Rags to riches is click that is often applied to describe the climb up the ladder of even modestly successful businessmen. But it
could hardly be more appropriately used than to trace the meteoric
rise of Dhirubhani Ambani, Chairman of high flying Reliance
Industries, rated among the top three business groups in India today.
From an initial investment of a mere
Rs. 15000 in 1958 to start a trading house, followed by the setting
up of his own tiny manufacturing facility in Gujarat in 1966, Ambani,
Son of a rural school teacher, has managed to build up a synthetic
yarn, textiles and petrochemicals empire that is today the third
largest private sector mega corporation.
For the year ended March 1991, Reliance
Industries is understood to have recorded a sales turnover of Rs.
2,300 crores ( more than US $ 1 billion), making it the third largest
private corporation in the country to day. Those who predicted that
he was a conman, a confidence trickster, have had to eat their words.
I am the dubble that burst! chortles Dhirubhai,
sarcastically referring to the negative headlines that greeted his
forays into the primary capital market in the early- 1980s.
Success on such a gigantic scale
inevitable excites jealousy and enmity; and Ambani, today 58, has had
to deal with his share. Reliances have been the subject of
several exposes in the press. But these have neither fazed the tycoon
extraordinaire, nor halted the inexorable progress of his march
forward towards his goal of becoming the undisputed No.1 in the
To any sort of sniping in the press,
Dhirbhai has responded with stoic silence. Rarely has he reacted to
even the most stringent media criticism. In the last couple of years,
though, he has taken a leaf out of industrialist-cum press baron
Ramnath Goenkas book. He has taken the precaution of shoring up
his own strength in the media, not minding the expenditure of huge
sums of money, and timing the launches of his products to a nicety.
In late-1989, he bought a
small but well-respected weekly newspaper, The Sunday
Observer, that had a combined circulation of approximately
85,000 in the up market areas of Bombay and Delhi. He converted it
into the Observer group of publications, and recruited
some of the countrys top financial journalists to help run it.
Today, the Observer group
brings out a political and financial daily in addition to the weekend
paper. Notwithstanding excellent production values, the paper is a
white elephant, has limited circulation and is understood be making
huge losses. Started recently is an equally slickly produced video
news magazine that is becoming increasingly popular.
These tools have helped Ambani counter
the adverse publicity that his group has often faced in the past for
the reluctance of its big bosses to grant interviews. Even to the
most powerful of journalists in the country, Dhirubhai pleads his
inability to grant taped interviews. He and his sons are wiling to
meet the scribes on a personal level and give them any information
they desire, but on condition that it is strictly off the record.
Whether he talks to the press about his
groups working or not is a matter of the utmost indifference to
lakhs of Reliance shareholders, a high percentage of them ordinary
middle-class people. They all unequivocally bless the moon-faced
magnate for having handed them sizable fortunes in the share market
in return for loyalty to Reliance.
Over the years, the
company has rewarded its shareholders handsomely. Anyone who resisted
the markets skepticism when the firm went public in 1977,
invested even a small amount in debentures and shares, and purchased
all subsequent additional rights offerings, has seen his money
multiply by leaps and bounds, to well over a hundred times the
Today, nearly three
million people hold shares in Reliance Industries and its sister
concerns. And these shareholders beget special treatment form
Dhirubhai as his family. He has gone to extraordinary
lengths to give them a feeling of belonging. When he floated his last
series of debentures, he set up a temporary force of delivery boys
who handed over the certificates to each individual shareholder at
his or her stated address.
In several ways,
Dhirubhai is unique. He could hardly have started nearer the bottom
then he did. Please understand, to have success traditionally,
you require education or money or family background; and I did not
have any of these three, he admits. So people
occasionally ask; Where did this upstart come form?, and
demand to see my credentials!
Dhirajlal Hirachand Ambai
( Dhirubhai is a nickname ) came from a tiny village that
is not even a dot on the political map of Gujarat. But Chorwad, in
Junagadh district, today remembers that its most famous scion born-
was the progeny of a humble school teacher, and that he could not go
in for higher education simply because there was no money in the
Instead, at the age of
16, he shipped out for the Arabian peninsular city of Aden, where a
village acquaintance had secured him a job working for A. Beesse &
Co. , a French trading firm, as a clerk at a gas station. From that
point onwards, his rise has been generally steady and occasionally
The Jewish proprietor of
the agency must have seen some exceptional qualities in the young
man; and by the time he was 24, Ambani was already the general
marketing manager for Burmah Shell products. Any middleclass Indian
would have been euphoric to have achieved so much success at such a
young age, and clung to the job like glue. Not Ambani. He wanted
his own business, he wanted to put to work the precepts he had picked
up on the job.
For a while, he worked in
a totally unrelated business-representing people whose insurance
claims had been rejected, and splitting any settlements he was able
to negotiate. At the age of 25, he returned to India and set up a
firm for exporting spices and other commodities to Aden. Reliance
Commercial Corporation was put up at an outlay of Rs. 15,000. While
the firm specialized in ginger, cardamom, turmeric and fabrics, it
was not averse to taking on any other item.
