The undisputed king of petrol

IIPM MANAGEMENT INSTITUTE

With a vision to be the global emperor, will Mukesh be ‘the one’

The man must be encountering a string of conflicting emotions. Relief at having managed to hang on to Rs.850 billion out of the Rs 1,000 billion empire; sadness at having to give up his “brainwave”, “favourite baby” and recent passion, Reliance Infocomm. A surge of joy at having kept the post of Reliance Chairman – last occupied by Dhirubhai Ambani; and worry at having to fill his shoes.

At the moment, Mukesh looks like the clear winner when it comes to inheriting the Ambani legacy. Dhirubhai Ambani’s driving passion was to create an industrial empire that rivalled the best in the west. He did that, by starting with textiles and going all the way to oil and gas. What Mukesh has inherited is really his father’s legacy and vision. Even he has admitted during the launch of Reliance Infocomm that it was Dhirubhai who dreamt of a mobile phone call at just 40 paise.

The problem is: the core businesses of Reliance can only grow so far organically; after all, what more can you do after setting up a 30 million tonne refinery and discovering India’s largest ever source of gas? Historically, the oil majors of the world have grown at a pace that is far slower than companies in the services sector. Oil companies like Shell, Amocco, Texaco and British Petroleum may be garangutan, but conceivably those are companies in services like Wal-Mart, Microsoft , Intel and FedEx that will rule in the 21st century.

The way the sibling rivalry has unfolded, there is simply no way Mukesh would be content to gloat at the huge share he got of the divided Ambani pie. Predictably, there are clear indications that the elder brother might invest in real estate, retail and value added services. He will obviously use the huge cash generated by Reliance to finance his ventures. That’s exactly what he did with Reliance Infocomm. Innovating in mass marketing of petroleum by bringing it to the doorstep of normal retail customers is a sure shot investment he’ll undertake soon. In fact, Reliance has already unveiled a plan to launch about 150 ‘dhaba’ style budget hotels strategically located in company owned petrol pumps. But right now, Mukesh Ambani doesn’t have the luxury. For starters, the group’s cash fund will dwindle because of pay off s to younger brother Anil. Then again, the famed Ambani clout in the corridors of power is no longer as envied as it was.

If one were to look deeper, the future of Mukesh Ambani’s truncated Ambani empire looks virtually impregnable. The size, the cash, the pedigree, the ambition, is all there. India now needs no kings, India needs emperors, and Mukesh may be the first, incumbent to the throne!

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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