Tag: Ambani Family

Weekly Update: A lesson From Tiny Cuba; Succession At Reliance

By Lehnga Singh

The tiny Caribbean country, Cuba, is a speck compared to India. Its population of 11 million people is less than half of most Indian metropolises. Cuba struggles to remain afloat, its economy is restricted by US sanctions and revenues from tourism, a major source of income for the nation, has all but dried up since the Covid pandemic began in early 2020. But what is a curious surprise is how Cuba has managed to keep afloat in the wake of Covid. More than 90% of Cubans have been vaccinated with at least one dose of the vaccine; and 83% have been double-dosed. And this while many much larger and more powerful nations with stronger economies have struggled. The other remarkable fact is that Cuba has developed its own vaccines to administer to its citizens.

How did Cuba do it? In early 2020 when the pandemic’s first wave began gathering momentum, Cuba realised that it would need to act fast. Lack of resources and the sanctions imposed on it made it difficult for the nation to import vaccines at huge costs. So it got its own scientists to double up and develop vaccines. Those efforts bore fruit. Early this year, Cuba became the smallest country in the world to develop and manufacture its own vaccines.

Last year, the spread of Covid in Cuba was alarming with the small country reporting hundreds of deaths a week. But this year the story is different. Covid infections have plummeted and deaths are down to two or three a week. But the Cuban “miracle” is the result of something that the erstwhile head of the nation, the late Fidel Castro, had done decades ago. In the late 1980s and early 1990s, Cuba invested heavily in biotech and healthcare, not only in creating pharmaceutical research facilities and hospitals but also in training doctors and other healthcare personnel. The result is a robust infrastructure that is paying back now.

Investing in healthcare is vital for developing countries but often it gets neglected. During the second wave of the pandemic, India’s lack of hospital infrastructure was in sharp focus as patients struggled to get hospital beds and oxygen.

As per the World Health Organisation’s data relating to Domestic General Government Health Expenditure (GGHE-D) as a percentage of GDP in the year 2018, India’s share of GGHE-D in GDP is 0.96%. That figure might have gone up marginally but it is still far lower than in many comparable countries. The lack of public health facilities takes a huge toll on India’s population and even in ordinary times patients have to depend on private medical facilities that are often expensive and poorly regulated.

In extraordinary times such as now, the problem is further exacerbated. Recent reports suggest during the third wave of the Covid pandemic, which is yet to reach the peak in India, there could be an acute shortage of healthcare staff. The nightmarish memories of seriously sick people gasping for oxygen or trying desperately to get hospital beds barely a year ago are still vivid. And the lessons from those experiences have to be learnt. For instance, the majority of Indians are not fully vaccinated (only 44% are, according to official estimates). The need of the hour is for India to accord top priority to healthcare infrastructure–be it through investment in hospitals, training of more healthcare professionals and research. If tiny nations such as Cuba can do it, why can’t India?

Is Reliance Readying For Succession?

Twenty years ago, after Dhirubhai Ambani died, a very public and acrimonious battle broke out between his two sons, Mukesh and Anil. It is widely acknowledged that the former emerged a victor from that spat. Today, Mukesh Ambani has grown his inherited Reliance empire into a US$217 billion empire, spanning oil refining and petrochemicals, telecom and retail, and he is one of the world’s richest businessmen.

Recently, he announced that the group was working on a succession plan. That should come as good news in corporate India. Mukesh who is 64 is still very much an active head of his diversified group but a succession plan at this juncture would be a prudent thing to embark upon. Part of the reason for the fight that he and his estranged brother had was because their father, Dhirubhai, had not clearly earmarked a succession plan. Mukesh has three children, twins Akash and Isha, 30, and Anant, 26.

‘Mukesh’s statement on succession has, predictably, led to speculation about how succession will be managed in the group. Will its businesses be split up and shared as inheritance for his children? Or will there be some other way of ensuring that the process happens smoothly. One theory doing the rounds is that perhaps the plan would be not to split the businesses, given that each of them have a different set of risks and future potential. For instance, in the long run, refining and petroleum could become a sunset industry given the move away from fossil fuels. On the other hand, Reliance’s telecom business is seen to have a brighter future both in India and globally. 

Many believe that the next move by Reliance could be to set up a family trust and bring the flagship company Reliance Industries under it. The trust’s board could have as members, Mukesh himself, his wife Nita, and his three children. That could ensure that the businesses remained under family control and minimise intra-family discord. The coming months would probably reveal what really will be the succession plan at Reliance but corporate India will be eagerly waiting to see how it unfolds.

Family Business & Succession Plan

By Kunal Bose

Kokilaben Ambani must still be ruing that her husband Dhirubhai did everything else but write a will clearly stating what their two sons would inherit beyond him. Dhirubhai had an outstanding career of building a monolith that is Reliance from a scratch outsmarting a system in prevalence during his time that to say the least did not encourage new entrepreneurship. Moreover, leading business houses found then had no love lost for adventurous businessmen seeking a place in the sun. Dhirubhai could take care of all that. In fact to the shock of tall men of Indian business, they found Dhirubhai ahead of them, including the storied Birlas and Tatas.

In the pursuit of what even today in a more open environment looks seemingly unachievable, Dhirubhai had his two sons Mukesh and Anil working closely with him for most of the time. The burden of running the business fell on the shoulders of young Ambanis when Dhirubhai suffered the first stroke in 1986 which left him partially paralysed. Even that grievous experience was not enough for the buccaneering industrialist to formally spell out what exactly would be the inheritance of his progeny.

