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November 30, 2000

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Tracing the warp and weft of Ambani's empire

By Arjuna Ranawana

MUCH HAS BEEN WRITTEN about Dhirubhai Ambani. The 66-year-old Indian tycoon is one of Asia's most successful entrepreneurs. The Polyester Prince: The Rise of Dhirubhai Ambani (Allen & Unwin, St Leonards, Australia, 296 pages, $19.70) is a fine addition to that body of work. In telling Ambani's story, journalist Hamish McDonald also lays bare the complex and often corrupt regime in India which he manipulated so brilliantly.

Ambani is sometimes described as three people. One is a larger-than-life industrialist who is an inspiration to his fellow Gujaratis. The second, an amoral schemer. Then there is his image as an "almost Napoleonic" political visionary. McDonald describes all three - without passing judgment.

The tycoon-to-be grew up in northwestern Gujarat state in the village of Chorwad, known as the "settlement of thieves." The son of a petty trader, Ambani cut his eyeteeth as a clerk in a British trading company in Aden. By his 20s, he was making handsome profits on the side. One sterling idea was to buy silver riyal coins and melt them down into ingots. Ambani had noticed that the riyal exchange to the British pound was lower than its worth on the silver market.

In 1957, Ambani returned to India with his wife and an infant son. Armed with about $3,000 in savings, he set up as a trader in polyester yarn. He quickly learned to negotiate his way around India's suffocatingly regulated business regime. Purchasing import licenses was vital, and McDonald supplies choice anecdotes of how Ambani dealt with officials and politicians.

Reliance, the trading company that he first set up, became the flagship of his empire. From trading in polyester fiber, Reliance ventured into weaving it. Its cloth factory in Gujarat was legendary for efficiency, and its Vimal brand became a household word. Reliance grew to become one of the top five companies in India within 10 years. Ambani then made the next logical step: into manufacturing polyester fiber.

By the time it was listed in 1977, Reliance was beginning to look like an equity cult. More than three million Indians bought shares in the company, helping to finance Ambani's move into oil-refining and other business. He ensured that his investors came out on top. Shareholder meetings were held in football stadiums and new issues had the hoopla of a circus coming to town. Reliance stock became so valued that it even formed part of the dowry in some families. Because of the scale of Ambani's operations, McDonald notes, no politician dared to move against him when he bent the rules. Market regulators were also afraid that a slide in Reliance would send local stock exchanges plummeting.

Ambani is widely acknowleged as an influence buyer par excellence. And McDonald shows how. Inveigling his way into prime minister Indira Gandhi's inner circle, Ambani found the power to control yarn prices. Regulations helped keep out the competition and allowed Reliance to grow into the giant it is today.

But problems began to emerge when Rajiv Gandhi took over the premiership following his mother's assassination in 1984. Ambani's political influence was on the wane. At the same time, he became locked in a fierce battle with his business rivals, most notably Nusli Wadia, a textile tycoon and scion of a powerful Parsee family. The tussles got so bitter, the police had to investigate an alleged attempt to assassinate Wadia.

With a hostile Rajiv in power, Reliance registered losses for the first time. Meanwhile, Ambani was fighting off press baron Ramnath Goenka. ExposÚs of his controversial dealings by Goenka's Indian Express horrified many people. Ambani even resorted to buying a Bombay-based newspaper to counter the negative stories. The extent to which Ambani was able to "manipulate patronage," McDonald argues, undermined the validity of India's democracy.

Eventually, Ambani fought his way out of the morass. Rajiv Gandhi, too, came round to his way of thinking. The spur, longtime Bombay journalists like to think, was supposed revelations that the young premier's mother had left Ambani in charge of a huge political slush fund. In any case, by the time the free market came to India, Reliance was so entrenched official patronage was no longer necessary. Indeed, Ambani is the only Indian in Forbes' list of 500 richest people in the world last year. Today Reliance shares are sold worldwide. Ambani's U.S.-educated sons, Anil and Mukesh, effectively run the company now, and they look forward to a new India. But that is another story: this book concludes around the time of the last Congress government.

To close followers of Ambani's career, the material may not be new. But The Polyester Prince presents reams of information in a highly readable fashion. McDonald offers insights into a remarkable character - and rare glimpses into the Indian government's inner dealings with the corporate world.

This edition's table of contents | Asiaweek home



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