Wednesday18 March 2020 ★ FINANCIAL TIMES 9

F T B I G R E A D. INDIA

Once one of the richest people in the world, Anil Ambani is part of a generation of industrialists who

rode a wave of economic growthand easy credit. But he claims his net worth is now zero.

By Benjamin Parkin

floors of SeaWind, an apartment build-

ing with a roof-top helipad into which

his father Dhirubhai moved the family

inthelate1980s.

MrAmbani’slawyerstoldthecourthe

does not own the building but is allowed

to live there rent-free. He said the yacht

was purchased for $20m instead of the

$56m price suggested by the banks,

denied it was a gift and said it is owned

by a company whose value is already

factored in to Reliance Innoventures’

negativenetvalue.

The banks accuse Mr Ambani of mov-

ing assets beyond their reach, pointing

to a decision to sell a stake in a London

Stock Exchange-listed company as the

HighCourtproceedingscontinued.

In court filings they also cited PwC’s

decision to resign in June 2019 as audi-

tor of Reliance Capital, one of the group

companies. In its resignation letter, PwC

said it had not received a satisfactory

response from the company when it

flaggedcertainallegedlyirregulartrans-

actions. The banks alleged in their fil-

ingsthatPwC’sdecisiontoresign“onthe

grounds of concerns about improper

diversion of funds” serves “to cast fur-

ther doubt on the reliability of the pic-

turepresented”byMrAmbani.

But Mr Ambani’s lawyers told the

courtthattheUKstakewassoldtocover

other debt obligations, adding that the

banks’ case contains “errors and misap-

prehensions”.

Reliance Capital has denied the sug-

gestion that consultants PwC uncovered

evidence of impropriety, sayingPwC’s

observations were “completely baseless

and unjustified... There is no question

of‘diversion’.”

Mounting pressures

Indian prime minister Narendra Modi

has sought to put an end to the era of

crony capitalism that he said flourished

under his predecessors, giving authori-

ties and creditors broader powers to

pursueindebtedpromoters.

But the prime minister hascultivated

close tieswith industrialists including

Mr Ambani. The pair were at the centre

of an international outcry over allega-

tions levelled by India’s opposition Con-

gress party, and repeated by former

French president François Hollande in

2018, that the Indian government

helpedMr Ambani’s defence business

secure a dealto build fighter jets with

France’sDassault.

Mr Ambani criticised “the complete

falsity of the wild, baseless and politi-

cally motivated allegations levelled

against Reliance Group and me person-

ally”. The government and Dassault

havealsodeniedwrongdoing.

Pressure on Mr Ambani has nonethe-

less mounted as his fortune plunged. He

faced three months in jail last year after

India’s Supreme Court found him guilty

ofcontemptofcourtfordelayinga$77m

paymenttoRComcreditorEricsson,the

Swedishtelecomsgroup.

That payment wasultimately made

by Mukesh, prompting speculation that

the two brothers had put their disputes

behind them. Anil at the time expressed

his “sincere and heartfelt thanks” to his

elder brother, though he has since

denied that it was anything more than a

corporate transaction between the two

conglomerates.

The 2016 bankruptcy code, India’s

first, aims to wrest control of companies

from industrialists if they are unable to

repay debts. But the system has none-

theless been beset by delays and messy

legal battles have limited recoveries.

Whileonpapercasesshouldberesolved

in under a year, many have dragged out

farlonger.

“The big challenge that we as a nation

are currently grappling with is to get

these assets back on stream, make them

productive again,” says Ananda Bhou-

mik, managing director of India Ratings

andResearch.“It’saworkinprogress.”

RCom will be the bankruptcy code’s

next big test.This month RCom’s credi-

torsapproved a resolution plan that

would clear the way for Mukesh’s Reli-

ance Jio to buy its core mobile assets for

Rs47bn ($636m), people familiar with

the matter said, with another investor

buying remaining assets including spec-

trumandrealestate.

If approved by an Indian court, it

could help the Chinese banks recover a

chunk of the dues they are currently

pursuinginLondon.

Yet Abizer Diwanji, India financial

services head at EY, says lenders still

face an uphill struggle in their efforts to

pursue the Indian tycoons they once

bankrolled. Enforcing personal guaran-

tees, for one, “is unprecedented”, he

says.“We’renotthereyet.”

I

n March 2013, Bollywood was

abuzz asSteven Spielbergcame to

town. At a glitzy gala to celebrate

his visit to Mumbai, the world’s

most famous film-maker mingled

with a star-studded crowd and chatted

on stage with legendary Indian actor

AmitabhBachchan.

Seatedatatablealongsidethetwowas

the party’s host, the man who made the

visit possible: Mr Spielberg’s business

partner and “dear friend”Anil Ambani,

thenoneoftheworld’srichestmen.