Dhirubhai has never
looked back. Most top Indian corporate bosses at the time were
content to sit behind the walls of governmental protectionism on the
imports front, and earnprofits from marketing frequently shoddy,
high-priced products based on obsolete technology. In contrast,
Ambani showed that he could combine the inborn shrewdness of the
Gujarati businessman with an almost American style of entrepreneurial
self-confidence and a Japanese willingness to invest in the latest
For a long while, he
indulged in buying and selling synthetic fibres and textiles. He
was a small-time, paan-chewing trader, with a persuasive manner and a
razor-sharp brain for finance, recalls Virenchee Sagar, former
Managing Director of Nirlon Chemicals and Synthetic Fibres Limited.
In the early 1960s, he used to buy regularly from us; by the
start of the 1980s, we were buying a lot of our own raw material from
At first, Dhirubhai could
not afford an office of his own, so he rented desk space for two
hours a day. He, wife Kokilaben and four children (two sons, two
daughters, in that order) lived in a cramped two-room flat in a
crowded chawl in a Bombay slum, sharing communal lavatories.
I remember, a
children, my elder brother Mukesh and I had to share clothes, and our
only playgrounds were the gullies in the area, recalls 32 year
old Anil, the younger of the Ambani, sons, who was in the limelight
earlier this year because of his marriage to former film star Tina
Very early in his new
venture, Dhirubhai picked up the art of profiting from the Byzantine
system of controls that were guaranteed to choke the enthusiasm out
of other entrepreneurs. He exported spices, and used replenishment
licences to import rayon.
Later, when rayon began
being manufactured in India, he exported rayon and imported nylon.
Still later, he exported nylon and imported polyester. He was always
a step ahead of the main competition, looking ahead and scoring
bulls-eyes with most of the bold steps he took. With the imported
items being heavily in demand, his profit margins were rarely under
300 per cent. (he admits to having made 700 per cent on one
occasions when we exported rayon at a loss, because the entire
purpose was to get an import licence for nylon, he explains.
In this country, it is considered fashionable to complain about
government restrictions. We took the restrictions as an
opportunity. If the rules against nylon imports had not been there,
I could not have made the money!
manufacturing activities at Naroda in 1966, with for warp-knitting
machines and a staff strength of 70. By the time he decided to make
his maiden public offer of shares in 1977, he had already gained a
good reputation as a manufacturer of quality fabrics.
That first issue of 28.20
lakh shares of Rs. 10 each was oversubscribed seven times, despite
the financial press shooting down the offer in its issue reviews.
Today, the company is a multi-division behemoth, employing more than
50,000 people at its major manufacturing centres in Naroda and
Patalganga, and using machinery that is among the most advanced in
In his early days,
Dhirubhai found the domestic cloth market controlled by wholesalers
who preferred to deal with established companies. So he decided to
set up his own chain of retailing stores throughout India, using the
franchising technique. Today, Vimal textiles are sold through
thousands of retail outlets, and easily from the industrys
Once the rupees and
dollars both began flowing in, Dhirubhai decided that his sons would
have the best education that money could buy. Elder son Mukesh, who
showed a technical bent of mind, did chemical engineering,
subsequently went to Standford and obtained an M.B.A. Anil, the
younger of the boys by three years, specialized in chemistry and then
went to Wharton to secure his masters degree in business
The experience of putting
up projects in the shortest possible time so as to avoid cost and
time over-runs served Mukesh in good stead when Dhirubhai purchased
the latest polyster filament yarn technology from DuPont, and
decided to set up a 10,000 tonnes per annum plant at a 300-acre site
in Patalganga, about 65 kilometres from Bombay. DuPont would have
taken two years to raise such a complex, but Mukesh, working with a
small project team, completed the job in an incredible 18 months.
Going still further
upstream, Reliance put up plants to manufacture purified terephthalic
acid (PTA) and monoethylene glycol (MEG), both essential raw
materials in the manufacture of polyster yarn. Some time in
the future, boasts Anil the more voluble of the two sons, We
hope to integrate all the way back to natural gas!
to have finger on the political pulse of the country has quite
obviously helped him slice through most of the bureaucratic red tape
that has often tied Indian businessmen up in knots. Since it went
public in 1977, Reliance has repeatedly infuriated competitors and
customers alike by acquiring manufacturing licences to produce not
only synthetic yarn and fibre, but also more and more of the raw
materials used in making these products.
consistently failed to get these coveted licences. In 1981, more
than 400 companies applied for a licence to produce polyster filament
yarn; 43 made the waiting list, but only two companies were granted
the requisite permission. Reliance got a licence for 10,000 tonnes
per annum while the only other licence granted was to Orkay Mills for
Since it went public in
1977, Reliance has set several corporate records. One of these is
for the growth in its assets; these have bloated by a factor of 33
times of currently top the Rs. 2,000 crores mark. No other company
has grown so much, so fast.
