The Fault In Mukesh Ambani’s Stars

The Fault In Mukesh Ambani's Star

A 14-year-old event is back to haunt the MD & Chairman of Reliance Industries Mukesh Ambani! SEBI has imposed a penalty of ₹40 crores on RIL Industries along with its Chairman for fraudulent trading in Reliance Petroleum in 2007. Let us understand what was the scenario that led to the current standing point.

Crux of the Matter

The Case
With respect to alleged fraudulent trading of Reliance Petroleum (RPL) shares back in 2007, the Securities & Exchange Board of India (SEBI) imposed a hefty penalty of:

  • ₹25 Crore on Reliance Industries Limited
  • ₹15 Crore on RIL Chairman Mukesh Ambani
  • ₹20 Crore Navi Mumbai SEZ 
  • ₹10 Crore Mumbai SEZ

The Episode

  • November 2007: Alleged manipulative trade in Reliance Petroleum shares through both cash & F&O markets.
  • March 2007:  RIL decides to sell 4.1% of Reliance Petroleum.
  • March 2009: RPL was merged with RIL.

The Case of Insider Trading

  • Between 1st November – 29th November 2007: Reliance appointed 12 agents who took short positions (selling shares you don’t own and then buying them later when price is low) in the RPL shares for the F&O Market and RIL undertook similar transactions but in the cash segment.
  • 15th November onwards: Their short positions in the F&O segment constantly surpassed the proposed sale of shares in the Cash segment.
  • November 29: In cash segment, RIL sold 2.25 crore shares in the last 10 minutes of trading hours. Consequently, RPL’s stock price plummeted. It also lowered the F&O settlement prices for the month of November benefiting the short position held by the agents, who booked huge profits by closing their short positions of 7.97 crore RPL shares at this distressed price. Agents are estimated to have booked a profit of ₹513.12 crores in the illegal trade.

Excerpts From SEBI’S 95 Page Order

RIL fraudulently cornered nearly 93% of open interest* in RPL November Futures, when the said 12 agents took short positions in F&O Segment on its behalf. In the instant case, the general investors were not aware that the entity behind the above F&O segment transactions was RIL. The execution of the fraudulent trades affected the price of the RPL securities in both cash and F&O segments and harmed the interests of other investors. It also has an adverse impact on the fairness, integrity, and transparency of the stock market.

SEBI’S 95 Page Order

*Open Interest is the number of outstanding (open) Future & Option contracts.

The Standing Point
The case has been hanging on for the past 13 years! In November 2020, the Securities Appellate Tribunal dismissed RIL’s plea challenging the 2017 SEBI order that asked it to pay ₹447 crores for insider trading.

In Other News

  • Mukesh Ambani is no longer Asia’s richest man! He has been replaced by China’s Lone Wolf Zhong Shanshan.
  • Shanshan’s rise is believed to be the fastest in history with the majority of it attributed to the listing of his two companies: vaccine maker Beijing Wantai Biological Pharmacy Enterprises Co and Nongu Spring Co, a bottled water firm.
  • Ambani has also slipped from World’s 10th richest man to 11th position as per Bloomberg Billionaires Index.
  • Experts say the correction is on account of RIL’s falling share price post-Amazon’s appeal to the Reliance and Future Retail’s deal.
  • The Wall Street Journal, in a 2014 article entitled “Why It’s Hard to Catch India’s Insider Trading,” said that despite a widespread belief that insider trading takes place on a regular basis in India, there were few examples of insider traders being prosecuted in India.
  • Mathew Martoma is an American former hedge fund trader. As a portfolio manager at S.A.C. Capital Advisors, he was accused of generating possibly the largest single insider trading transaction profit in history at a value of $276 million. A jury convicted him, and in November 2014 he began serving a nine-year prison sentence.
  • Selective disclosure is a situation when a publicly-traded company discloses material information to a single person, or a limited group of people or investors, as opposed to disclosing the information to all investors at the same time. Material information is roughly defined as information that would cause a reasonable investor to make a buy or sell decision.

Urban Ladder, The Latest Acquisition By Reliance

Urban Ladder, The Latest Acquisition By Reliance

Reliance Industries’ Retail unit bought a 96% stake in Urban Ladder for ₹182.12 crore. Let’s take a look at various aspects of deal and what does it mean for both the entities.

Crux of the Matter

About Urban Ladder
In 2012, Ashish Goel and Rajiv Srivatsa founded Urban Ladder. So far, it has received total funding of ~$115 million from investors like Steadview Capital, Sequoia Capital India, etc.

