Reliance: Bigger, Faster, Better
India's top tycoon hopes to kick
the country's nascent boom into hyperdrive by remaking its stores,
farms and even its biggest cities.
Mukesh Ambani has been India's Mr. Big for a long time. By all accounts,
he is the country's most influential private citizen, and the businessman
who thinks bigger than the rest in this rising economic superpower.
He was all that even before a bitter internal feud led to a split
in his family conglomerate. The breakup, finalized in January, left
Mukesh in control of the larger (and largely petrochemical) share,
Reliance Industries, and that behemoth has seen its fortunes soar
ever since. It is now India's largest private-sector enterprise by
any measure: revenue ($20 billion in 2005), profit ($2 billion), or
share of Indian GDP (3.5 percent). Last week its stock closed up 15
percent since January, making Reliance India's biggest company by
market cap (about $35 billion). Mukesh, who was already the world's
38th richest person before the split, according to Forbes, is now
considerably richer. He says that while most family empires destroy
wealth when they divide, the parting of the Ambanis was a "win-win"
Now, Mr. Big's ambitions are bigger than ever. Since the breakup,
Ambani, 49, has finalized plans to invest more than $11 billion over
the next decade to build two new satellite cities outside creaking,
overcrowded Mumbai and Delhi. He foresees these metropolises emerging
within just four years, each with a population of 5 million people
making $5,000 a year, on average (or seven times India's norm), and
hosting top multinational companies. And that is all pretty simple—a
development on steroids—compared with the idea that really gets Ambani
Ambani's favorite scheme aims to revolutionize in one swoop two of
India's largest but most backward sectors: farming and retail. Despite
boom times, India is still a nation where 100 million mostly small
farmers work with ox and plow, where 96 percent of retail stores are
mom-and-pop shops and most of the roads between farm and store are
mud tracks. Ambani plans to invest $5 billion by 2011 to put both
the farms and the stores on the road to modernity, connect them through
a distribution system guided by the latest logistics technology, and
create enough of a surplus to generate $20 billion in agricultural
In China, these plans would be hatched by the Communist Party. In
India, the government is neither visionary nor efficient enough. But
Mukesh Ambani is both. "This new business model excites me the most,"
said Ambani, wearing a white polyester-blend, safari-style shirt and
dark blue slacks, in an exclusive interview in his Mumbai office recently.
Ambani is in many ways the enthusiastic extreme in a booming India,
which has seen an explosion of entrepreneurial energy every time it
opens a new industry to competition. The Reliance conglomerate got
its start as a family textile business in 1966, and has grown in spurts,
often triggered when the government released its grip on one sector
or another. Mukesh Ambani's new cities were born, for example, from
a recent reversal in the attitude of both state and federal governments,
which are now willing to give private businessmen control over huge
projects. "Can you imagine the change in mind-set?" he says. "The
government is ceding its powers."
Reliance has always had a complex relationship with the government.
In a sea of family monopolies, it was a genuine start-up. Yet it quickly
acquired deep and sometimes murky connections with politicians, who
have often helped Reliance along the way. Mukesh retains the extraordinary
clout of his late father, Dhirubhai, the company's founder. But many
who have dealt with him say he has also created a company that succeeds
based on merit, not political good will. In that sense India's complex
and controlled reform process has been perfect for market-savvy insiders
Ambani is not the only major Indian entrepreneur who sees India's
farmers as an army of opportunity, either. Others are investing heavily
in fruit and vegetable exports to Europe, information services for
farmers, and consumer credit in the countryside. What unites them
is both pursuit of profit, and a perhaps uniquely Indian mission to
spread the wealth, which is arguably becoming a business necessity
in a democracy whose growing income gap could prove explosive, particularly
for the superrich. What distinguishes Ambani is the sweep of his plans,
and a track record for making big projects happen. "His genius, his
strength, is that he's enormously good at executing large projects,"
says Nandan Nilekani, the CEO of Infosys, India's huge IT company.
"He is able to assemble large numbers of people, the project-management
skills, the capital and then execute."
Ambani wants to build a chain of both small and supersize stores across
India, creating 1 million jobs and reaching $25 billion in annual
sales, all by 2011. If his plan succeeds, he says, consumers will
get fresher food at lower prices, rural incomes will soar, farmers
will become active consumers, and Reliance will become "a WalMart
in India." The agricultural export boom will bring India's farmers
into the global economy, as IT has done for its college grads. "We
are rebalancing the world," says Ambani. "We are in fact lucky to
be at the right place at the right time, contributing to our self-confidence
as Indians. That's what energizes me." It's a vision in which everyone
wins, which helps explain the silence of any doubters.
