While Ambani hasn’t publicly disclosed any plan to step away from his responsibilities as Reliance’s chairman and managing director, his children are becoming more visible. Addressing shareholders this June, Ambani gave the first indication his offspring — twins Akash and Isha, 30, and Anant, 26 — will play significant roles at Reliance.
“I have no doubt whatsoever that the next generation of leaders at Reliance, led by Isha, Akash and Anant, will further enrich this precious legacy,” he said. The magnate is drawn to the way the family behind Walmart managed the transfer of control after the death of founder Sam Walton in 1992, the people familiar with his thinking said.
Wealthy dynasties like the heirs to the Dumas family’s Hermes fashion empire, or the Johnsons of consumer-products giant S.C. Johnson & Son Inc., have sought to keep relatives in day-to-day control of their businesses. But the storied Waltons — the world’s richest family — have only retained board-level oversight, outsourcing the running of the US retail behemoth to managers since 1988, when David Glass took over the CEO role from Sam Walton.
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Rob Walton, Sam’s eldest son, and his nephew Steuart Walton sit on Walmart’s board, and Greg Penner, Sam’s grandson-in-law, became chairman of the Bentonville, Arkansas-based company in 2015. While this has led to criticism the interests of the clan were being elevated above other shareholders, most of the extended family focus their energies outside of Walmart, on other businesses or in areas like sustainable investment and philanthropy.
The Walton family model reflects unusual prescience on the part of founder Sam, who built the now global giant from a handful of five-and-dime stores. He started preparing for succession in 1953 — almost 40 years before he died — by passing 80% of the family business to his four children: Alice, Rob, Jim and John. That minimized estate taxes and helped the family retain control even as the company grew into the world’s largest retailer.
The Waltons currently own about 47% of Walmart through Walton Enterprises LLC and other family-owned trusts, according to data compiled by Bloomberg. That means they continue to maintain sway, according to Nelson Lichtenstein, author of the The Retail Revolution: How Wal-Mart Created a Brave New World of Business and director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara.
“The fact that the family owns close to 50% of the company means that the managers they hire know where the real power lies,” Lichtenstein said.
Walmart disagreed with Lichtenstein’s interpretation, saying the retailer is committed to maintaining a majority independent board. It “believes that this independence ensures robust oversight, independent viewpoints, and promotes the board’s overall effectiveness,” a spokesperson for Walmart said.
A model that keeps the family central but delegates management has obvious appeal for someone like Ambani, given his history.
Founded in 1973 as a trading house by Mukesh’s father Dhirajlal Hirachand Ambani, the Reliance empire was plunged into uncertainty in 2002 when the patriarch, known universally as Dhirubhai, died without a will. That sparked a years-long battle for control between Mukesh and his younger brother Anil, 62, who were both involved in the business at the time.
Initially, the siblings worked together with Mukesh as chairman and Anil vice chairman of Reliance, then already India’s most important company with plans to expand beyond what had become its energy niche. But relations grew strained, with each believing the other was making decisions without enough consultation: Mukesh was annoyed when Anil once announced a power-generation project without discussing it, while Anil was infuriated when his brother restructured the entities that managed the family’s Reliance shares without his input.
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Underlying it all was a dispute about the basic nature of the brothers’ relationship. As the elder, Mukesh saw himself as the natural boss, while Anil considered himself an equal partner. This tussle eventually snowballed into a sort of Ambani civil war and three years after Dhirubhai’s death, their mother, Kokilaben, was forced to intervene.
In a 2005 settlement brokered by Kokilaben, the brothers divvied up Reliance’s assets. While Anil took the telecommunications, asset-management, entertainment and power-generation businesses, Mukesh retained control over the refining, petrochemicals, oil and gas, and textiles operations.
It’s a “classic case of poor succession management,” said Kavil Ramachandran, head of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business. “Having gone though a bitter process with his brother, Mukesh Ambani definitely wouldn’t like to have the play re-enacted in his family branch.”
Ambani’s heirs will be taking on an empire very different from the one their father inherited as part of the family detente.
In his two decades at the helm, Ambani has transformed Reliance. Owner of the world’s largest crude refining complex, the conglomerate’s diversification has gone into overdrive over the past five years, upending India’s mobile communications landscape and taking on Amazon.com Inc. — and Walmart — in the country’s budding e-retailing space. Since 2016, Reliance’s market value has more than quadrupled, making it India’s most valuable company.
This year, the focus has been on building the group’s green energy flank, a strategic shift for one of the world’s biggest fossil-fuel billionaires. With the traditional energy industry facing a reckoning and concerns about climate change coming to the fore for investors, it appears to be another future-proofing play by Ambani, who became a grandfather in December. Ambani recently scrapped a two-year-old plan to sell a 20% stake in his oil and chemicals unit to Saudi Arabian Oil Co, a sign of his shifting priorities.
He’s also been restructuring the business to consolidate family control, said one of the people familiar with Ambani’s planning. The clan’s stake in the listed arm of Reliance has risen to 50.6% from 47.27% in March 2019, according to company filings.
Reliance may over time become a holding company for three underlying businesses — energy, retail and digital — which are likely to be listed separately in the future, the people said. The children and Nita would have equal shares in the holding firm, giving them the same level of sway over the listed entities, according to some of the people.
Such a setup would likely prevent any uncertainty over control that could lead to infighting. And the family will likely have more of a say in the running of Reliance than the Waltons do in Walmart, some of the people said.
“In Indian companies, the controlling shareholders hold considerable voting powers which can be used to appoint or remove members of the director board,” said V K Unni, a professor at the Indian Institute of Management in Calcutta.
As he seeks to entrench Reliance’s transformation, the way Ambani manages the handover of operational and strategic direction will be closely watched — not just in India.
More than a third of Asia’s family empires are owned by first-generation founders, according to Credit Suisse, and over the next decade almost 100 of these companies will be looking to transfer control and wealth, often to heirs who may have been educated abroad and have been exposed to Western business models.
The tycoons already handing over the reins have taken a range of routes, from the traditional — Hong Kong’s Li and Cheng families passed on management to elder sons — to the less so, with Teresita Sy-Coson, the eldest child and daughter of the late Philippine billionaire Henry Sy, leading a family council that oversees the Southeast Asian nation’s biggest publicly-listed company by market value, spanning real estate to banking.
Hong Kong billionaire Lee Man Tat broke precedence when he formed a family council that gave his wife and their five children say over the more than 100-year-old Lee Kum Kee empire, which spans condiments to real estate. Lee died in July, leaving his children to run the conglomerate with a family constitution in place.
It’s clear Ambani’s children are already being groomed for greater prominence.
The twins played pivotal roles in the company’s shift toward retail and technology, including talks with the Facebook Inc., now Meta Platforms Inc., that secured a Rs 42,443 crore ($5.7 billion) investment by the social-media giant in Reliance’s Jio Platforms Ltd., the vessel for Ambani’s ecommerce ambitions. Anant is a director at Jio Platforms Ltd., the oil and chemicals business, as well as the renewable energy units of Reliance.
“What Ambani is doing is quite rare,” said Peng at the Tanoto Center in Hong Kong, referring to his forward planning. “Normally these patriarchs hold onto it all until the last minute. He’s become wise because he’s learned from his family’s past mistakes that they don’t want to repeat.”