E-Furniture Sector
India’s online furniture market size was $700 million in 2019-20, with Urban Ladder and PepperFry being the two prominent brands. This sector faces problems like infrequent purchasing by customers, high inventory cost, hard logistics, etc.

The Deal
Reliance Industries’ Retail unit bought a 96% stake in Urban Ladder for ₹182.12 crores. The company also has the option to buy the remaining 4% stake, which is expected to sell at ₹75 crores by December 2023. Three months ago, Reliance Retail acquired a majority stake in online pharma firm Netmeds for around ₹620 crores.

After this deal, Urbanladder can get out of financial problems and stop worrying about funding. According to experts, “company will continue to operate as a separate brand within the Reliance ecosystem with CEO and co-founder Ashish Goel continuing to hold his post for the time being”.

What Does It Mean For Reliance?
After making strides in the retail sector by buying Future Group and getting investments for Reliance Retail, this deal will help Reliance build a stronger and diversified retail portfolio.

Acquisitions like these enable the group’s digital and new commerce initiatives and widen the bouquet of consumer products provided by the group while enhancing user engagement and experience across its retail offerings.

  • Mukesh Ambani-led Reliance Industries has raised ₹1.15 lakh crores from 11 investors in less than 2 months and ₹53,124.20 crores from rights issue.
  • Vodafone and Idea announced a merger and renamed itself Vi. Reuters reported the Vodafone Idea merger to be valued at $23 billion.
  • Alphabet, the Parent company of Google has become one of the world’s largest technology conglomerates with a market capitalization of $1 trillion. It has acquired over 230 companies with Motorola Mobility being the largest acquisition for $12.5 billion.
  • Vodafone Group bought German telecom giant Mannesmann AG in 1999 for a $180.95 billion acquisition, making the takeover the largest merger and acquisition (M&A) deal in history.

Why Has Amazon Sent Notice To Future Group Over Reliance-Future Deal?

Why Has Amazon Sent Notice To Future Group Over Reliance-Future Deal?

In August 2020, Future Group made a deal worth ₹24,713 crores with Reliance to sell Future’s retail business. Amazon, however, recently issued a legal notice to Future Group which states that its deal with Reliance was a breach of contract. How is suddenly Amazon into the picture and what contract did it have with Kishore Biyani’s Future Group? Let’s find out.

Crux of the Matter

Legal Battle
With an outstanding debt of ~₹13,000 crores, Future Group was debt-laden and the Covid-19 crisis increased the problems for Future Group. So in August, it sold its Retail business for ₹24,713 crores to Reliance Retail.

Amazon sent a legal notice to Future Group for violating its “contractual rights” in the deal made with Reliance.

Why Is Amazon Objecting?
It all started with Amazon buying a 49% stake in Future Coupons Ltd, which contributes 7.3% stake in Future Retail Group, in 2019. This translates to Amazon holding ~5% stake in Future Retail. As a part of the deal, Amazon had the right to buy (a call option) all or part of shareholding in Future Retail after a period between 3 and 10 years of the deal.

The deal also included “a restricted list” of companies – mostly competitors with the name of Reliance explicitly mentioned – that Future was not supposed to sell the business to without making an offer to Amazon. Amazon says Future Group did not inform Amazon of the deal in progress. Amazon has taken the matter to Singapore International Arbitration Centre for resolution.

What Future Group Has To Say?
Future Group says it had reached out to Amazon while it was facing issues due to lockdown, but it kept delaying without any concrete commitments. One of Future’s close associates said Amazon was kept in the loop while the Reliance deal was in progress.

Future Group also says that it has not violated any agreement as the deal with Reliance does not involve any sale of ‘stake’ but involves only the sale of Future Group’s ‘assets’. Amazon says this deal is deliberately structured to oust Amazon.

The Reliance-Future Group deal involves combining 5 listed entities of Future Group into 1, and transferring the ‘retail assets’ to Reliance – this structure obviates the need for a stake sale.

Views Of Legal Experts
Experts also say that Amazon cannot challenge the deal as it involves only listed entities, whereas it has sent a notice to and had an agreement with Future Coupons, which is an unlisted firm.

Moreover, as per Future-Amazon agreement, Amazon’s rights to buy promoters’ stake only comes into effect after 2022. This right is also based on the condition that FDI rules regarding investment in retail firms change in India. Currently, India does not allow E-commerce companies to own stake in entities that sell on their platforms – here Future Group sells products on Amazon.