They were not so silent earlier. Mukesh Ambani got his start implementing
his father's dreams. In 1980 Dhirubhai summoned Mukesh back from his
M.B.A. studies at Stanford to begin a risky attempt at "backward integration"
of its textile mills. The plan was to move from sewing clothes to
creating the fabric, and eventually refining and pumping the oil from
which synthetic fabrics are made.
At almost every step, naysayers would dismiss Ambani's plans as too
grand for the Indian market. Mukesh first took charge of building
a polyester plant at Patalganga, with an annual capacity of 10,000
tons at a time when India's demand was only 6,000 tons, and got it
done in just 18 months. After Dhirubhai was hobbled by a stroke in
1986, Mukesh became a more nearly equal partner and was once again
manager-in-chief when Reliance built a petrochemical plant to feed
the Patalganga complex. "The son learned at his father's feet how
to think big," says Vallabh Bhanshali, a Mumbai investment banker.
By 1996, the Ambanis were launching the next step in their grand plan:
an oil refinery. Mukesh lived in a shipping container at the arid
site in Jamnagar, 850 kilometers northwest of Mumbai on the Gulf of
Kutch, while managing a work force of 80,000 and shuttling back to
Mumbai in a small plane to consult with his invalid father and answer
the critics, who kept asking: "What does Reliance know about refining?"
The Jamnagar project would set the pattern of sharp attention to detail,
executed at breakneck speed, for which Ambani is now famous. He and
his experts looked at 2,400 configurations for the refinery, sweated
over every detail, yet finished in just three years. Jamnagar is now
the world's third-largest refinery, and can turn crude into gas for
cars or aviation fuel for $2 or $3 less per barrel than its closest
Asian rival, a plant in Singapore. "We wanted and got an elephant
that could dance to the tune of any market," says Hital Meswani, a
long-time family friend who heads the refining operation.
Soon after the plant came online in 2000, India not only stopped importing
refined oil products, it started exporting enough to more than pay
for its crude-oil imports, becoming a net energy exporter for the
first time. While other nations like Angola and Turkmenistan have
achieved a similar turnaround, they did it by simply exploiting existing
oil reserves—not by creating an industry from nothing, as Ambani did
Soon, Ambani plans to break ground on a $6 billion expansion that
will make Jamnagar the world's largest refinery, capable of processing
more than 60 million tons of crude oil annually. Meanwhile, he has
completed the "backward integration" of Reliance through an oil and
gas exploration company that has hit a potentially huge natural gas
reserve off the east coast of India, and is now spending $1 billion
annually to pursue sites too remote for major oil companies, including
three in Iraqi Kurdistan. "Mukesh wants to take risks," says P.M.S.
Prasad, president of the search company, Reliance Petroleum.
Dhirubhai did not live to see this moment. He died in 2002, setting
off a power struggle between Mukesh and his younger, more flamboyant
brother, Anil, 47, that became a tabloid sensation and prompted speculation
that Reliance itself might not survive. Mukesh pushed ahead during
this period, taking advantage of the deregulation of the telecom sector
to launch Reliance Infocomm in 2003, which quickly became the third-largest
telecom in India. Mukesh felt a special attachment to Infocomm because
it realized another dream of his father's—cutting the price of a phone
call down to a penny a minute in India.
A year ago, with Reliance stock faltering, the matriarch of the Ambani
clan stepped in to resolve the feud by dividing the conglomerate in
two: the majority share ended up in Mukesh's hands, but Anil got Reliance
Infocomm as well as Reliance Energy (electric power) and Reliance
Capital (finance). "We are not crying about the three sectors we lost,"
says Anand Jain, Ambani's friend from their grammar-school days and
head of Reliance's new cities project. Jain points out that within
one month of the settlement Mukesh was rolling out three new projects,
including the new cities, the farm-to-retail plan, and a related plan
to foment "a second green revolution" in biofuels.
The Indian market is smiling on all of Mukesh's schemes. The three
companies under his control have more than $22 billion in annual revenue,
but 90 percent of that comes from Reliance Industries, which is entirely
in petrochemicals. No doubt high oil prices have helped push up Reliance's
stock price in recent months, says Ambarish Baliga, a vice president
at Karvy Stock Broking in Mumbai. "But Reliance's strength is Mukesh"
and the consensus view is that Reliance Industries will thrive even
if oil prices fall because retail is "the main story going forward."
The question that some Indian businessmen ask, in private, is whether
Ambani can really translate the model he used to build refineries
so successfully to all his new projects. While Reliance touts its
new business teams as top-flight, many old family friends remain in
the upper ranks.
