New Delhi: Mukesh Ambani, who recently became the world’s fourth richest man, is setting up a ‘family council’. It will be used to implement a collective governance structure to manage the family’s thriving business empire, two people aware of the discussions told Mint.
The family council will provide equal representation to all family members, including the three Ambani siblings who are expected to take over the reins of Reliance.
“The move is part of succession planning of Reliance (RIL) and will include an adult member of the family, the three children, and possibly external members who will act as mentors and advisors,” said one of the two people.
“The council will play an important role in decision making at RIL. This forum will provide representation to each branch in the agreed manner and help take critical decisions that relate to the family or its businesses,” he said, adding that Ambani, now worth more than $80 billion, aims to complete the succession planning process by the end of next year.
Through the council, Ambani plans to ensure the family has a shared vision for RIL’s future and a common forum where conflicts can be resolved. Ambani is possibly drawing lessons from his rivalry with his brother after the death of their father, Dhirubhai, who founded RIL in 1973.
“The proposed family council, which will emulate other wealthy families, especially multi-generational families with controlling interests in diversified businesses, will also act as an executive body to coordinate among the family members on various matters. It is expected that the three Ambani siblings will eventually head separate verticals within Reliance Industries such as — retail, digital and energy. A family council would ensure that synergies are maintained,” said the second person cited above.
“Family council is like a melting pot where ideas and recommendations of family members melt and help them in arriving at a decision in an informed and democratic way where transparency and participation plays an important role,” said Rajesh Narayan Gupta, managing partner at law firm SNG and Partners.
The way forward
RIL has been the busiest deal maker in India Inc, buying businesses and selling stakes in them. The oil-to-telecom conglomerate is at a crossroads as its organisational DNA is changing with GeNext taking up more proactive roles in executive leadership and management, while the old-world commodities and industrials champion evolves into a more consumer-facing enterprise.
Mukesh Ambani wants to ensure his legacy endures through his three children —Isha, Akash and Anant. And he well knows the pitfalls of not having a clear plan for who gets to run what. In October 2014, Akash and Isha Ambani joined the boards Jio Infocomm and Reliance Retail as directors. With Anant Ambani, the three siblings are in the board of Jio as additional directors. Isha Ambani is also a director at Reliance Foundation Institution of Education and Research, which is setting up the Jio Institute.
The 43rd AGM beaconed the way forward for RIL at a time when the Ambani family is trying to position Jio as a tech company in the same league as Internet giants Facebook and Google, ahead of a potential public offering in the forthcoming future.
It was announced that Google has jumped on Jio’s fundraising bandwagon by investing Rs 33,737 crores ($4.5 billion) for a 7.7 per cent stake. This is part of the Internet giant’s $10 billion India Digitization Fund. “This is the first and the biggest investment we will make through this fund,” Alphabet chief executive Sundar Pichai said.
Reliance Jio is likely to emerge as a winner in India’s 5G race as its homegrown 5G technology will help it save massive costs, according to brokerages. Jio’s plans to build its own 5G software stack and embrace Open-RAN techniques will help it save up on hefty premium payouts to traditional gear vendors, including existing networks supplier Samsung, said Sanford C Bernstein in a report.
At the AGM, Ambani also emphasised that JioMart, a platform for customers and kirana stores, and WhatsApp will work together to create more growth opportunities for kirana stores in India. “It is worth noting that Jio is accelerating the roll-out of JioMart, which has now entered over 200 cities”, said Ambani, adding that it has reached 250,000 orders a day with numbers continuing to grow each day. “We will also expand JioMart to include electronics, fashion, pharmaceutical, and healthcare,” he added.
On the hot-button RIL-Aramco deal, progress has been laggard. Ambani in August last year announced plans to sell a 20 per cent stake in RIL’s oil-to-chemical business to Saudi Aramco, which he valued at $75 billion. The deal was supposed to close by March 2020 but has been persistently delayed. At the AGM, Ambani announced that RIL approached NCLT with its proposal to spin off Oil-to-Chemical business into a separate subsidiary to facilitate multiple partnership opportunities. Aramco, the world’s largest oil exporter, is doing its due diligence on buying a $15 billion stake in RIL’s refining and petrochemical business, its CEO Amin Nasser said.
According to a report, RIL is also close to buying out a majority stake in the Kishore Biyani-led Future Group, a move that will eliminate competition for the Mukesh Ambani-owned company and boost growth prospects at Reliance Retail. Chinese social media giant ByteDance, which owns TikTok, too is in early-stage talks with RIL to financially back its India business. The popular video-sharing app, with 58 others, was banned in India on June 29 over data privacy concerns.
RIL beat D-Street estimates in its first quarter earnings in tough quarter amid the Covid-induced lockdown. Jio, Retail, and oil-to-chemical (O2C) all contributed to fighting the slowdown. RIL reported a consolidated profit of Rs 13,248 crore for Q1FY21, with Jio’s ARPU growth of 7.4 percent QoQ at Rs 140.3.
Jio’s net profit jumped to Rs 2,520 crore in Q1 FY21 against Rs 891 crore in Q1FY20, a YoY jump of 182.8 per cent. In the quarter store functioning and digital commerce were severely impacted by lockdown restrictions, yet Reliance Retail clocked significant revenues of Rs 31,633 crore.
The refining and marketing segment’s revenues took a hit in Q1FY21, declining by 54.1 per cent YoY to Rs 46,642 crore due to lower crude oil prices and lower throughput. The company said it managed to achieve more than 70 percent of previous quarter MS and HSD volumes, due to the strategic presence of retail outlets and strong customer value proposition.