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The Ambanis: Anil, Dhirubhai and Mukesh
Dhirajlal Hirachand Ambani (28 December 1932 - 6 July 2002), was instrumental in bringing first time Indian investors to stock market. After working in Gulf as dispatch clerk, he returned to India to start Reliance Commercial Corporation with an investment of Rs.15,000. It was engaged in polyster yarn import.
He started a textile mill at Naroda, Ahmedabad to manufacture textiles using polyester fibre yarn. He implemented backward integration philosophy and a petrochemical complex at Patalganga in Maharashtra was set up to produce polyesters, intermediates and petrochemicals. Reliance established another petrochemical complex at Hazira near Surat in Gujarat to manufacture ethylene, propylene, ethylene glycols, polymers like polypropylene, polyvinyl chloride, polyester intermediates like pure terephthalic acid, polyester filament yarn etc.
His dream project, of course, was a grass root refinery. The 27 million metric ton grassroot refinery at Jamnagar, Gujarat came up in 1999. Reliance has diversified into power, telecom, infrastructure, capital markets, insurance, logistics, retail etc.
At the time of Dhirubhai’s demise, Reliance Group had a gross turnover of Rs. 75,000 crore. This was 1000 times its 1976 – 77 turnover of Rs.70 crore.
Reliance came out with their first IPO in 1977 and Dhirubhai convinced people in rural Gujarat that his company would yield substantial returns to shareholders. This happened at a time when the awareness among public about stock markets was minimum.
Have his sons, Mukesh and Anil, lived up to Dhirubhai’s repuations? The answer is a big YES, as can be seen from the tables below.
Mukesh Ambani Group Companies’ Performance:
| Scrip | 3 month return | 1 year return | 5 year return |
| IPCL | 34 | 50 | 621 |
| RELIANCE | 38 | 104 | 822 |
| RIIL | 140 | 138 | 3,542 |
| RPL | 74 | 150 | NA |
Anil Ambani Group Companies’ Performance:
| Scrip | 3 month return | 1 year return | 5 year return |
| RCOM | 17 | 72 | NA |
| REL | 85 | 137 | 396 |
| RELCAPITAL | 45 | 196 | 3,370 |
| RNRL | 167 | 307 | NA |
For details about close prices on various dates, please click here.
In the last 1 year, IPCL and RCOM have gained more than 50%; All other companies have gained more than 100%. In the last five years (After Dhirubhai’s demise) RELCAPITAL and RIIL have got multiplied by more than 30 times; REL, IPCL and RELIANCE have gained more than 4, 6 and 8 times respectively.
Dhirubhai is no more; but his dreams have become true. Those who had faith in him and his companies have been thoroughly rewarded.
Let us now analyze some of the medium term charts of these companies.
In late 2004, the media reported that there was some dispute among Ambani brothers regarding ownership of group companies. The Hindu Businessline dated November 30, 2004 read:
“THE Ambani controversy was today stoked further with the despatch of another e-mail to the employees of Reliance Industries Limited, this time by the Vice-Chairman, Mr Anil Ambani, obliquely emphasising the brothers' equal status in the corporate group.
… This is the third email to the employees from the Ambani brothers. The first one was from Mr Mukesh Ambani last week, telling his employees that the Chairman and Managing Director (who is himself) is the final authority at Reliance…”
What did this mean to the stock market? See the chart below.
http://groups.google.com/group/theindiastreet/web/RELIANCE_W_150705.jpg
The weekly chart of Reliance indicates that on November 5, 2004 the stock closed at 540.35. On June 10, 2005 it closed at 566.55.
Between November 5, 2004 and December 17. 2004, the Nifty gained 160 points whereas Reliance lost 59.80 rupees, indicating the market was not quite certain about the stock. Reliance is known to perform very much in line with both Sensex and Nifty due to its weightage. But during this period it was not so.
Finally, after the accord was reached between the brothers, the stock managed to break its resistance at 650 during the week ending June 24, 2005. Technically, a “three inside up” bullish candlestick pattern was formed during first week of June. There was a huge upward gap when the resistance was broken.
The Tribune reported on June 19, 2005 about the accord as follows:
“India’s biggest industrial conglomerate, Reliance Industries Limited, will finally be split up between Mukesh Ambani and his younger brother, Anil, thereby ending a seven-month war between the two.
Kokilaben Ambani, their mother and widow of Reliance Industries Limited founder Dhirubhai, announced the broad contours of the settlement in a statement released here today.”
All the companies mentioned above are currently trading at lifetime highs. There have been no reversal signals on any of the medium term charts. But it is better two book profits in RIIL and RNRL, since both have appreciated very sharply in the last one week or so.
Reliance Industrial Infrastructure Limited
(Group: B1, Scrip Code: 523445):
http://groups.google.com/group/theindiastreet/web/RIIL_W_250907.jpg
The stock formed a false “head and shoulder” pattern between January 2006 and March 2007. False, because, the neckline support was not broken; Volumes were increasing as right shoulder was formed. Between May and June 2006, stock had fallen from a high of 951.70 to a low of 357.40. A bullish three inside up candlestick pattern was formed during the week ending September 7, 2007. From a close of 498 it has appreciated to 1149 (131%) in just about 11 trading sessions. It is extremely overbought in daily charts as well. So profit booking may be considered in this counter.
Reliance Natural Resources Limited (Group: B1; Scrip Code: 532709):
http://groups.google.com/group/theindiastreet/web/RNRL_W_250907.jpg
This stock made a high of 41.65 in March 2006. It had broken this resistance during the week ending July 20, 2007. However, in the last six trading sessions the stock has already gained 84%. It is quite an unusual movement since no major price rise was observed for almost 2 months after the breakout. Profit booking may be considered in the stock for the medium term.
As mentioned earlier, we need to wait for a confirmation of trend reversal for these stocks. But short term investors may avoid these stocks due to overbought conditions and a reversal is expected anytime.
Sundaramurthy Vadivelu
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