Reliance surprised all yesterday with a post market bonus declaration of 1:1….It last gave a bonus in 1997…and before that in 1983 and 1980

Dhirubhai Ambani,the Founder was the dramatic architect for all these bonus issues…but he passed away in 2002……Investors were like Children in those days…and the father was Dhirubhai !….his bonus announcements were always dramatic…like breaking an AGM to have a board meeting to discuss Bonus and coming back to announce a 1:1 Bonus…all pre planned

But yesterday’s Bonus was clearly less preplanned….and Investors are no longer Children…and Mukesh Ambani is surely not the father !

And I was truly amused to hear the reason why Mukesh declared this Bonus….To reward Shareholders for this Value Creation of over a lakh Crores in assets and the completion of setting up of two major projects….gas and the new refinery….Bonus is declared from Free Reserves created by Operational Profits …Reliance has enough of these…but not from the two new projects yet !….even brother Anil rewarded,if you can ,I daresay, call it that,! shareholders of Reliance Power with a 3:5 Bonus last year,within months of the IPO…even before the Company has commissioned even one power project !…the bonus was to bring down the holding cost from the obscene IPO Pricing of Rs 427.50 to Rs 270 ! It’s quoted at Rs 160 right now…so now both brothers have ‘rewarded’ with bonus after creating the assets !  

The Bonus normally reinforces the expectation of good performance into the future,though it is merely an accounting entry….may change sentiment,but not valuations 

In Reliance,the Equity now will double from Rs 1642 crs to Rs 3284 crs with just a small dent of Rs 1642 crs in reserves of over Rs 1.1 lakh crs…The Book Value will halve from Rs 700 to Rs 350…Adjusted EPS for FY 10 would be in the Rs 60-Rs 65 range.

The Share Price should open strong this morning…In fact it has opened at 4% high at Rs 2189 and is now easing….From this price the ex-bonus price adjusts to a shade below Rs 1100…that’s 16 P/E on  FY 10 EPS and 11/12 P/E on a much stronger FY 11 EPS of close to Rs 90

And this declaration of Rs 13/share as interim dividend on existing capital of Rs 1642 crs is good but it works out at just a 10% payout of projected EPS in the range of Rs 120-Rs 130 for FY 10 before adjusting for bonus

And this Bonus and Dividend declaration is clearly a tool intended to raise shareholder sentiment given the acrimonious legal issues between the two Ambani Brothers….Ironically the Gross Refining Margin has dropped to a 26 year low of just US $ 3…and is not expected to revive strongly in the nexy year…..so if it was not for the Gas Profits that will now accrue to Reliance Industries,the Profitability would have been impacted 

Investors are now mature…..A Bonus announcement should not significantly impact their outlook for Reliance Industries as Valuations do not get impacted

Wonder What brother Anil has to say about this Bonus ! ?….Wonder why no one in Media has bothered to get his View !…surely it would be interesting to hear him on this !

Cheers !    

I have audited a Wadia Group Company and lived the 1980s and 1990s through the bitter rivalry between Nusli Wadia and Dhirubhai Ambani….so it was with some Interest that I read Nusli Wadia’s Article and Interview in today’s edition of the Economic Times…..Brought back some Memories

He has chosen to be interviewed and communicate now after so many years..and amusingly he has done so through the Times group despite being very close to the Express Group

I remember the 1980s when I had joined the prestigious CA Firm,S B Billimoria and Co ( Now part of one of the Big 4, Deloitte Group) to begin my articles….my first audit was BRT ( Bombay Ring Tools),a Wadia Group Company….What I remember was the condescending attitude of their Chief Accountant…he was a very emotional Parsi Gentleman ,who held a strong view that Statutory Auditors were merely like Employees of the Company and should therefore behave as such…they had no right to ask questions and Wadias were even their Boss !….This irked my seniors quite a bit…I was a total newcomer…so I just observed…..My Seniors used to take great pleasure in never missing an opportunity to argue and work up steam with this Accountant…he used to get red in the face and very angry and even complained to our Firm Partner that the Audit team was getting Personal !…while most Lunches during the Audit were at ‘Shere-e-Punjab’,a lane away from Wadia Group’s ‘Neville House’  at Ballard Estate ( near the Docks) in South Mumbai,we were treated to ‘Khyber’ when our Firm Partner too was present.It was my first audit and I learnt that Ethics in Business and Personal Ethics are two separate Issues 

Nusli Wadia’s wife Maureen Wadia (Gladrags fame) also used to get both their sons, Jeh and Ness, when they were kids, to play Badminton at the Willingdon Club…It was always in a Mercedes…..Never played with them,though spotted them very often as my friends and I alternated between Tennis and Badminton depending on court availability.  

