The K factor in Reliance settlement

Saturday’s settlement deal between the Ambani brothers may not have been possible if it wasn’t for KV Kamath, chairman of ICICI Bank and another trusted friend and merchant banker, Nimesh Kampani, chairman, JM Morgan Stanley.

Mr Kamath came into the picture following a request from Dhirubhai Ambani’s widow Kokilaben at Dhirubhai’s birth anniversary celebrations in December last year. What made Mr Kamath acceptable to both Anil and Mukesh Ambani was that he continued to remain completely neutral in the period when the spat between the two brothers became public.

Both Ambani brothers had met with Mr Kamath during the period when the tussle for control came out into the open. However, Mr Kamath persistently refused to play messenger or take sides. Ultimately, it was this neutrality that led to his valuation being the basis of settlement among the brothers.

Mr Kamath had a four point agenda; get the brothers to talk, do a proper valuation of group companies, create a fair division, and ensure that a settlement does not come at a cost to shareholders or create legal hassles. But Mr Kamath’s role did not end there.

After identifying who would control which company, there was the complex issue of structuring a deal to establish ownership. Structuring of complex deals was nothing new to Mr Kamath. Under his leadership, ICICI has been through a spate of mergers, desubsidarisations and a reverse merger. The bank has also experience in distancing a subsidiary from the parent through the trust route. Hence for this complex restructuring exercise there was no one as experienced as Mr Kamath.

Mr Kamath’s relationship with the Ambani family began in the early ’70s when Dhirubai Ambani sought a term loan from ICICI Bank for expanding manufacturing facilities. At that time the loan was cleared by Mr Kamath, who was a young dealing officer in the Industrial Credit and Investment Corporation of India, as it was known then.

The relationship evolved further as Reliance expanded and ICICI and Mr Kamath advised Reliance on structuring its various convertible issues in the 80’s. Mr Kamath has, on several occasions, publicly stated his admiration for the late Dhirubhai Ambani and his ability to make orbital changes. In fact, those in the financial sector often draw similarities between ICICI Bank and Reliance - the ability of both to raise large capital and scale up operations to new levels. Mr Ambani on his part did not forget those who had faith in him during his years of struggle.

While Mr Kamath was the lender of choice, the other financial figure closely associated with the Ambani saga is Nimish Kampani. The Ambani brothers have chosen Nimesh Kampani to do the valuation for the entire Reliance group for arriving at a proper division of assets. Mr Kampani had done the valuation in a month, creating a platform for the settlement.

Mr Kampani aided the late Dhirubhai in rewriting the rules of the Indian capital markets over two decades ago, when he started the equity cult in India. His association with Reliance group dates back to 1977 when RIL came out with a public issue. Since then, Mr Kampani has been involved in almost every issue of Reliance. The relationship strengthened when Morgan Stanley managed RILs maiden gross depository receipts issue in the early 90’s.

Mr Kampani shares a good relationship with both Mukesh as well as Anil. This could be the reason why after the merger of Reliance Petroleum with RIL, Mr Kampani was made one of the trustees of the trust which controlled RIL shares in RPL. The relationship was further cemented with the acquisition of BSES — where JM was the lead manager for the open offer.