Time of answers

The Reliance affair is now two weeks old. Many issues are not clear at this stage of the tussle between the two managing directors of the company, but one thing has certainly become clear.

Mukesh Ambani was off the mark when he declared that the ownership issues that remained to be sorted out were in the private domain. He was also mistaken in confining the issues to those of ownership, for management questions and issues of corporate governance too have come to the fore.

Insofar as these issues involve India’s largest private sector company, they are very much in the public domain. This is not to take sides in what has become a very public spat between two brothers, but to say that the information that has emerged into the public eye raises a variety of questions, and answers need to be provided.

The most obvious point (and one that is perhaps at the heart of the dispute that has arisen) is that questions surround the true ownership of the company, specifically the 34 per cent of Reliance that is held by “persons acting in concert”—in practice a clutch of investment companies that Mukesh Ambani controls.

If his own brother, who happens to be the vice-chairman of the company, asks about the ownership of these companies, then this is a question that needs to be settled, because it is inconceivable that the largest ownership bloc in the country’s largest company should be a mystery to everyone other than the company chairman.

The second ownership question concerns Reliance Infocomm. It is incomprehensible to most observers as to why and how Reliance Industries could provide 90 per cent or more of the investor funding for the telecom venture, and yet end up only as a minority shareholder with no representation on the Infocomm board, other than Mukesh Ambani himself.

That the telecom company’s chief mover, architect and now promoter is also the Reliance Industries chairman, to whom a substantial chunk of shares (12 per cent) were given in the form of sweat equity, raises obvious questions about a conflict of interest.

If the Reliance Industries board of directors was not informed of this, it raises questions about the standards of corporate governance in the company.

For, it is difficult to understand, from what is known so far, why Reliance Industries should not itself have become the sole or predominant equity investor in Infocomm, since for all practical purposes it has been not just the promoter but also the chief financier and (on top of that) the company that has carried on the business on behalf of Infocomm—buying and selling handsets, getting customers and billing them, paying for the advertising—as also providing financial guarantees running into thousands of crores of rupees.

Not enough is known on any of these questions to be able to come to any firm conclusions. But Reliance Industries has so far been niggardly with the information that it has provided on many questions.

Both the company and its chairman should make themselves available to answer the questions that have cropped up, so that issues are resolved to the satisfaction of the company’s millions of shareholders, not to mention stakeholders.

As for the fight between the Ambani brothers, that remains an issue that should be discussed and resolved quickly in the interest of corporate cohesion. Having two warring managing directors on a company board is not recommended in any corporate manual.