Nusli Wadia talks in his Interview of many things…Upholding Value is one of them

• How he respects those who have grown upholding Values…Tatas,Keshub Mahindra,Deepak Parekh…..how the Political System got ’taken over’ by the strong nexus with Business….how the Mantra today is to scuttle Other’s Projects,preventing their approvals…fixing them,in simple terms….they never did this in their Generation,says Wadia…all business groups co-existed with each other and were happy to see each other Grow….What has grown since then is this business of ” I will Block you or I will Stop you” !…How Ratan Tata had a tough time breaking the strangleholds of Four or Five in the Tata Group….Nusli Wadia does not mention these men…but by implications they should be Russi Mody of Tata Steel,Darbari Seth and his Son of Tata Chemicals,Ajit Kelkar of Indian Hotels and Sumant Moolgaonkar of Telco…I remember,that Tata group had to prepare a criminal dossier on Ajit Kelkar to force him to resign     

My View of Nusli Wadia’s View on ‘Values’ is a bit mixed….Everybody Values those who upholds Values !But,in my view ,it was this very Monoply and Business Control of the Old Groups that new aggressive Businessmen attempted to break by aggressive means….other less aggressive means were easily thwarted…… Nusli Wadia knows that post Independence,Indian Business grew and was centered around Tatas,Wadias,Birlas and the Mafatlals….It was very difficult to break into the Business of this coterie….These Business groups controlled most Indian Business and thwarted anyone who wished to enter or scale up in their lines…Textiles,Steel,Cotton to name a few…..It is this barrier that newer and more aggressive businessman like Dhirubhai Ambani broke through and scaled up….It was a Catch 22 situation for these newcomers….They had to do what they had to do in order to do what they had to do ! ….So,in this context, to imply that many Newer Big Business has emerged without any Value base is not wholly correct…Old Houses also ‘managed’ the government and it’s bureacrats…but Newer Business ‘managed’ them bigger and therefore better !

New Sunrise and High Growth Industries of Private Banking,Insurance,Telecom and IT have all bypassed the Wadia Group…..though Nusli Wadia had applied in vain for a Telecom License and nearly took over banks…but government policy was amended,citing conflict of Interest, so that Industrial Groups were not allowed to do take over a Bank or set up a new one

There was clear ‘old world complacency’ in the Wadia Group….My growing sense is that Nusli Wadia by speaking of ‘Values’ and how he respects those who have have grown keeping the Value System rather than those who may have grown the Biggest or the Highest,is merely offering a justification for himself having not Grown !…He could have grown,upholding his Value System……and after having audited one of his companies in the 1980s and having come across some rather ‘Valueless’ Practices and in relatively recent times the rumours of the Wadia connection with the sordid Pillai episode involving Brittania leading to Pillai’s Death  ,I can only comment that Practice and Preaching always seem to be two seperate issues 

However,at the turn of this century I had liked two of the Wadia Group Listings…the flagship,Bombay Dyeing and a holding company,Bombay Burmah…the former for the great Real Estate story after DCO 2001 and the latter for the sum of the value of the several business holdings…Tea and Aviation to mention two…Got disillusioned a few years down the line as the values never really unfolded to potential

Jeh and Ness,both seem to have inherited the ‘old world charm’ of the Wadias…Having always lived ‘Upper Crust’,you can say that they held Pole Position when they started out,but lost it somewhere down the laps…. They yet they have to demonstrate that they have the killer instinct and aggression to create and run great businesses

For me,right now the Wadias Fortunes are resting solely on their Real Estate Inheritance…Probably this Great Wealth is the cause of the Complacency ! and,I daresay, the IPL Distraction too !….Wadias need to scale up Risk in the Right Areas…they will otherwise stagnate and  an emerging question mark on the continuation of the Wadia legacy and Business Empire will only grow bigger