  • Pantaloons is one of the major clothing retail outlets in India with over 350 stores in 160 cities. Pantaloons was previously controlled by the Future Group, and was taken over by Aditya Birla in 2012-13.
  • Alternative dispute resolution typically denotes a wide range of dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement with the help of a third party. Alternative dispute resolution (ADR) is generally classified into at least four types: negotiation, mediation, collaborative law, and arbitration.
  • Amazon Go is a chain of convenience stores in the United States, operated by the online retailer Amazon. The stores are partially automated, with customers able to purchase products without being checked out by a cashier or using a self-checkout station. As of 2020, there are 27 open and announced store locations.

Reliance Books A Big Bazaar in The Organized Retail Market

Reliance Books A Big Bazaar in The Organized Retail Market

After a spree of foreign investments in the petro to tech conglomerate Reliance, it recently acquired Future Group’s retail, wholesale, logistic, and warehousing business, which include the likes of Big Bazaar, FBB, Brand Factory, etc for ~₹24,713 crores. With this takeover, Reliance will dominate the retail business in India, which is estimated at $89 billion. Let’s take a look at how the landscape of the industry has shifted.

Crux of the Matter

Reliance To Get A ‘Big Bazaar’
Future Group’s decision to sell its retail came when the group ran out of all options to save its retail business from heavy debts and losses. Reliance Industries Limited bought Future Group’s retail, wholesale, logistics, and warehousing business for ~₹24,713 crores. RIL’s Subsidiary Reliance Retail Venture Limited (RRVL) will takeover logistic and warehousing business and Reliance Retail and Fashion Lifestyle Limited (RRFLL), a subsidiary of RRVL will takeover retail and wholesale business.

Future Group

  • Kishore Biyani (CEO) formally founded Future Group in 2013.
  • It is divided into various subsidiaries such as Future Retail Limited, Future Lifestyle Fashion Limited, Future Consumer Enterprise Limited, etc.
  • Biyani in May 2012 sold 50.1% stake of its fashion chain Pantaloons to Aditya Birla Group to reduce the debt of ~₹8,000 crores.
  • In August 2020, Reliance Retail acquired its retail, wholesale, logistics, and warehousing business, which include it larget and India’s pioneer retail brand Big Bazaar, for ~₹24,700 crores.

Short History Of Future Group

  • 1987 – Launched pantaloons and incorporated company under the name of Manz Wear Private Ltd.
  • 1991 – Changed company’s name to Pantaloon Fashions (India) Limited.
  • 1992 – Company came up with Initial Public Offer (IPO) of shares.
  • 2001 – Pantaloon Retail launched three Big Bazaar stores in Kolkata, Bangalore, and Hyderabad.
  • 2002 – Launched Food Bazaar food chain.
  • 2004 – Launched Central mall in Bangalore.
  • 2006 – Big Bazaar launched the shopping festival Sabse Sasta Din and Navaras jewelry store within Big Bazaar stores.
  • 2007 – Big Bazaar launched its 50th store in Kanpur.
  • 2008 – Launched FBB and Big Bazaar and Big Bazaar expanded to 100th store.
  • 2010 – A subsidiary of main retail Future Value Retail Limited is formed and future Group launched ‘The Great Indian Shopping Festival’.
  • 2013 – Launched India’s largest Logistical Distribution Hub at Nagpur.
  • 2015 – Future Retail formed a partnership with Bharti Retail and Patanjali.
  • 2018 – Big Bazaar dropped prices of 1,500 everyday items with the tagline ‘Har Din Lowest Price’.
  • 2019 – Amazon acquired a 49% stake in Future Coupons.

  • Na Tum Jaano Na Hum is a 2002 Indian Hindi-language romantic drama flop film produced by Future Group owner Kishore Biyani. Despite having a cast of Saif Ali Khan, Hrithik Roshan, and Esha Deol; the film was a box office disaster.
  • With Dipayan Baishya, Biyani co-authored the book It happened in India: The Story of Pantaloons, Big Bazaar, Central and The Great Indian Consumer. As of 2007, it was the best-selling business book ever published in India, with sales of over 100,000.
  • Brand Factory is a chain of retail stores operated by Future Group. It is one of India’s largest discount retail chains and offers a wide range of apparel brands in different categories for men, women, infants, accessories, cosmetics, footwear, sportswear and luggage.

From Textiles to Tech Giant: History of Reliance

From Textiles to Tech Giant: History of Reliance

As of 17th July 2020, Mukesh Ambani was the world’s 6th richest person with a wealth of $71.2bn. While companies across the world are combating the Coronavirus, RIL bagged 14 investments worth more than ₹1 lakh crores in just 14 weeks. RIL became the 1st Indian firm to cross ₹9 lakh crores valuation – it is currently valued at ₹12 lakh crores. Moreover, Jio will now launch 5G next year and is working on a low-cost 5G phone with Google. But do you how Reliance became one of the world’s largest conglomerate? Let’s have look at its timeline.