They are, however, as meticulous as ever. The farm-to-retail team
is researching every step of the plan, from vegetable growing to hypermarket
versus mom-and-pop retailing. The good news is that the backwardness
of Indian farming conceals competitive advantages—for example, India
has more arable land than any other country, and spans climate zones
ranging from alpine to tropical that can grow any cash crop. The bad
news, says Ambani, is that "the whole supply chain is totally disorganized."
Because of a lack of storage, refrigeration and transportation, some
40 percent of India's fruit and vegetables spoils before reaching
To transform Indian farmers into quality suppliers for his new retail
chain, Ambani plans to create 1,600 farm-supply hubs across India,
providing technical know-how and credit, selling seeds, fertilizer
and fuel, and buying produce. He also plans to build some 85 logistics
centers to move food to retail outlets and to ports and airports for
export. Reliance is gearing up to train tens of thousands of new employees
in the next six to eight months to do everything from erecting prefab
warehouses to transporting fresh produce. Even Reliance's admirers
note that with little experience in farming or retail, Ambani is taking
his biggest risks yet. "There will be mistakes," Ambani admits. "But
we are not scared. We will correct our mistakes fast and move on."
In a sense, Ambani's basic bet is on the future of the Indian market
and its 1 billion consumers. This is virgin territory, in which the
96 percent share held by 12 million family-run shops is high even
compared with China (80 percent) or Thailand (60 percent). That makes
it a relatively easy market to conquer. In the past two years Reliance
has built 1,250 modern service stations, and already has 15 percent
of the retail gas market, with plans to double the number of Reliance
stations by December. Mukesh predicts consumer sales will surpass
refining as Reliance Industries' main source of revenue within seven
Ambani thinks he can beat the likes of Wal-Mart on his home turf based
in part on local knowledge: for example, Reliance executives understand
that small retailers are a powerful lobby, particularly on the local
level, and could easily trip up a giant. So Ambani is moving first
to incorporate small stores into his chain, starting with a trial
partnership with the Sahakari Bhandar chain of 19 supermarkets in
Mumbai. In just two months, Reliance has renovated, computerized and
stocked these stores, with dramatic results: average store revenue
and customer traffic have tripled. In a second stage, Ambani plans
to build new superstores, starting on the outskirts of the 784 Indian
towns with populations greater than 50,000 before expanding into the
ten largest cities, where property prices and congestion make superstores
Ambani's farm, retail and energy visions merge at his Life Sciences
Center in Mumbai, which is pursuing his "second green revolution."
Founded in 2002, its research includes experiments in growing biofuels
from the jatropha plant and cellulose on a commercial scale. "If you
can crack the cellulose code just like the Da Vinci code, cellulose
and jatropha could give us two agro-routes to a world without gasoline,"
he says. About half of Indian homes have no electricity, and Ambani
says big companies have no workable plan to bring it to them (an indirect
slap at Anil's Reliance Energy). His answer is to go "wireless." He
now has teams setting up experimental biomass generators in remote
villages, and envisions a day when thousands of villages have these
generators—sold and serviced by Reliance's rural retail network.
It could happen, as many obstacles seem to be melting in Ambani's
path. Last year Parliament passed a law creating Special Economic
Zones, which grant developers authority to plan new projects with
more freedom than even China allows in its own bustling SEZs, on which
Ambani's new cities are modeled. Reliance has all but secured 150
square kilometers of largely farm land east of Mumbai, at prices Jain
estimates at 1/1000th those in downtown Mumbai. The government holds
some equity in the projects, but as a largely "silent" partner, and
has already approved Reliance's detailed plans for both new cities,
says Ambani. "If you would have asked me five years ago if a project
like this was possible I would have said no."
Reliance's first move will be to set up roads, rapid transit, power
and water supply, telecom and rail links. In cooperation with the
government it plans to build a 20-kilometer bridge across the bay
linking old and new Mumbai, and a new seaport. Another private firm
is building a new airport nearby. There will be a one-stop licensing
agency, jointly run by Reliance and the government, to cut through
India's infamous red tape. "Every serious investor in the world is
approaching us to get in," boasts Jain, and Reliance has already secured
$2 billion. Ambani expects that the cities will each pump $25 billion
into the national economy every year. With groundbreaking due to begin
later this year, Reliance aims to finish New Mumbai and Delhi by 2010
or sooner. "If anyone can do it Reliance can," says Sanjay Nayar,
the CEO of Citigroup in India. After all, the bigger and faster, the
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