To begin with,Nusli Wadia should see ‘Guru’ and even get hold of a copy of the banned book,Hamish Mcdonald’s ‘Prince of Polyester’….this may revive bitter memories but would help in brushing away any demons he may yet have on his rivalry with the Ambanis…he says he hasn’t any…but his very reference to these chronicles and his revelation that he has yet to see the Movie,  belies this….he needs to brush off and move ahead…he does,however, confess that he is finding it hard to ‘let go’ at this age,rivalries with different people at different levels,both outside and within his family

By Not Letting Go,the Wadias are Letting Up !   

Pranab’s Union Budget has shorted the Market !

Ironically It’s Reliance Group Founder’s Dhirubhai Ambani’s Death Anniversary today… Arguably the Father of Indian Equity… He was the King in Capital Formation through Equity….. we probably need him to resurrect… to resurrect our Markets !… he build his flagship on scaling up a Domestic Consumption Story… we need to stimulate the same today… his vision, experience, inspiration, motivation, ideas and leadership would have helped…. You can corelate our huge Fiscal Deficit with Dependency on Oil Imports and being victimised by the huge surge in Oil last year to US $ 145/barrel…. Reliance continues to lead the way in the Private Hydrocarbons Sector in building World Class Refineries and Exploration of Oil and Gas…. Clearly it was Dhirubhai’s Vision to help make India a World Class Country and less Dependent on Oil Imports… His guidance in aiding the Government in Capital Formation through Equity would have been invaluable… He would have had the crucial retail Investors support too.

And how in the Hell did Planning Commission’s Montek Singh Ahluwalia keep stating, in the past few days, on the media to millions that the Union Budget will be Popular !

Was he deliberately misleading, like many of our market operators do, or is he as inarticulate as Finance Minister, Pranab Mukherjee !?…. ‘Popular’ Indeed !… Market has Popped !… Sensex has closed down 870 points at 14043, having breached 14000 earlier… It’s down over 1000 points from Intra day Highs of over 15000 just before Pranab began his ‘to be popular’ Budget Speech… Nifty closed at 4166, down 259 points

And come to think of it even our Finance Minister had told us to Wait for the Budget !… and so we waited… and now we’re worried and those who bet long are even wailing !

It’s not just a coincidence I’m wearing ‘Red’ today !… my past blogs would support this T-Shirt colour code for today !… you thought I was wearing a Red Shirt, did you !?

I do hope to wear ‘Green’ soon though !

You’ll get the pirated edition of “The Polyester Prince “at the signals in South Mumbai…don’t pay more than Rs 100

Today’s Sunday Mid Day devotes a whole page to it…….The Book was written in 1998 by Hamish McDonald who in 1991 was appointed to run the India Country desk from New Delhi for “Far Eastern Econimc Review”. He now is the Asia-Pacific Editor of the “Sydney Morning Herald”

The idea of the book actually came in 1992 after the author had met the late Mr Dhirubhai Ambani a few times beginning in 1991 with the Invitation to the marriage of his son Anil Ambani with the Film Actress Tina Munim

The Pirated Print is not too good, but the book does give some insight into the enormous risk taking abilities of the late Dhirubhai Ambani and where the End often justified the Means adopted.

Born on December 28, 1932, Dhirubhai Ambani sowed the seeds for the Reliance Empire soon after he returned from Aden in 1958…. before he crossed 30 years of age… he went on to becoming an icon and also is considered as the father of the Modern Equity Cult.

This controversial book was never really released in India by the Original Publishers Harper Collins as it saw an endless round of litigation ahead with the Reliance Group who had applied for and obtained injunctions against publication on grounds of anticipated defamation as the relationship between the author and the Ambanis had soured after the author wrote a few articles against them

Dhirubhai Ambani passed away in July 2002 and his two sons, Mukesh and Anil soon came to loggerheads leading to an inevitable split of the Reliance Empire

The continuing feud, often vitrolic and bitter, has given strength to a sentiment that National Interests are far more important than Ambani Interests…. moreover it has brought this Book on Dhirubhai Ambani back into the limelight…… I’m sure McDonald must be tempted now to write a sequel to cover this feud…He needed 274 pages to cover the rise of the late Dhirubhai Ambani… he may need twice as much to cover the two sons 

