In the dynamic realm of Indian business, few names resonate as profoundly as Dhirubhai Ambani. A visionary and risk-taker, Ambani’s journey from humble beginnings to corporate zenith is a legendary saga. Amidst the myriad chapters of his storied career, one particularly intriguing episode unfolds—a captivating power play between Ambani and Larsen & Toubro (L&T), an engineering behemoth that found itself on the precipice of a hostile takeover.
1987: A Tumultuous Year for L&T
The year was 1987, and L&T, a stalwart in the engineering sector, faced an unsettling predicament. The spectre of a hostile takeover loomed large following the acquisition of a 1% stake by Dubai-based businessman Manu Chhabria. N M Desai, L&T’s chairman at the time, grappled with the prospect of losing control over the company he had painstakingly nurtured.
Enter Dhirubhai Ambani: The Opportunist
Recognizing L&T’s vulnerability, Dhirubhai Ambani emerged as a strategic saviour. In a calculated move, he acquired an 18.5% stake in L&T over the next two years, investing approximately Rs 190 crore. This not only positioned Ambani as a major stakeholder but also welcomed his sons, Mukesh and Anil, onto the L&T board—a significant shift in power dynamics.
Ambani’s True Intentions
Initially hailed as a guardian, Ambani’s true motives gradually surfaced. Acquiring the chairmanship of L&T marked a pivotal moment as he sought to wield control over the company’s vast resources and cash reserves. This manoeuvre led to the ousting of N M Desai, the stalwart chairman, from the helm of the company he had painstakingly built.
Strategic Maneuvers and Government Intervention
Ambani’s ambitions extended beyond mere protection. Recognizing L&T’s financial strength, he strategically utilized it to secure a line of credit for purchasing a substantial stake in his own company, Reliance Industries. However, in 1989, the newly elected Prime Minister, V P Singh, aimed to restore government control over L&T through the Life Insurance Corporation of India (LIC). This governmental intervention posed a significant obstacle to Ambani’s plans.
Despite the return of the Congress party to power in 1991, Ambani’s attempts to regain control faced indirect opposition from Dr. Manmohan Singh, then Finance Minister. Singh utilized LIC as a proxy to uphold government influence, creating a formidable barrier for Ambani.
The Denouement: Exit from L&T
In 2001, after years of power struggles and strategic chess moves, Reliance Industries finally divested its entire stake in L&T. The purchaser was K.M. Birla’s Grasim Industries, signalling the conclusion of Ambani’s intricate involvement with L&T.
In the annals of Indian business, the saga of Dhirubhai Ambani and Larsen & Toubro stands as a compelling narrative of power dynamics, strategic acumen, and the challenges of maintaining control.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.