Ambanis call truce, strike deal

Brothers Reliance

The “new and simple” pact is expected to help resolve the Krishna-Godavari gas supply dispute and bring about better cooperation between the brothers.

It also allows Mukesh to venture into the telecom, power and financial sectors, while the younger sibling, Anil, could now enter oil, gas, retail and petrochemical businesses.
Mukesh’s Reliance Industries Limited (RIL), however, has agreed not to enter into the gas-based power generation till March 2022, except the captive power plants it has in various projects.

“All existing non-compete agreements between the two groups executed in January 2006 stand cancelled,” the Anil Dhirubhai Ambani Group (ADAG) said on Sunday, after the new pact was approved and endorsed by the board of companies of both groups.
The new pact will eliminate any room for any further disputes between the two groups on matters relating to the scope and interpretation of the non-compete obligations, similar statements from both sides said on Sunday. The new agreement comes weeks after the Supreme Court ruled in Mukesh’s favour in a bitter dispute over the supply and pricing of natural gas from the Krishna-Godavari basin.

The dispute before the SC was on the supply of 28 million units of gas a day at $2.34 per unit for 17 years by RIL to Anil’s Reliance Natural Resources Limited (RNRL) for its proposed Dadri plant. The apex court, in its May 7 order, had asked the brothers to reach a new gas pricing pact in tune with government guidelines in six weeks, using the 2006 agreement between them as a “guiding tool.”

In their respective statements, both groups said they hoped to reach a conclusion soon on the gas supply agreement. “RIL and ADAG are hopeful and confident that all these steps will create an overall environment of harmony, cooperation and collaboration between the two groups, thereby further enhancing the overall shareholder value for shareholders of both groups,” the statements said.

According to analysts, the new pact is an attempt to show that the brothers are not going to fight with each other any more and have come to terms with the changed situation. 



“There might be a relief rally in both group’s stocks” in the wake of the pact, as there was more clarity now, they said. However, in terms of cash-flow generation, the RIL is placed much better than the ADAG. “If you weigh the positives and negatives, this is more positive for RIL than ADAG, because the new pact gives RIL an opportunity to look into expansion in other areas, which they were not allowed to do earlier,” said S P Tulsian, an independent investment consultant.

The two brothers inherited their business empires from their father Dhirubhai Ambani in 2005.