Behind Mukesh Ambani's big succession plan at Reliance

Mukesh ambani, chairman and Managing Director of Reliance Industries Limited (RIL), is finally moving towards effecting a succession plan for his diversified conglomerate. At the annual general meeting held recently, Ambani announced the appointment of his three children, twins Akash and Isha, and younger son Anant, to the board of the $119-billion group as non-executive directors, conditional on the approval of the company’s shareholders.

Market trackers view the development as a clear indication of succession planning in the group. In many ways, the foundation for this move had been laid a few years ago when the three siblings were given clear responsibilities within the group’s various businesses. Currently, Isha runs the group’s retail business Reliance Retail, whereas Akash is in charge of the telecom business Reliance Jio Infocomm, and Anant oversees the new green energy business. It is in that backdrop that moving them to the board of RIL appears to be a continuation of the succession process.

As for RIL, it is a highly diversified conglomerate with a healthy mix of old and new businesses. While its new businesses encompass sectors like telecommunications, retail and, more recently, new energy, the old oil and gas, and petrochemicals businesses contribute the highest share of revenues to the group’s top line.

More importantly, for a diversified RIL with businesses of scale, a clear succession plan is a good fit, market watchers say. Sonu Bhasin, a family business historian, author and an independent director, says, “For a conglomerate like that, its diversified set of businesses increases the chances of succession planning working out well. With distinct job responsibilities, it gives each inheritor a chance to prove themselves.”

While pointing out that Ambani will remain the guiding light, her view is that the siblings would be given ample space to learn, while being required to stay focussed on growing the businesses they have been entrusted with.

A huge plus working in their favour is the time they have already spent understanding the businesses in the roles they have been assigned to. “The initial period was spent in a phase of mentorship by the professionals. That was obviously a part of getting them ready for larger leadership roles,” says Deven Choksey, Promoter and MD of wealth management firm KRChoksey Group. Maintaining this continuity was planned, he believes, adding that it has helped the Ambani children gain the acceptance of senior management and other RIL board members. “Today, RIL is an extremely complicated entity with a multitude of businesses. It is huge, and a proper succession process is necessary. And the company has been very proactive in doing that.”

In the Indian context, given how many businesses are family-run in the country, succession planning is a tricky affair. Kavil Ramachandran, Senior Advisor at the Thomas Schmidheiny Centre for Family Enterprise in the Indian School of Business (ISB), Hyderabad, and a long-time family business tracker, points out that the board of any company has a fiduciary responsibility towards its shareholders. Hence, “It’s important to bring in people with proven capabilities,” he explains.

Based on his understanding of large Indian conglomerates and their succession planning models, Ramachandran says that usually, the chosen family members move through several roles and responsibilities in an organisation before being entrusted with bigger responsibilities. “They are continuously evaluated, groomed and mentored before a board position comes their way. The way Reliance has gone about it is merely one more example of that.” The grooming model, he points out, has been successful, with the overall long-term impact seen be to quite beneficial for the company and its stakeholders.

One reason that succession planning can be challenging for family businesses is when the patriarch does not want to let go. “Mukesh Ambani has displayed a lot of maturity, and it is important for more patriarchs to do that. In the long-term, the decision to demarcate responsibilities the way he has done, will be good for all stakeholders, including the family,” says Bhasin.

@krishnagopalan