Crux of the Matter

Early Days

  • 1957 – Dhirubhai Ambani returned to India from Yemen
  • 1957 – Dhirubhai Ambani started a yarn trading business at Mumbai
  • 1960s – Dhirubhai Ambani and Champaklal Damani established Reliance Commercial Corporation
  • 1965 – Partnership ended
  • 1966 – Established Reliance Textiles Engineers Pvt. Ltd. in Maharashtra
  • 1966 – Established a synthetic fabrics mill in the same year at Naroda in Gujarat
  • 1973 – Became Reliance Industries Limited
  • 1975 – Expanded its business into textiles
  • 1977 – Reliance Textile Industries’ IPO creates history by introducing the equity cult in India.
  • 1979 – Textiles company Sidhpur Mills was amalgamated with the company
  • 1980 – Expanded its polyester yarn business with a financial and technical collaboration with E. I. duPont de Nemours & Co., U.S.

    Growing In The 90s
  • 1991 – The Hazira plant laid the foundation for Reliance becoming the world’s largest integrated producer of polyester
  • 1993 – Collected overseas funds through a global depositary issue of Reliance Petroleum
  • 1996 – Became the first private sector company in India to be rated by international credit rating agencies
  • 1995/96 – entered Telecom industry
  • 1998/99 – RIL introduced Reliance Gas
  • 1998–2000 – Established world’s largest refinery integrated petrochemical complex at Jamnagar in Gujarat
  • 2001-02 – Merged Reliance petroleum into Reliance Industrial Ltd.
  • 2003 – Purchased a majority stake in Indian Petrochemicals Corporation Ltd. (IPCL)
  • 2004-05 – Demerged its investments in power generation and distribution, financial services and telecommunication services into four separate entities. Brothers Mukesh and Anil Ambani separate.

    RIL Marking Its Presence
  • 2006 – Launched ‘Reliance Fresh’ Retail store chain
  • 2010 – Reliance entered the broadband services market with the acquisition of Infotel Broadband Services Limited
  • 2011 – RIL and D E Shaw Group agree to establish a joint venture to build a financial services business in India
  • 2011 – Acquisitions of Bharti Axa Life Insurance Co Ltd and Bharti Axa General Insurance Co Ltd.
  • 2013 – RIL owned Infotel Broadband Services was renamed Reliance Jio Infocomm Limited
  • 2014 – Acquired control in Network18 Media & Investments Limited (NW18) including its subsidiary TV18 Broadcast Ltd
  • 2015 – LYF is established by Reliance Jio as a mobile handset company. Headquartered in Mumbai
  • 2016 – Reliance Jio Infocomm announced the commencement of telecom services with Jio Welcome Offer
  • 2017 – RIL and British Petroleum announced Joint development of R-Series’ deepwater gas fields in Block KGD6 offshore the east coast of India
  • 2018 – RIL is ranked 148th on the Fortune Global 500 list of the world’s biggest corporations as of 2018
  • 2019 – RIL becomes the first Indian firm to cross Rs 9 lakh crore market valuation mark

Latest Announcements By RIL Jio

  • Jio Mart online grocery platform and WhatsApp working closely for local Kirana stores to come online.
  • Jio TV+ to host 12 OTT platforms like Netflix, Amazon Prime Video, Disney+, Youtube, Hotstar, etc.
  • Jio Meet set to replace Zoom, Google Meet, etc.
  • Jio Embibe is its new ed-tech platform.
  • Jio HealthHub – a healthcare and fitness app.
  • Jio Glasses, a mixed reality headset.

  • The Polyester Prince is an unauthorized biography of Indian business tycoon and Reliance Industries founder Dhirubhai Ambani. The book was never published in India and was banned in it.
  • Football Sports Development Ltd is an Indian company established to operate the Indian Super League, the association football franchise-based league. The company is run as a subsidiary to Reliance with Nita Ambani as its chairperson.
  • E. I. du Pont de Nemours and Company, commonly referred to as DuPont, was an American company that was founded in 1802 in Wilmington, Delaware, as a gunpowder mill by French-American chemist and industrialist Éleuthère Irénée du Pont. In 2014, DuPont was the world’s fourth-largest chemical company based on market capitalization and eighth-largest based on revenue.