Dhirubhai Ambani and Reliance

"Our dreams have to be bigger. Our ambition higher. Our commitment deeper. And our
efforts greater. This is my dream for Reliance and for India."- Dhirubhai Ambani.

A perfect combination of entrepreneurship and leadership, Dhirubhai transformed

Reliance from a company with a turnover of Rs 640 million in 1976, to one with a
turnover of Rs 620 billion in 2002.

Dhirubhai never followed the textbook style of management. Instead, he evolved a unique
style, which combined the American style of entrepreneurship, with the Japanese focus on
the latest technology. And to this, he added the innate shrewdness of a Gujarati businessman.

Analysts feel that he was a perfect manager of time, money and men and exhibited a passion
to find solutions to problems.

Dhirubhai started Reliance at a time when most companies in India were owned by the
government, and the private players were given step-motherly treatment by the government
while offering licenses and permits.

When most Indian business houses depended on government owned financial institutions
for funds, Dhirubhai raised capital from the public by offering shares of his companies.

About Dirubhai Ambani:

Dhirubhai was born on December 28, 1932, to Hirachand Govardhandas Ambani and
Jamunaben Hirachand Ambani. He was the middle of five children, three boys and two
girls. His father was a local school teacher in a village called Chorwad in the Junagadh
district of Gujarat.

After his matriculation in 1949, Dhirubhai left for Aden, (now in Yemen) at the young
age of 17. His first job was to fill gas and collect money at a Shell petrol station, earning
Rs 300 a month. Within a few years, he rose to the position of a sales manager in the
same company.

After working for eight years in Aden, Dhirubhai decided to come back to India and start
something on his own. On December 31, 1958, he came back to Mumbai and started the
Reliance Commercial Corporation (RCC) with a borrowed capital of Rs.15,000.
RCC was mainly involved in exporting commodities like ginger, cardamom, pepper,
turmeric, and cashewnut. Using his connections in Aden, he exported a wide range of
commodities to Aden.

In the mid 1960s, the Government of India introduced an export promotion scheme under
which the earnings from export of rayon fabrics can be used for the import of nylon fiber.
This attracted Dhirubhai's attention and he decided to switch from spices to textiles.
In 1966, he set up a spinning mill at Naroda 20 kms from Ahmedabad with borrowed
funds of Rs 2,80,000 and registered it (Reliance Textile Industries) as a powerloom unit
with a paid up capital of Rs 150,000.

Another program, the High Unit Value Scheme introduced by the GoI in 1971 gave
tremendous boost to Reliance textiles.The scheme allowed the import of polyester
filament yarn against the export of nylon fabrics. RCC was benefited the most from this
scheme and its exports constituted more than 60% of exports under this scheme.

When the High Unit Value scheme ended in 1978, Dhirubhai focused his attention on the
domestic market. During this time, Reliance Textiles was not a very well known name in
the domestic market. His first priority was to establish the Vimal brand, under which
Reliance Textiles sold its fabrics in India. An advertising programme was launched to
facilitate its entry into the domestic market.

Besides this, Dhirubhai also took steps to develop an efficient distribution system for
Vimal as he found that the existing marketing channels were inadequate and
inefficient. By 1980, Reliance fabrics were available all over India through 20
company owned retail outlets, over 1000 franchised outlets, and over 20,000 retail
stores.To strengthen his position further, Dhirubhai decided to integrate backwards
and produce fibers. He planned to set up a polyester filament yarn (PFY)
manufacturing plant at Patalganga(1981). He wanted to make it a world-class plant
equipped with the best machinery and having the best faculties.

In 1984, Dhirubhai got the license to manufacture purified terephthalic acid (PTA),
one of the chemicals from which PFY and polyester staple fiber (PSF) can be
manufactured.

Gradually, Reliance started manufacturing petrochemical intermediaries like

paraxylene, n-paraffin and mono ethylene glycol (MEG), and ethylene, the basic raw
material for all petrochemical bi-products and intermediaries. And finally it entered
into production and extraction of oil .

Dhirubhai's entrepreneurial abilities enabled Reliance to progress on the roads to

success both in the licensing era as well as in the era of liberalisation, privatisation
and globalisation.

He faced the toughest battles with the toughest of politicians and bureaucrats and was
eventually successful in gaining a victory over all his political and corporate rivals.
His business ideologies have been praised and are being emulated the world over .

