RELIANCE & ESSAR: RIVALRY TAKES A BACK SEAT

Vol 2, PW 24 (23 Dec 98) Midstream & Downstream
     

INTRODUCTION: The longstanding rivalry between the Ruia and Ambani families that control Essar and Reliance Industries (respectively) is the stuff of Indian corporate gossip.

The Ruia-Ambani rivalry has its roots in India's ethno-linguistic divisions. The Ruias are Marwaris from Rajasthan, while the Ambanis are Gujaratis from Gujarat.

The Marwaris dominate big business in India, while the Ambanis are the only Gujarati business house that has made it into the big league, where it rubs shoulders with big Marwari names such as the Birlas. A correspondent for Petrowatch offers this inside look at the latest twist in the on-going battle of supremacy between two of Indias leading energy companies.

In recent months Essar has realised it has lost the race to be the countrys leading energy company. Essar has not given up its hostility to Reliance but has grudgingly come to accept that Reliance is the "boss" in the petroleum business.

The Ruia family which controls Essar has realised there is no point in rattling the skeletons in the Ambani cupboard as it cannot compete with the kind of hold the Ambanis have on the central government bureaucracy. At Essar, everything is on hold, as the Ruias try to manage the severe cash crunch in their core businesses, among them power, oil and steel.

They are seriously in debt to several state-owned financial institutions, among them the Industrial Development Bank of India (IDBI). If the real estate market was not in a slump, they would have gladly sold or at least leased out their impressive multi-storied steel and glass office complex in south Bombay, Essar House, which now lies partly empty.

Essars entire oil division has been packed off to field offices in Jamnagar, firstly to cut costs but mainly to get the staff off its butts and produce results. The Ruias are in a sense trying to ride piggy-back on Reliance.

They know that if the Reliance-IOC deal is approved, their deal with IOC will also be approved.

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