The event cemented the reputation of

Mr Ambani, the younger son of a corpo-

rate dynasty, as one of 21st-century

India’s most glamorous tycoons. His

foray intoentertainment, including a

tie-up with Mr Spielberg’s Dream-

Works, added flamboyance to a busi-

nessempirecentredontelecommunica-

tions, power and finance. In 2008

ForbesnamedMrAmbaniastheworld’s

sixth-richest man, with a fortune of

morethan$40bn.

YetMrAmbanihassinceenduredone

of the most stunningreversals of for-

tunein recent corporate history. The

extent of this decline has now been laid

bare through a legal case in London

which reaches a crucial stage this week,

asatrioofChinesebankspursuehimfor

some $700m in unpaid loans they allege

hepersonallyguaranteed.

The case prompted Mr Ambani to

make the extraordinary claim last

month that his net worth had plum-

meted to zero after many of his invest-

ments soured and his flagship telecoms

business, Reliance Communications, or

RCom,wentbankrupt.

But his creditors —Industrial and

Commercial Bank of China, the world’s

largest bank by assets,China Develop-

ment BankandExport-Import Bank of

China— allege that Mr Ambani, whose

older brother Mukeshis now India’s

richest person, continues to enjoy

access to vast wealth. Not only does this

include interests in companies around

the world, they say, but an apartment

building in exclusive south Mumbai, a

private jet, a yacht worth tens of mil-

lionsofdollarsanda$3mfleetofcars.

A judge has given Mr Ambani, who

denies that he personally guaranteed

the loans, until March 20 to pay $100m

into court ahead of a trial. If a payment

is not made, Mr Ambani’s defence can

bestruckout.

“Mr Ambani has, and continues to

have, a very lavish lifestyle,” Mr Justice

Waksman said in a February judgment.

“Ijust do not accept that his own availa-

ble assets are as limited or as negative as

he says... He clearly has more assets

and/or income than he is letting on.” Mr

Ambani is appealing the order, saying

the assets in question are not owned by

himandhehasnofundsathisdisposal.

Mr Ambani is among the most high

profile of a generation of Indian tycoons

who rode a wave of booming economic

growth, tapping easy credit to fuelinfra-

structure-heavyconglomerates.

But asIndia’s economyslowed, many

of those bets soured. That has left the

banks and other lenders that financed

theindustrialists, who areknown locally

as“promoters”,strugglingtorecoupbil-

lionsofdollarsinunpaiddebts.

The dangers of this cycle became

apparent this month when private

Indian lender Yes Bank, which had

exposure to Mr Ambani’s companies,

wastakenoverbythecentralbankamid

fearsthatitwouldnotsurvive—sending

shockwaves through the financial sys-

tem. Reliance Group said it is commit-

tedtorepayingitsdebtstoYesBank.

The perceived lack of accountability

for the industrialists who sit atop these

crumbling groups has fuelled resent-

mentatatimewhenIndiaissufferingits

mostsevereslowdowninyears.

“This is a very open secret that in

India, the business goes bankrupt but

the businessmen never go bankrupt.

Their lifestyles never get affected,” says

a former Indian financial executive. “In

a good year, it goes unnoticed. Because

the economy is in a downturn... they

arebeingpushedintoacorner.”

Brothers at war

Mr Ambani spent some of his early

years in tenement housing in an unre-

markable Mumbai neighbourhood. His

Anil told shareholders in 2009 that

Reliance Industries “has tried every

trick in the book, and apparently sev-

eral outside the book, to back out of its

solemn, legal and contractual obliga-

tions. It is plain and simple corporate

greed.” Reliance Industries declined to

comment.

But their paths followeddifferent tra-

jectories. Anil’s investments in power

andinfrastructuresuffered,whileRCom

lost market share to rivals before being

hammered by a newcomer to the sector:

noneotherthanhiselderbrother.

Mukesh’s new mobile operator Reli-

ance Jio, backed with tens of billions of

dollars in investment, started a price

war in 2016 that eroded revenues to a

point where the number of private pro-

viders fell from around a dozen to three

today. RCom quit the mobile sector in

2017, entering bankruptcy proceedings

withabout$7bnindebtslastyearaftera

deal to sell its assets to Jio fell through.

Forbes named Mukesh as India’s richest

manwithanetworthof$50bnin2019.

By contrast, Anil’s lawyers told the

High Court in February that Reliance

Innoventures, the holding company

owned by him and his family, had a net

asset value of negative $412m at the end

of2019.

“These stories are a combination of

hubris and misfortune,” says Saurabh

Mukherjea, founder of Marcellus

Investment Managers in Mumbai.

“India was a red-hot roaring economy,

andit’snolongerared-hotroaringecon-

omy. As the tide has receded these

promotershavebeenleftstranded.”

Pursuing the debt

As China Inc traversed the globe in

search of returns over the past decade,

India’s nascent mobile sector seemed a

promisingplacetopark.

