Dhirubhai Ambani: The Equity Revolutionist of India

Between my past, the present and the future, there is one common factor: relationship and trust. This is the foundation of our growth. - Dhirubhai AmbaniFounder of the Reliance Industries, India’s largest private firm, it is common knowledge that Dhirubhai Ambani hailed from a poor family. However, he did not let that deter his capacity to think big and move forward. Ambani, the third of five siblings, was articulate and intelligent, right from the beginning.

Dream big.

Ambani realised two things early on – that he would have to keep his customers happy and that only by keeping them happy would he be able to raise the capital to fund his grand dreams.

Ambani was unable to secure bank loans to fund his projects. Keeping in mind the customer relationships he had cultivated over many years, hardened risk-taker Ambani decided to go public in 1977. More than 58,000 investors subscribed to the Reliance IPO.

The turning point for Indian equity markets

Dhirubhai Ambani was known to pay his investors handsome dividends, which kept them loyal to Reliance. He realised that there was one way to maximise profit for investors, better than dividends, and that was capital appreciation. He ensured bonus shares and rights issues to his investors – big and small – apart from handsome dividends. Thus, he decided to convert non-convertible debentures into equity through which his shareholders would get massive profits, which did not go down well with the Government.

In the interest of the investors, Ambani lobbied relentlessly for the restrictive law to be changed, and eventually he won. Investors were so happy with the idea, that the Reliance issue of 1979 was oversubscribed by 6 times!

Seeing the shares (and subsequent returns) soar, millions of retail investors were encouraged to invest in the Indian stock market – all because of the massive market mobilization by Ambani. In fact, Reliance had such a large investor base within a decade that it would hold meetings in stadiums!

Action Summary:

  • Create relationships, not links. The trust that emerges from relationships lasts long.

  • Be determined – let your deeds speak of strong will. Positive results always come from a tenacious and focused attitude.

  • No idea is too small to be leveraged. Believe in your ideas, and work towards making them a reality.

 ~ Atrija Gaur