Nobody in the family or his close associates have ever thrown light on what might have baulked the otherwise worldly-wise man charting the course for Mukesh and Anil beyond him. In any case, as was to be expected, the post Dhirubhai days were marked by nasty sibling fights that made way to public domain. Intervention by the mother based on the sane advice of renowned banker KV Kamath who enjoyed the confidence of both Mukesh and Anil ensured splitting of Reliance businesses between the two engaged in a ten-month public row.

Having experienced the nastiness of sibling rivalry and washing of dirty linen in public, it is only to be expected that Mukesh and his wife Nita, who has proved her mettle in a number of areas from sports to education to philanthropy will be working hard to prepare a blueprint for succession so that their three US educated children –Isha, Akash and Anant – continue to move seamlessly to significant roles in Reliance Industries under the watchful eyes of their parents. Under Mukesh’s charge, Reliance Industries has become a behemoth spreading its wings beyond oil-refining and petrochemicals into telecommunications, retail (read both e-commerce and brick and mortar) and technology.

Known for delivering what he promises, Mukesh made an announcement in June of his plans to invest $10bn in green energy over the next three years and at the same time “aggressively” pursue the goal of producing cheaper green hydrogen. All this is to substantially bring down the group’s carbon footprint.

As Mukesh does all this to set the next phase of Reliance diversification and growth, one of the world’s eleven richest individuals is said to be studying the models of billionaire families in the US and Europe transferring control of businesses and wealth to the next generation and also succeeding thereby in wealth preservation. But what must be accepted is that every big family of the Ambani kind has its own challenges and problems and therefore, an arrangement that has worked splendidly well in one case may be found inadequate in other families. For example, at the time of passing of Dhirubhai there was enough in Reliance basket that could have been amicably distributed among Mukesh and Anil. But then sibling rivalry, ill feelings towards each other and blind ambition played spoilsport. Richer by that avoidable experience, Mukesh is reportedly working on a succession plan that will draw ideas from other billionaire families where successions are well settled but still will have its uniqueness.

Bloomberg in a well researched report says: “The 64-year-old Indian tycoon’s favoured plan shares elements with that of Walmart Inc.’s Walton family, people familiar with the matter say, and could provide the framework for one of the biggest transfers of wealth in recent times. Ambani is considering moving his family’s holdings into a trust-like structure that will control Reliance Industries.”

If what is speculated turns into reality, then Mukesh, Nita and the three children will have stakes likely in equal proportions in the trust which will have oversight over the working of Reliance to be run by professionals. Walton family, the owners of big-box retailer has the Walton Family Foundation in place for a long time. Family members may be on the board, controls the listed Wal-Mart Stores Inc. and its direction through majority ownership, but the day-to-day operations are left with professionals who bring new winning ideas and implement them. At the same time, the world is not to doubt that no major decision at the world’s largest retailer with footprints in a number of countries outside the US, including China and India, will ever be taken without consultation with family leaders. No doubt, a good model for Mukesh to seriously consider.

Family business observers will say in one voice that business family heads should not leave any grey areas in matters of succession. No one knows at what point differences will occur even in families where businesses are run jointly by brothers with a sense of amity. Take the brother Hindujas – Srichand, Gopichand, Prakash and Ashok – who between them control a nearly $20bn British-India group. From a high pedestal, the brothers signed a never heard motto in 2014 saying that “everything belongs to everyone and nothing belongs to anyone.” Some years down the line comes the reckoning for the richest London based family, which from trading in commodities and distribution of Bollywood films outside India graduated into sectors embracing automobile (Chennai based Ashok Leyland), banking (Hinduja Bank in Switzerland and IndusInd Bank in India), oil (Gulf Oil International), healthcare and education.

The claim of togetherness got a jolt when Srichand laid claim to sole ownership of the Swiss bank and wanted the London court to rule that the letter signed by four brothers to the effect of common ownership of assets is not legally binding. The 85 year old Srichanda’s health is failing and he also suffers from dementia. His wife Madhu and daughters Vinoo and Shanu believe that the other three brothers are misogynists and therefore, taking actions against them. How the unravelling of more than a century old the House of Hinduja will come about will depend upon decisions of courts in London and Switzerland. No doubt the third generation curse have befallen Hinduja brothers.

Not only siblings fight among themselves. There are quite a few instances in Indian business where parents become victims of the misbehaviour of children. In his newly published An Incomplete Life: The Autobiography, Vijaypat Singhania who made Raymond a household name, there is a chapter The Biggest Mistake in My Life which deals with the blunder of giving away his shares to his son Gautam Hari Singhania and all that followed. He writes: “Things really started to go downhill in 2000–2001, when our clashes became more frequent. After a period of unpleasantness, I thought that the only way out for me was to, in fact, resign as Raymond’s Chairman and Managing Director. I committed the first Himalayan stupid mistake of my life when I sent my resignation letter to Gautam. I had foreseen a scenario where he and I would hug each other – as we had done several times in the past after a disagreement – and we would make up. But this is not how things went. A meeting of the board of directors was urgently called, and my resignation was accepted in my absence. I was in London at the time. You can imagine my abject shock when I came to know of it. I berated myself mentally and not a day went by when I didn’t kick myself for being so impulsive with my legacy… Even after what had felt like an appalling betrayal, I just forgave him for what he did. What else could I do?”

Difficult to find another father like Gautam Hari Singhania who could speak so candidly about the treatment he got from his son and still would be forgiving. The lesson is if you have got a billion dollar or more then keep everything under control as long as it suits you and also write a will clearly stating how your wealth is to be distributed among your children.