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The Rise and Fall Of Anil Ambani– The Little Brother Who Matters A Little Less

Not too long ago, 11 years to be precise, Forbes Magazine listed Anil Ambani as the world’s sixth wealthiest person. Just a few days ago, on February 20, 2019, the Supreme Court said that RCom had disobeyed a ruling to pay $77 million owed to a local supplier and that if Anil Ambani fails to pay that amount within four weeks, he’ll be thrown in prison for three months.

RCom head Anil Ambani

His story shows just how far India has come in cracking down on borrowers who take their own sweet time to pay back what they owe. The richest citizens are no longer safe from the consequences of their irresponsible financial actions. India’s democracy has taken one step further in terms of equality.

There is an old joke on Dalal Street: the evolution of the Indian economy is symbolized by the transition from self-reliance to Reliance. Well, Anil Ambani is no longer a formidable pillar of Reliance. Perhaps he would have fared better had he not fought his brother to take ownership of the telecom business after their father died. Best to leave the hard stuff to big brother, right?

Ever since the brothers split, Anil’s fortunes have fallen. According to Forbes, in 2007 Anil’s net worth was $45 billion and in 2018 it dropped to a mere $2.5 billion. While there is nothing ‘mere’ about such a large sum – most people will never get remotely close to that figure in their lifetimes – it just goes to show that the rich don’t always get richer. If you’re bad with money, you’re going to lose it, no matter how much money your father gave you.

According to a Bloomberg report, the 10-year compounded annual growth rates of Mukesh’s Reliance Industries since the split have been – Sales: 11.2%, Profit: 9.4% and Returns: 17.8%,. The same rates for Anil’s RCom have been 9.4%, -12.6% and -1.7%. Looks like Asia’s richest person (Mukesh Ambani) clearly knows what he is doing.

When Anil Ambani took the reins of the telecom business after the split, he employed a similar strategy, he captured market share by selling telecom services at much cheaper rates than competitors. But the mistake he made was that he took on too much debt when purchasing spectrum. And now all his creditors – with the blessing of the Supreme Court – are armed with pitchforks and demanding that he pay his dues.

There is no doubt that Mukesh’s reentry into the telecom sector reestablished Reliance Group as a major player in the telecom industry in general. Jio’s unprecedented success is a magnet for haters. Rivals have bitterly complained that a succession of regulatory decisions benefited Jio at their expense. Jio’s disruptive strategy of selling 4G at rock bottom prices forced competitors to lower their rates. 

Though the sun is setting fast on Anil Ambani’s empire (although at this point it’s more of a ghost town than an empire), it is not too late to stave off complete disaster. ADAG (Anil Dhirubhai Ambani Group)  is crippled with debt, so Anil must find a way to pay off all his liabilities, and for this reason it would be wise for him to bury the hatchet with big brother. All of Anil’s businesses must be debt-free, or at least have much less debt, in order to survive.

Perhaps it’s good to have big brother watching!

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