Welcome truce

The truce between the two Ambani brothers, Mukesh and Anil, made public last Sunday was a consequence of the supreme court judgement which invalidated the gas-sharing arrangement that was part of their 2006 agreement on the division of family assets. With the court directing them to re-negotiate the terms, they did not have many options other than rewriting the entire agreement. The result can turn out to be beneficial for the brothers, the companies, their share-holders and the country. Both groups have grown after they were carved out of the original Reliance empire, though Mukesh has done better. But they would have done still better if they had not tried to undercut each other.

The new agreement has removed the non-compete clause from the 2006 agreement and this gives them the freedom to compete with each other in all areas. The only exception is that Mukesh Ambani cannot enter gas-based power generation business till 2022. The bar on entry into each other’s business had actually constrained both companies and increased the bad blood. Mukesh had invoked the right of first refusal to scuttle Anil-owned Reliance Communication’s plan for an alliance with the South African company MTN. Under the new agreement Mukesh’s Reliance can enter areas like telecom and financial services which were no-go for it till now, and Anil’s ADAG can venture into petrochemicals, oil and gas exploration and refining. Both can bring in new investors in their own businesses and undertake expansion plans. As the joint statement has claimed, this will increase the operational and financial flexibility of both groups. Free and healthy competition is better than spite and destructive rivalry.

All the details of the agreement have not been made public. The shareholders of the companies of both the groups have welcomed the agreement, as seen by the immediate market response. The country will also stand to gain from the well-being of the groups, whose companies together contribute more than 6 per cent of the national GDP. There are doubts about the sustainability of the truce, given the history of confrontation and feud between the two brothers. However, experience should teach them that wisdom lies in mutual respect and collaboration. The country also expects good sense and responsible conduct from the captains of its two biggest business houses.

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