Another record is for
subscription from the investing public in a single issue. In 1985,
Reliance notched the record of collecting Rs. 400 crores from an
estimated 1.5 million investors through the issue of nonconvertible
That was one of its best
years- a year that saw a mammoth, record crowd of over 12,000 attend
its Annual General Meeting held inside a shamiana set up on the
cooperage football ground, in a carnival-like atmosphere, where food
packets were distributed to attending shareholders.
subsecription record was broken by Larsen and Toubro, which collected
well over its equity offer of Rs. 820 crores in 1989. That happened
when Dhirubhai was elected chairman of the highly respected
engineering colossus, and put his weight behind the media blitz that
accompanied the announcement of the offer.
One of the boasts of
Reliance Industries is that the level of integration it has achieved
in the manufacturing process in unmatched anywhere in the world. Raw
naphtha, a product refined from oil, is used to produce paraxylene,
which in turn in used to produce PTA to make polyster filament yarn
and staple fibre. Not only does the company use this to make fabrics
which are marketed through 1,500 franchised retail outlets all over
the country, but it also supplies PTA to leading textile mills
While its manufacturing
activities have made Reliance pre-eminent in its field, it is in the
realm of high finance that its chief has been proven to be a
forerunner. A sort of innate financial legerdemain enabled this
human dynamo to manoeuvre his finances. Its innovative financial
schemes gave a big boost to the capital market.
Dhibubhai turned the
non-convertible debenture (NCD)-which is actually little better than
a fixed deposit placed with a company-into an amazing financial tool.
By announcing that these NCDs would be converted into equity shares
at a premium, Dhirubhai not only sent his investors into ecstasies,
but his firm also benefited hugely from the hefty premiums charged.
Legislation was finally
moved in June 1989 to prevent the company from converting its fifth
and sixth (the E and F series) issues of
debentures into equity. But by then, Reliance had already made a
fortune which it has wisely invested in both men and machines.
Dhirubhai, one could say,
has virtually the Midas touch when it comes to making money. Even in
a sports sponsorship deal, where a company usually only gains
unquantifiable publicity, Reliance made a quantifiable cash profit.
In 1987, the company sponsored the World Cup limited overs cricket
competition; and thanks to some savvy marketing techniques, not only
got free worldwide publicity, but also made a profit in the manner
made famous by the organizers of the 1984 Los Angeles Olympics.
Apart from began a
financial wizard, Dhirubhai is a truly magnificent organizer, and
has been able to give his employees the impression that they can
unequivocally count on him in times of distress. For example, when
an unexpected flood hit the industrial township of Patalganga, and
washed out three entire villages on Black Monday, 24th
July 1989, the human factor in the Reliance complex there was the
least badly affected, through the factory itself was totally
More than twenty inches
of rain fell in just eight hours in an area that had no flood history
in the previous 80 years. The downpour was accompanied by winds
rising to more than 80 kilometres per hour. Out of 384 people dead
and 264 missing, not a single person was a Reliance employee. As
many as 1,500 families were rendered homeless, and 1,15,000 people
rendered destitute, but none of these were Reliance personnel.
In space of 72 hours,
Reliance bosses had mobilized more than 6,000 personnel from India
and and abroad to salvage the complex in which the company had
invested more than Rs. 1,500 crores. Accommodation for affected
employees was organized overnight. In spite of an ongoing transport
strike, trucks and tempos were commissioned to remove 6,000 tonnes of
debris within three days. The firs two plants of the complex were
restarted in just 14 days from the date of the disaster, and the
entire complex was back on stream in a record time of 21 days.
Why do the investors in
his companies respond so wholeheartedly to Dhirubhai Ambani? One of
the reason is that, all through his career, he ahs employed one
principle that he picked up at A. Beesse in Adenlibreally rewarding
those who have come to his assistance in times of need. Enormously
large-hearted with those he considers his benefactors during his days
of struggle, he has been known to dole out massive sums of money
across the table without expectation of its being return.
At the same time, he is
known to be ruthless towards his competitors. He has an elephants
memory that easily identifies those who have crossed his path in
The strain of ceaselessly
fighting corporate and political wars has inevitably told on Ambani,
and his health hit a downward curve after 1986. That year, he had a
stroke that left one side of his body partially paralysed. The news
of his indisposition spread like wildfire in the stock market, and
the Reliance share fells like a stone in only a couple of hours
trading. For a long time, he did not make any public appearances,
and the counter continued to languish in the doldrums. The day he
first appeared in public, the scrip made a smart recovery.
Though not as physically
hardy as before, Dhirubhai has not let the permanent handicap of the
paralytic stroke blunt the edge of his razor-sharp brain. It is
still from his fourth floor office in Maker tower IV at Nariman point
that all major policy decisions which affect the future of the
Reliance group are taken. The routine running of the organization is
left to Mukesh and Anil, who nevertheless consult him in all key
There are some
opinion-makers, like well-known newspaper editor Vinod Mehta, who
have referred in print to Dhirubhai Ambani as the embodiment
of evil; However, to the Gujarati business community, he has assumed
the status of demi-god. To al aspiring small-time entrepreneurs, he
has become a sort of benchmark they aim at. And so, with each
succeeding day, the legend to Dhirubhai Ambani continues to gather