Indian billionaire Anil Ambani has spent years fending off creditors and suing critics of his debt-saddled business empire. But his moment of reckoning may have arrived, as he races to pay debts or face a possible jail sentence.
On Feb. 20, India’s Supreme Court said that the Reliance Group’s phone unit had disobeyed a ruling to pay about $77 million owed to the local subsidiary of supplier Ericsson AB, adding that the tycoon will personally face three months of jail unless the payments are made within four weeks. Ambani’s group said it will comply with the order and make the payments within the required time.
It’s an extraordinary fall for a man listed by Forbes magazine in 2008 as the world’s sixth-wealthiest person. The court’s decision comes after a tough year for Ambani, as parts of his empire saw losses and competition in India’s telecommunications market became increasingly brutal. His story also offers insights into how far India has come in cracking down on overdue borrowers and curbing the financial impunity of its richest citizens.
“He has reached the final weeks of the battle,” said Arun Kejriwal, director at KRIS, a Mumbai-based investment advisory firm. Ambani can fight with Ericsson and other creditors but can’t do that with the nation’s top court, he said.
Anil Ambani took ownership of the telecom business after battling his older brother, Mukesh, in a high-profile dispute over control of the sprawling conglomerate built by their father, who died in 2002 without a will. Prior to the patriarch’s death, the Ambani brothers served as executives at their father’s company. Three years after their father’s passing, the dispute was settled by splitting the empire into two, vaulting both Ambanis among the ranks of India’s wealthiest businessmen.
The founder’s death left the sons in charge of the massive family business just as India was about to enter a growth spurt powered by a newly upwardly mobile middle class. Even as Anil’s star has faded, his older brother Mukesh has gone on to become Asia’s richest man. Representatives for both brothers didn’t comment.
Bloomberg News is currently defending litigation brought by Anil Ambani, 59, and Reliance Communications Ltd. in connection with previous Bloomberg reporting.
Here’s a look at how the sibling rivalry at the Ambani family, troubles at the telecom business and India’s tougher stance on credit, contributed to the decline in Anil’s fortunes.
Fortune Divided
When the family feud was settled in 2005, Mukesh got control of the flagship oil-refining and petrochemicals business. Anil, meanwhile, got the newer businesses such as power generation, financial services and a telecom business, which was seen as a prime growth prospect.
From there, Anil’s companies borrowed heavily to diversify and build a credible conglomerate that could generate the kind of revenue enjoyed by Mukesh’s refining firm Reliance Industries Ltd.
Telecom Headwinds
A non-compete clause between the brothers kept Mukesh out of telecoms until the agreement was scrapped in 2010. The elder brother’s return to telecom resulted in the creation of Reliance Jio Infocomm Ltd., which built a nationwide 4G wireless network.
At the same time, the younger Ambani brother was facing intensifying competition in the fast-growing wireless-phone business. As carriers fed off each other’s subscribers, Reliance Communications raised borrowings to keep up. Still, the carrier lost its rank as the No. 2 carrier in a slide that accelerated when Mukesh fatefully barged into the market. Jio’s entry into the market in 2016 pressured all rivals, including Anil’s company, because it lured so many of their customers away with free calls and cheap plans.