Major Reasons Behind The Downfall Of Anil Ambani
Someone has rightly quoted - “Rags to Riches is not a story anyone wants to hear until after it’s done.”
This quote goes the best with whatever the younger sibling of the Ambani family, Anil Ambani is facing. The journey from living a glorious time to the present downfall of Anil Ambani gives us a feel of cinemas.
On one hand where the elder brother, Mukesh Ambani continues to flourish with his business than on the other hand situations seems to be out of control of the younger sibling. Since the Reliance Group was split into 2 equal parts between Anil and Mukesh Ambani after the sudden demise of their father, Anil Ambani has witnessed a journey from riches to rags in the business world.
Plans did not work, the businesses failed, acquisitions did not go as planned. Finally, Anil Ambani is surrounded with several cases and above all the pain of seeing everything he built falling apart The man who was named as the 6th richest person in the world, about 11 years ago, recently claimed in the court that he is not left with any wealth to pay off the loans that he and his company took. But, what really went wrong, is the million-dollar question here!
Read ahead to find the answers!
How Anil Ambani Piled Up A Burden Of Loan
The shares of Anil Ambani’s company has plunged by nearly 90% in recent times. With this, recently he also quoted in a British court that in order to cover the needed expenses he had to even sell some precious personal jewellery. Well, folks, that can give a picture of how bad the situation has become for Anil Ambani that he had to resort to such measures to sustain.
There was a time when the firm owned by Anil Ambani had an impressive market capitalization of around ₹4 lakh crores, but at present, the market capitalization has plunged to around 2000 crores only. Well, that’s a sharp decline.
Back in 2001, it was Kokilaben, the wife of Dhirubhai Ambani who decided to put an end to the rift between the brothers by ordering a split of the entire Reliance business. Where Mukesh Ambani got petrochemical business (the older companies), Anil Ambani got hold of the newer ventures like energy, telecom, financial services etc.
Unfortunately, even with newer business segments, Anil Ambani could not do wonders with time but his elder brother continues to make the best of whatever he got!
During the initial years after the split happened, Anil Ambani started off on a good note having big as well ambitious dreams about the telecom and infrastructure business segments. And, why not? These two business segment did promise good future growth prospects. Back in 2002 when Rcom surfaced the Indian market Reliance Anil Dhirubhai Ambani kicked off with the adoption of CDMA (Code Division Multiple Access). The upper management with Anil Ambani dreamt of creating wonders with this technology, but soon it proved to be a wrong decision!
CDMA or Code Division Multiple Access came with a drawback. The technology was limited until 2G and 3G. Hence, the technology and with that Rcom flourished till 3G was a popular choice. The game turned completely upside down when 4G came to India, Rcom began to struggle in the competitive telecom industry. As a result by 2008, Reliance Communications already had taken loan worth ₹25,000 crores. A total of 66% of Anil Ambani’s wealth was a part of Rcom but he failed to keep his company on tiptoes with as the time passed.
Came the year 2010 and with that Anil Ambani’s problems started to pile up! Despite facing a roadblock in its deal with GTL Infra, he made a wrong decision by making investments several projects like the expansion of 3G and under-sea cable. Someone has rightly said, whatever happens with you is a reflection of the decisions you take! Again in 2017, Reliance Communication failed to accomplish a merger with Aircel.
The Unmaking Of Billionaire
In the year 2018, when 4G became popular among the Indian masses, Anil Ambani suddenly announced to exit the telecom space and with a blink of an eye his company lost around 8 crore customers.
Well, an interesting turn of event was happening at the same time as the elder Ambani! Around the same time, Mukesh Ambani broke all the record by launching his brainchild- Jio. With the launch of Reliance Jio, he made a Bollywood style entry into the telecom space and with that he also made it clear that Jio came to stay!
You would be surprised to know that in the year 2008 when Reliance Power came up with its IPO it ended up collecting a record amount of around ₹11,563 crores. A blockbuster listing was followed by some ambitious goals. One such aim was to start and complete 13 projects of gas, coal and hydropower. Sadly, these projects could really turn into reality and remained just on papers.
The prime roadblock these Reliance power faced in implementing these projects was the availability of gas and reasonable rates. The dreams of Anil Ambani shuttered crashed! As a result, Reliance Power had to sell its major assets and around ₹1.2 lakh crores of investment were stuck in those 13 projects.
The next move that did not work in favour of Anil Ambani was its venture into the defence sector. In the year 2015, Anil Ambani went on to buy Pipavav Defense which was already under the debt of around ₹7,000 crores. The situation turned even worse when Pipavava was dragged to NCLT by IDBI Bank and IFCI due to non-payment of its debt. The impact of all this impacted Anil Ambani’s business on a large scale.
Came the year 2018!
By this time Anil Dhirubhai Ambani Group was under a huge debt of around ₹1.72 lakh crores and Reliance Communication became bankrupt. In FY 2019-20, Rcom could only churn out revenue of ₹1,734 crores. Again it was the year 2018 when Anil Ambani finally announced his exit from the telecom industry in his Annual General Meeting (2008).
Where in 2008, Anil Dhirubhai Ambani Group of companies had a total market capitalization of around ₹4 lakh crores then currently its market capitalization has plunged to around ₹2,000 crores. Now, that is a great fall!
To conclude, it is quite interesting and ironic to see one brother touch all the skies of success and other brother drowning under in the debt river as well as court cases. Lack of innovation and some wrong investment decisions crippled the game of Anil Ambani in the business world.
From here it will interesting see what destiny has in its store for the younger Ambani brother!
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