From the time he suffered his first stroke (1986), Dhirubhai groomed his sons Mukesh
and Anil to take care of the regular operations of Reliance. It was from him that his
sons imbibed the quality to think big. He provided them with a strategic vision.They
always considered themselves as co-builders rather than inheritors of Reliance.
Some of the characteristic features of the Reliance group were:
(i) Continuous vertical integration;
(a) From synthetic textiles into the manufacture of polyester fibre and filament yarn;
(b) From yarn and fibres to intermediaries like purified terephthalic acid and mono-
ethylene glycol; and (c) Further upstream into basic building blocks like paraxylene;

(ii) Consolidation of internal capabilities generated in this process through related

horizontal diversification into petrochemical end-products such as detergent
intermediates.

(iii) Efforts to complete this process of integration through investment in an

NGL/naphtha cracker and in oil extraction itself.

Dhirubhai's biggest contribution to the nation was the development of an equity culture.
Having understood the psychology of the Indian capital markets and the mindset of
Indian investors, he was instrumental in introducing the equity culture in India. Dhirubhai
gave importance to the small investor and his contributions, and by doing so, he involved
millions of middle class investors. Reliance went public in 1977 and had its first annual
general meeting (AGM) in 1977.

Whenever Reliance needed money to fund its expansion purposes, Dhirubhai opted for
a public issue. From 1979 to 1982, Reliance brought out several issues for different
purposes like: financing a worsted spinning mill, modernizing its already existing
textile mill, financing a PFY plant, and to overcome the bear syndicate crisis
respectively.

Reliance contribution

In 2002, the Reliance group with a turnover of Rs 620 billion, assets worth Rs 564.85
billion, and a work force of over 85,000 people accounted for 5% of the Central
Government's total revenue.

It contributed 3 % of India's GDP, 5 % of the total exports, and 9 % of the GoI's indirect
tax revenues. Reliance also accounted for 25 % of India's total private sector profits.

Reliance secured nearly 10 % of the profits of the entire corporate sector in India.
Moreover, one out of every four investors was a shareholder of Reliance. Reliance
acquired IPCL, the Indian petrochemical giant.

With the amalgamation of RPL with RIL, Reliance became the only company in the
world to have fully integrated world scale operations in oil and gas exploration and
production, refining and marketing, petrochemicals, power and textiles.

Presently Reliance enjoys global ranking in all major businesses and its shares lead the
domestic market. According to the global Fortune 500 rankings, Reliance ranks amongst
the top 200 companies in terms of net profit, amongst the top 300 in terms of net worth,
amongst the top 425 in terms of total assets, and amongst the top 500 in terms of sales.

Reliance Mobile, the new venture of Reliance provides cellular telephony services in 13
Indian states, and Reliance Basic holds the licence to provide fixed line telecom services
in the state of Gujarat.

With the launch of Reliance Infocomm, Reliance has taken another major step in its
continuous search for growth and excellence. It was Dhirubhai's dream to provide
information technology and communication facilities to the common man, at affordable
prices.

With Reliance General Insurance and Reliance Life Insurance, the group has also entered
into the insurance sector.

Corporate Battles of Dhirubhai Ambani

Reliance faced corporate battles with- Bear Syndicate(Calcutta based), Nusli Wadia
(Bombay Deing chief), Ramnath Goenka(proprietor of Indian Express Group). Some
businessmen described Reliance as "an out of control monster, a bubble that would burst
any moment."However, not all analysts would agree to that. They felt that Dhirubhai was
quick to recognize and exploit opportunities. Dhirubhai believed that "business is nothing
but a web of relationships and obligations."

Keeping this principle in mind, Dhirubhai managed to create favourable centers in all
the important areas among the bureaucrats, the ruling politicians, as well as the
media. These were the areas where power vested.

Dhirubhai was of the opinion that business was not all about ethics and morality; it was
about expansion and success. His amazing ability to use the state and its policies to his
advantage was responsible for the expansion of Reliance. Be it licenses, foreign
exchanges or quotas, he succeeded in making the best out of most difficult situations.
However, his immense success earned him a number of enemies.

Political Battles of Dhirubhai Ambani

Vishwanath Pratap Singh (V.P.Singh), the Finance Minister in Rajiv Gandhi's cabinet,
was not pleased with Ambanis activities and always put something against them.But
once V.P Singh was transferred from the Finance Ministry to the Defence Ministry
(October 1986) turned out to be quite favourable for Reliance.