Perceptions and Proportions
Perceiving the market opportunities with a sense of proportion and embarking into appropriate diversification plans go a long way in the growth of a business enterprise. The case study of Reliance Enterprise is presented here. The students of Management Schools may like to draw lessons and find it to be a source of inspiration for the niche strategies adopted by the business tycoon Dhirubhai Ambani from rags to riches.
From rags to riches:
Dhirubhai Ambani was born on 28 Dec. 1932 as the third son to a school teacher in Gujarat with moderate means. Ambani moved to Aden, Yemen when he was 16 for a livelihood. He started his career as a dispatch clerk before becoming the distributor for Shell Products. He was later promoted as a manager in an oil filling station at the port of Aden.
The Yemeni Rial Coin had high content of pure silver in those days. Young Dhirubhai perceived high demand for ‘rial’ in London Stock Exchange and purchased them in bulk and melted the coins in silver and sold it to bullion traders in London. Though it was stopped in 3 months, D.A. made a few lakhs of Rupees in this transaction.
D.A. returned to India after 10 years and found Reliance Commercial Company with a capital of Rs.15000/= in Masjid Bunder in Mumbai in a 350 Sq.ft. space with one telephone, one table, three chairs and with a business mission of importing polyester yarn and exporting spices.. He went on to establish Reliance Textiles in 1964 under the brand name “Vimal” and the World Bank applauded the brand as the best Polyester Cloth. Perceiving success, Dhirubhai established Reliance IndustriesLtd in 1970s..
Dhirubhai Ambani is credited with starting the equity cult in India. More than 58,000 investors from various parts of India subscribed to Reliance’s IPO in 1977. Dhirubhai was able to convince people of rural Gujarat that being shareholders of his company will only bring returns to their investment.
RIL holds the distinction that it is the only Public Limited Company whose several Annual General Meetings were held in stadiums.In 1986, The Annual General Meeting of Reliance Industries was held in Cross Maidan, Mumbai, was attended by more than 30,000 shareholders.
Dhirubhai Ambani’s takes control of the Mumbai Stock exchange : In 1982, RIL was coming out with a rights issue of partly convertible debenture and it was rumored that the objective was not to get the then existing stock price to slide by an inch. A group of stock brokers in Calcutta joined together as a Bear Cartel. Taking this as an opportunity they started to short sell RIL scrips. Friends of RIL counteracted this move and the Bulls started buying the scrips on Bombay Stock Exchange.The bulls kept on buying and a price of Rs. 152 per share was maintained till the day of settlement. The Bear Cartel believed that the Bulls would accept settlement under the then prevalent ” Badla ” system. On the day of settlement the Bear Cartel was taken a back when the Bulls demanded physical delivery of shares.To complete the transaction the much needed cash was provided to the stock brokers who had brought shares of Reliance by none other than Dhirubhai Ambani. In case of non-settlement the Bulls demanded an ‘Unbadala’ (penalty sum) of Rs.35 per share. With this the demand increased and the shares of Reliance shot above 180 rupees in minutes. The settlement caused enormous uproar in the market and Dhirubhai Ambani was the unquestioned king of the stock markets.
The situation was completely out of control. Authorities of Bombay Stock exchange intervened in the matter and brought down the “Unbadla” rate to Rs. 2 with a stipulation that the Bear Cartel has to give the delivery of shares within few days. The Bear Cartel brought shares of Reliance from the market at higher price levels and it was also realized that Dhirubhai Ambani himself supplied those shares to the Bear Cartel and earned a healthy profit out of The Bear Cartel’s adventure .
After this incident many questions were raised by his detractors and the press. Not many people were able to understand as to how a yarn trader till a few years ago was able to get in so much of cash flow during the crisis. RBI was called upon to investigate into the matter . It was clarified by RBI that the money flow into RIL was due to Rs.220 million investment made by NRIs thru’ various Companies like ‘ crocodile’s etc., and that there was nothing unethical nor illegal in the whole matter.
A film inspired by the life of Dhirubhai is set to release in January 2007. The Hindi Film Guru, directed by ManiRathnam and music by Rahman will show the struggle of a man who strives to make his mark in life. The movie stars Abhishek Bachan and AishwaryaRai in leading roles.
Highlights of Dhirubhai’s venture :-
* What the Corporate Houses of Tatas, Birlas and Dalmiahs achieved and dominated over a period of a century, Dhirubhai Ambani could achieve within a short period with a razor like sharpness and business acumen.
* Dhirubhai Ambani proved to be a king in his diversification plans into Petro Chemicals, Energy, Power, Information Technology, Telecommunications, Capital Markets, Retails and so on.
* RIL is now India’s largest Private Sector with turnover over US$19.976 billion backed by a profit over US$2.03 billion.
* 25% of share holders in India own a RIL Scrip.
* Fortune Global 500 featured RIL in 342nd rank in 2006. Forbes Global featured RIL at 295 spot in 2000.
*Chemtech and Chemical Engg.World gave the” Man of the Century ” award in Nov 2000 to Dhirubhai Ambani.
* Dhirubhai won the ” Dean’s Medal ” of Wharton School, University of Pennsylvania in June 1998 for ” Outstanding Leadership ”
* FICCI conferred the title ” Man of 20th century ” on D.A.in 2000.
* Times Of India in 2000 voted Dhirubhai Ambani as the greatest creator of wealth in the country.
The man from rags to riches, Dhirubhai Ambani breathed his last on July 6, 2002 but his glow would continue to inspire the whole generations of nations.
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