By loaning money to telecommunica-

tions tycoons, China’s state banks could

help fund the purchase of equipment

from the likes of Huawei and ZTE, aid-

ing national champions while simulta-

neouslytappingthecreditmarket.

Against this backdrop, ICBC, CDB and

Exim in 2012 agreed to loan RCom

almost $1bn. With foreign currency

debt obligations due in March of 2012,

Anil Ambani dispatched a senior RCom

executive to Hong Kong in February on

his behalf to sign off on the deal with the

Chinese banks. The banks allege the

deal included a personal guarantee

making Mr Ambani responsible for the

debtunderEnglishlaw.

RCom had by 2018 defaulted on the

repayments, prompting the banks to

sue Mr Ambani in an English court last

year. But Mr Ambani says he had no

knowledge that, when he gave his lieu-

tenant power of attorney to sign on his

behalf, it would be used for anything

more than a non-binding “comfort let-

ter” assuring the banks that the debt

wouldberepaid.

Citing correspondence placed before

the court detailing the negotiations, Mr

Ambani’s lawyers argue there is no evi-

dence that Mr Ambani ever authorised

anyonetomakeaguarantee.

Justice Waksman was critical in his

assessment of Mr Ambani’s defence,

observing that it would amount to “seri-

ous dishonesty” and deception by his

executiveswithoutanobviousmotive.

“I consider that Mr Ambani’s evi-

dence is inexplicably incomplete,

implausible and highly unlikely,” the

judgesaidinaDecemberruling.“Ithink

it is highly probable that at trial his

defence will be shown to be opportunis-

ticandfalse.”

The judge also said in February Mr

Ambani had been “caught out on a lie”

for suggesting he would not give a per-

sonal guarantee of such nature, after it

was revealed in court filings that he had

alreadydonesotoStateBankofIndia.

Reliance Group did not respond to a

requestforcommentonthejudge’sview

that Mr Ambani lied. The company said

in December that “Mr Ambani is confi-

dentthathispositionwouldbefullyvin-

dicated once all the facts and the entire

evidenceisbeforethecourt.”

The Chinese banks called the case “a

straightforward debt claim to recover

outstanding loans made to RCom in

good faith and secured by a binding per-

sonal guarantee given by Mr Ambani,

which he has refused to honour. We

remainveryconfident.”

The banks’ lawyers alleged in court

filings from February that Mr Ambani is

not being transparent about his wealth,

callinghispleasofpoverty“ayetfurther

opportunistic attempt to evade his

financialobligations”.

They point, for example, to the yacht

reportedly bought as a gift for his wife

Tina, a former Bollywood star. Mr

Ambanialsocontinuestoliveacrosstwo

late father Dhirubhai Ambani was one

of 20th-century India’s most celebrated

rags-to-riches success stories, rising

from petrol-pump attendant to lead a

polyestermanufacturingempire.

Mukesh and Anil first burst into pub-

lic view in 2002 after Dhirubhai died

withoutleavingawill,settingupayears-

long dispute between the two brothers

that drew comparisons with Bollywood

family dramas and even the Sanskrit

epicThe Mahabharata, in which two

branchesofafamilygotowar.

The brothers divided their father’s

businesses in 2005. While Mukesh took

theoilproductsbusinessundertheReli-

ance Industries brand, Anil wrapped

telecommunications and power into his

RelianceGroup.

The spat continued, with Anil accus-

ing Mukesh of reneging on a gas-supply

deal and, separately in 2008, suing his

brother for alleged defamation. In the

sameyear,Mukeshusedhisfirstrightof

refusal under the terms of the divorce to

scupper a deal that would have seen

Anil’s RCom merge with South African

MTN to create a transcontinental

mobilephonegiant.

‘India is no longer a

red-hot roaring economy.

As the tide has receded

these “promoters” have

been left stranded’

‘This is a very open

secret that in India the

business goes bankrupt

but the businessmen

never go bankrupt’

Anil Ambani.

His RCom quit

the mobile

sector in 2017

after intense

competition

from Reliance

Jio, his brother’s

operation.

Below: the

brothers at their

father’s 2002

funeral. Bottom:

the upscale

southern

Mumbai district

close to where

Ambani lives

ShaileshAndrade/Reuters

The rapid decline of an Indian tycoon

-$412m

Net asset value of

the holding company

owned by Anil

Ambani at the end of

2019, according to a

statement to

London’s High Court

$7bn

Estimated debt

when RCom quit the

mobile sector in 2017

and entered

bankruptcy

proceedings

$50bn

Elder brother

Mukesh’s 2019 net

worth, making him

India’s richest man

MARCH 18 2020 Section:Features Time: 17/3/2020-18:29 User:alistair.hayes Page Name:BIG PAGE, Part,Page,Edition:USA, 9 , 1