I was junior to Mukesh and Anil in the Jewish run Hill Grange High School (Closed down years ago) on Peddar Road in Mumbai…. the late Dhirubhai Ambani sometimes delivered the lunch tiffin himself to his boys. In the late 1980′s I had an opportunity to interact very briefly with Anil who had approached me through the  DSJ Publication Group for scripting and making a small film on Reliance. This was in the backdrop of V P Singh’s zeal to bring down the Group and the Share price of Reliance being battered on the Bourses. I never got round to doing the film because I conveyed a stance that while I would highlight the Positives I would not be biased.

Today, while I wish both Mukesh and Anil all the best in their business forays… just a little feedback… keep an eye on the Integrity and  Credibility of your Teams… many may not share your vision or just pay it lip service…. and may just be with you for the Money… one way or the other !

It was therefore easy for me to connect with the book as I have lived and observed the sagas of the Larsen Takeover Bid through BOB Fiscal, the excitement that Reliance Equity Issues generated on the Bourses,Orkay’s Kapil Mehra trying in vain to take on the Ambanis, V P Singh’s zealous mission (he nearly succeeded) in bringing down the Reliance Group, Enmity between the Wadias and Ambanis,t he Indian Express going hammer and Tongs at Reliance exposing the plethora of cases of Evasion of Various Duties, Reliance’s own unsuccesful media forays and many other vicissitudes of the Reliance Group 

What McDonald misses out is to highlight and emphasise  the grit and courage and the far vision that the late Dhirubhai Ambani displayed when aggressively taking on the monopolies of several business houses who were both complacent and comfortable in their belief that they ruled Indian Business and even our Stock Markets!

If you read the book the author’s demeanour clearly becomes obvious… it is derogatory and defaming….. he maintains this thread right through the book giving credence to the  suspicion that he had a hidden agenda in writing this book… in that it is to be read more as an expose rather than a biography

The sad fact is that you either hated or loved the late Dhirubhai Ambani but you could not ignore him! the debate will rage on whether in India a budding entrepreneur can achieve his vision on a big scale without compromising on principles and values and without successfully lobbying the Government…… the happy fact is that the success of the late Dhirubhai Ambani has spawned atleast a million Indians to Dream Big and endeavour to act out their Dreams   

To me the late Dhirubhai Ambani showed what an Entrepreneur can achieve in India if he is fearless and has a  broader Vision in mind … Tell me how many Industrialists have taken the masses along with them to riches by making them partners and shareholders in Equity ?!…… To me what he did was breaking a Catch 22 situation… he had to do what he did in order to do what he had to do !…. He dreamed Big and demonstrated this Dream in Size and Scale befitting a Great Democracy like India……. His detractors, Oh ! there were and still are many, accused him of getting Laws and Policies amended to grow in size and capture markets…….h e had the audacity to confront them and scream at them “you complain of me now but all of you have slept with me!”  

Sadly the legacy of the late Dhirubhai Ambani is being threatened by the growing feud between the sons that has left even the most loyal of Reliance Shareholders questioning the fate of the split Group now….. sadly the feud will again bring into focus the dangerous nexus between Industrialists, Bankers, Politicians, Bureaucrats, Brokers, Media and yes even the underworld

Can we ever have Moral Leadership and Clean Business ever again in India ?

My Heart says “Yes”… my Head says “No”

One Final Comment… Yes I have read the Book and it has not changed my views on what the late Dhirubhai Ambani acheived against challenging odds and archaic laws that kept India in shackles and prevented it from growing Business to a Global Scale… ofcourse I too have reservations about some of the Means adopted… but on the bigger scale of things he could not have broken barriers that needed to be broken if he had not…. Breaking a Catch 22 situation as I said earlier

Both, Anil and Mukesh are risk takers and must take this risk of allowing the publication of this Book in India now… it may just work in their favour… it’s always a more courageous and better option to face ambivalence rather than camouflage it… your father did this wonderfully well…. leaves little place to dangerously speculate or second guess the action and thought process in your Groups… why you think and act the way you do!