You say "Following the death of Dhirubhai in 2002, a succession dispute between his sons, Mukesh and Anil Ambani, led to a family settlement in 2005. This resulted in a division of assets, with Mukesh Ambani retaining control of Reliance Industries' core petrochemical business and oil and gas exploration operations. Anil Ambani got the Financial Services company, the energy, the telecommunications and the infrastructure assets."
But I would like to know more about the management today.
Is the business still run by the brothers?
Is there still a grievance in the family?
Is nepotism an issue? In my experience, there are 7 billion people in the world and the chances that the son of the founder being the best choice to lead the business is about 7 billion to one! Brunello Cuccinelli once told his daughter, 'you may inherit my business, but don't assume that you will inherit the ability to manage it'. These are wise words. The father was saying that if you want to protect the asset I leave you (the business), find the best person to run it. Founders that don't follow this advice generally see their offspring destroy much of what they had built.
With this in mind, I would like to better understand the management here.
Also, their growth by acquisition style seems to be a scatter gun approach rather than being focused like a sniper. How do they determine which companies to acquire and what is their record on divestments?
Thank you for taking the time to write such a detailed set of comments. The company is run by the older brother, Mukesh Ambani and his children have recently joined the business including a daughter who is running the key retail business. In India most private-sector businesses are family dominated. Even if they are listed, the "promoter" (the promoting family) tries very hard to ensure they have controlling stake (minimum 40%) . In the case of Reliance Industries, Mukesh Ambani's 51% stake means he was the richest man in Asia at the end of 2024. This may have changed as the stock has fallen.
I agree with the Cuccinelli quote and the jury's still out on the management ability of the third generation in RIL. As an investor in India you have to engage with and take a view on family owned and operated companies in the stock market. The acquisition style does feel a little scatter gun in Retail and a few other sectors but not in Telecom. The stock has underperformed the Indian indices in the last 18 months at least and is likely at a big discount to the SOTP valuation. This reflects worries about the strategy in Retail. They have just started to cut costs there. The needs to show value unlocking by floating part of the retail business at a high valuation. That seems some time away.
There is clearly a nepotism issue here if they are on the third generation.
It may be a cultural thing in India, but these family dynasties rarely work out well.
The reason is primarily that the founder was ambitious and hungry for success. He had to work hard to make a living and was passionate about climbing the social ladder. But subsequent generations, born into the richest family in Asia have no such hunger. They have everything they could need. Where does the passion come from?
You say "Following the death of Dhirubhai in 2002, a succession dispute between his sons, Mukesh and Anil Ambani, led to a family settlement in 2005. This resulted in a division of assets, with Mukesh Ambani retaining control of Reliance Industries' core petrochemical business and oil and gas exploration operations. Anil Ambani got the Financial Services company, the energy, the telecommunications and the infrastructure assets."
But I would like to know more about the management today.
Is the business still run by the brothers?
Is there still a grievance in the family?
Is nepotism an issue? In my experience, there are 7 billion people in the world and the chances that the son of the founder being the best choice to lead the business is about 7 billion to one! Brunello Cuccinelli once told his daughter, 'you may inherit my business, but don't assume that you will inherit the ability to manage it'. These are wise words. The father was saying that if you want to protect the asset I leave you (the business), find the best person to run it. Founders that don't follow this advice generally see their offspring destroy much of what they had built.
With this in mind, I would like to better understand the management here.
Also, their growth by acquisition style seems to be a scatter gun approach rather than being focused like a sniper. How do they determine which companies to acquire and what is their record on divestments?
Thank you in advance.
Thank you for taking the time to write such a detailed set of comments. The company is run by the older brother, Mukesh Ambani and his children have recently joined the business including a daughter who is running the key retail business. In India most private-sector businesses are family dominated. Even if they are listed, the "promoter" (the promoting family) tries very hard to ensure they have controlling stake (minimum 40%) . In the case of Reliance Industries, Mukesh Ambani's 51% stake means he was the richest man in Asia at the end of 2024. This may have changed as the stock has fallen.
I agree with the Cuccinelli quote and the jury's still out on the management ability of the third generation in RIL. As an investor in India you have to engage with and take a view on family owned and operated companies in the stock market. The acquisition style does feel a little scatter gun in Retail and a few other sectors but not in Telecom. The stock has underperformed the Indian indices in the last 18 months at least and is likely at a big discount to the SOTP valuation. This reflects worries about the strategy in Retail. They have just started to cut costs there. The needs to show value unlocking by floating part of the retail business at a high valuation. That seems some time away.
Thank you for the response.
There is clearly a nepotism issue here if they are on the third generation.
It may be a cultural thing in India, but these family dynasties rarely work out well.
The reason is primarily that the founder was ambitious and hungry for success. He had to work hard to make a living and was passionate about climbing the social ladder. But subsequent generations, born into the richest family in Asia have no such hunger. They have everything they could need. Where does the passion come from?
If you are interested, I devote a chapter of my book to this very subject with multiple case studies: https://www.amazon.com/Fabric-Success-Threads-Tapestry-Business-ebook/dp/B0D6GWV7T5
I think there is a phrase describing this often observed phenomena- Clogs to clogs in three generations