Opening Case

Dhirubhai Ambani
28/12/1932 6/07/2002

 Dhirubhai Ambani
Born in Chorwad, a remote village in Gujarat to a poor
Gujarati family.
Father was a village school teacher.
Even as a school boy, he used to engage himself in
commercial activities retailing cooking oil, selling
onion/potato fries at the village market during village fairs.
Became a student leader at the age of 15. He
spearheaded and won the movement to merge the
Junangadh Nawabs territory to the Indian Union in 1947.
His familys poor financial condition and his fathers
ailment made him shelve his business as well as his
education.
He moved to Aden to take up a job with a French company
A. Besse & Co. at a salary of Rs 300/-.
Aden was one of the busiest trading and oil bunkering port
in the world, harboring over 6,300 ships and handling over
1,500 dhows a year.

 The company was the largest trans-continental trading firm

east of the Suez and was a primary trading agent for a large
number of European, Asian, American and African
companies dealing with exports relating to a wide variety of
products.
It was here that Ambani learnt his trading skills and he
made exclusive contacts in the trading and export business.
He learnt ways of commodity trading, marketing and
distribution as well as currency trading and money
management.
He worked free with a Gujarati trading firm in Aden, with the
intention of learning accountancy, documentation of
purchases and shipping and the ways of dealing with banks
and insurance companies.
He used his lunch breaks for trading commodities in the
market and spent most of his leisure time reading books
and magazines to
improve his English and general knowledge.

 When Shell Oil Refinery was set up in Aden in 1954, A Besse & Co
became the primary distributors of Shell refinery products.
Dhirubhai was promoted to manage the companys filling station at the
newly built harbor. This fuelled his dream to own a refinery one day.
In 1958 he returned to Mumbai with whatever money he had saved in
Aden. While his ambition was high, his ability to invest was extremely
low.
He started a spice trading company under the name of Reliance
Commercial Corporation (RCC). His office was a small room with no
furnishings. He used to use his neighbor's phone to make calls.
Although Dhirubhais formal education was low, the business education
he extracted was of a much better quality than what is imparted in
formal bu8siness education. Not surprisingly, he undertook a thorough
market research before starting his trading operations.
His trading in wholesale spice markets and export quotations of Mumbai,
he realized that that Indian exporters at that time were concerned
primarily with high margins and ignored quality standards and delivery
deadlines.
He decided to focus on high quality products at low margins, delivering

promptly. In fact he would deliver even before the customers

made the payments. Focus on high quality products at low
margins, delivered promptly.
Sensing the low margins in spice trade, he shifted focus to
yarn trade. It was a highly profitable business requiring heavy
investments and involved high risks on account of price
fluctuations in the international markets.
He learnt the tricks of the trade from the market. The success
of his operations brought him profits which he readily
distributed to his investors which brought him more investors ,
thereby realizing his dream to become a big yarn dealer.
The smartest move made by Dhirubhai was in the yarn trade
when he recognized the potential of the shiny variety of yarn.
On test marketing, he realized that he had a winner, especially
for women ceremonial dresses. It sold like hot cakes, bringing
him more and more revenues, establishing him as a leader in
the yarn market.
In 1960s, a major concern for GOI was to conserve Foreign
Exch.

which led to imports of synthetic fibers only against exports

of Rayon fabrics.
When textile manufacturers complained about the non
viability of the policy on account of the high cost of
manufacturing rayon fabrics in India, Dhirubhai started
procuring rayon fabrics from the power looms and exporting
them to contacts developed during the Aden days.
The FOREX thus generated was used for importing nylon
yarns, which could be sold in India at high margins, which not
only compensated for the export losses, but also
contributed to significant growth in RCCs revenues.
The growing popularity of Nylon in India opened another
window of opportunity for Dhirubhai, who realized that he
could make much more money, if he converted the yarn into
fabrics rather than selling it as raw yarn.
Accordingly in Sept. 1966, he set up a textile mill in a plot
measuring 5000 sq. yards in the Naroda Industrial Estate
near Ahmedabad, which later got expanded to a campus of
125 acres.

 He set up a brand new state of the art mill with machinery

imported from European countries, as RCC then had enough
money for such investments.
The entire work of setting up the mill was completed in less than 6
months with the help of just 6 people one was an engineering
graduate, two were matriculates and the rest were middle school
(8 th pass). Most of his top employees in the new mill were his
friends and associates from the Aden days.
Needless the say, the output of the Naroda plant was superb and
was attractively priced, inspite of which there were few takers..
The wholesalers refused to buy Reliance Mill products for fear of
retaliation from the established big textile mills.
Dhirubai came up with a counter strategy If we cant beat
them, we can bypass them, and instructed his people to deliver
goods directly to the retailers, and they did that initially without
asking for any receipt or advance payments and not even
mentioning any payment conditions or expecting any future
payments.
The strategy worked and how Reliance products got entrenched

in the market (no advertisements or publicity events). Even

at the later stage, Dhirubhai never asked for advance
payments, but told the retailers that they could make the
payments after selling the goods and realizing the revenues.
His appeal was for his resellers to grow with him, which
created a new retail structure by effectively removing the
wholesalers from the picture.
Moreover, when the company later branded its fabrics
Vimal (meaning pure), there were several retailers
interested in dealing only in Vimal, which led to the
creation of the retail franchise system, Only Vimal.
With such dealer and customer friendly policies, it is no
wonder that Reliance Textiles grew at an amazingly fast rate
both in terms of turnover as well as facilities.
Dhirubhai and his elder son Mukesh, kept on adding more
and more sophisticated machines and facilities to the mill,
such as computerized water jet looms, Sulzer looms, effluent
treatment plant and a design center.

 By late 1990s, the mill had about 85000 employees and a

turn over of Rs. 28 billion. In 1975, a World Bank team
that visited 24 leading textile mills in India found Reliance
Textile Industries Limited to be the best in India and
certified it as; excellent even by developing countries
standards.
The growth, expansion and diversification of RIL were
further accelerated when Dhirubhai inducted his sons
Mukesh and Anil, into the business.
Mukesh a graduate in Chemical Engineering and an MBA
from Stanford is considered to be an architect in the
companys backward integration into petrochemicals,
refineries and oil exploration.
Anil is a science graduate and an MBA from Wharton
School and is credited with the financial innovations of the
company, making Reliance the first company to raise
funds from global markets (1922) as well as a favorite
company for domestic investors.

 The company now operates in diversified areas like

textiles, petrochemicals, power/energy,
telecommunications, IT, infrastructure services,
retail, capital markets and logistics.
The company that Dhirubhai had started with Rs
15,000/- has now grown into a conglomerate with a
turnover of more than USD 12 bn. And is the first
Indian company to appear in the Fortune 500 list. It is
currently managed as two groups, one each under
Dhirubhais two sons.
He was named the Indian Entrepreneur of the 20th
century by FICCI. He was awarded the Deans
Medal of Wharton School, Univ. of Pennsylvania.