BOMBAY - Two brothers at the helm of India's largest private conglomerate, Reliance, have settled a long-running dispute that has transfixed the country, carving up their father's legacy in a deal announced by their mother.
The Ambani brothers will split the management of a business empire built by their father, just three years after his death, dividing control of a group with a vast shareholder base and revenues equivalent to more than 3 percent of India's economy.
The deal between Anil and Mukesh Ambani followed months of acrimony that hogged the headlines. It was announced on Saturday by their homemaker mother Kokilaben, who was approached for help by the business-school-educated duo after their ownership and management row became public seven months ago.
It formalises a parting of ways for two of India's best-known business leaders, whose personalities are as distinct as Reliance's myriad interests.
Kokilaben Ambani said in a statement that elder son Mukesh would run flagship Reliance Industries Ltd., with interests in petrochemicals, oil and gas exploration, refining and textiles, and Indian Petrochemicals Corp. Ltd..
Anil will be responsible for utility Reliance Energy Ltd., financial services company Reliance Capital Ltd. and Reliance Infocomm, a leading mobile phone operator that his brother has run since its launch in 2002.
A Reliance Industries statement said the board had authorised a committee to suggest a suitable scheme of reorganisation.
Anil Ambani told reporters late on Saturday that he wished his brother all the best for the future and was confident Reliance Industries would scale greater heights under his leadership.
"This is a new beginning for me. In the days and years ahead I am committed to creating value and adhering to the highest standards of governance," he said.
Mukesh has yet to make a formal comment.
"All focus was so far on the issue of control," said Devesh Kumar, head of equities at ICICI Securities. "Now they should be able to focus on the future of the companies."
But corporate lawyer H.P. Ranina said dividing the assets of the group, with $23 billion in revenue, would be a minefield of taxation and valuation issues.
POLITICAL JET SET
Reliance has had links with leading politicians, cutting across party lines. Just this week, a political row broke out following reports the ruling Congress party's president, Sonia Gandhi, had chartered a Reliance-owned jet to fly to Russia.
The group, founded in 1958 as a commodity trader, is credited with nurturing India's capital markets when Reliance Industries floated in 1977, and it now has more than 3 million shareholders.
"For all of them, this is good news," Prem Gupta, India's company affairs minister, said on television.
The broader stock market will be pleased to see an end to the dispute. Reliance Industries is the second-biggest constituent, and resolving it required the help of powerful corporate players.
Top investment banker Nimesh Kampani was called in to value the group and the settlement was mediated by K.V. Kamath, head of India's largest private-sector bank, ICICI Bank Ltd..
"The uncertainty has been sorted out amicably without litigation," said Abhay Aima, head of equities at HDFC Bank, adding that it should unlock value for shareholders.
Reliance Industries shares have gained more than 12 percent this month in anticipation of the settlement, and closed near an all-time high on Friday at 600.85 rupees.
Trading Strategies: How to play Reliance now
How must investors play Reliance group shares - Reliance Industries, Reliance Energy and Reliance Capital? Must they follow the tried and tested rule of selling at news, or should they accumulate, hoping for better valuations in the future? Moneycontrol surveyed analysts and brokers for their tips.
Reliance Industries
Techical Analyst Rajat Bose - Reliance Industries is looking quite positive. I am bullish on these stocks. It looks like Reliance is going to move up even further. The immediate resistance will be at Rs 600 and going forward I have a feeling that after that it will be Rs 620. But medium term looks pretty good for Reliance. In the short term Rs 600 is the immediate target and above that Rs 605-613-620 are its resistance level. The counter will trade above Rs 700 levels.
Technical Analyst E Mathew - In Reliance Industries there has been a break out above the 200-day moving average. The 200-day moving average was at Rs 563 and the stocks went up above Rs 563 with very good volumes and sustained above that. It was a clear signal that it was finally coming out of the immediate down trend. There is resistance now at Rs 605 in the short-term.
Technical Analyst Salil Sharma - In Reliance Industries one strong support is at Rs 582 and the other at Rs 577. If Rs 577 holds in any correction, which might happen tomorrow, then it is headed upwards. Next major resistance is around Rs 600 which is more of a psychological resistance, but the technical resistance is around Rs 610. If that is broken on the upside then we are headed towards Rs 640 in a months time. On the downside after Rs 575 the next support is at Rs 564.
Reliance Energy
Bose - Reliance energy has Rs 600 as its target, which it almost touched today. Once it crosses Rs 600, then you can look forward to Reliance Energy going up to Rs 630. The counter will trade above Rs 700 levels.
Mathew - The entire power sector is looking very bullish. Reliance Energy is also looking pretty bullish. It has very strong support at Rs 571-572. Minor resistance is at Rs 588 and once that is crossed the stocks will get into a very strong up trend. Investors should hold on to Reliance Energy and Reliance Industries for the long term. I am bullish on the group.
Sharma - Reliance Energy is also looking good. As long it stays above Rs 578, that is a major support and if that is broken then the next support is around Rs 553. On the upside the resistance first is at Rs 605 and then around Rs 645.
Reliance Capital
Bose - Reliance Capital is already on an uptrend. Amongst the three the maximum technical strength is in Reliance Capital. But since the move has been so sharp in it, there could be a mid code correction. The movement in Reliance Energy and Reliance Industries is much more solid. They are moving up, consolidating and the then moving up further. But movement in Reliance Capital is sharp. The technical formation suggests that Reliance Capital might be on its way to Rs 300 plus levels, which is its medium term target.
Sharma - Reliance Capital is the most positive amongst all of them. It is the only Reliance group share which is making new highs, whereas the other two are recouping the losses that they have made earlier. In two months time it should be around Rs 290-300 and on the downside the support is around Rs 215.
