This implies that Reliance Industries could not immediately fill these vacancies, without the board meeting. But another source said this authority could later be withdrawn by the Reliance Industries board and that Anil Ambani may have moved to pe-empt this.

Today's developments led to speculation that the Reliance Capital board may also see some resignations in the coming days. Reliance Industries holds a 46.71 per cent stake in Reliance Capital.

The veracity of all this could not be ascertained. A source in the Anil Ambani camp declined to comment, but said resignations from the Reliance Capital board were unlikely.

Most of the six directors are Reliance veterans. The Reliance Energy website says Seth has wide exposure in developing, strategising and overseeing businesses in the petrochemicals, petroleum, telecommunications and power sectors.

Seth is on the board of several companies, including Reliance Power Ventures, Reliance Industrial Investments and Holdings, and Reliance Telecom.

Mankad was finance director at BSES and continued in the post after Reliance Industries took over the company. Chalsania, director, business development, has been Reliance Energy's pointman in its distribution venture in the Delhi circle.

Jhunjhunwala, widely acknowledged to be the group's financial wizard, is on the boards of Reliance Capital and Reliance Capital Asset Management. Gupta, too, is a Reliance Industries veteran, and has been actively involved in the design and implementation of the company's captive power plants in Hazira, Patalganga, Naroda and Jamnagar.

The Reliance Energy scrip fell 7 per cent to an intra-day low of Rs 542.20 before closing at Rs 549.10, 5.83 per cent lower than Wednesday's close.