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Influence of Family on Family Business Succession Planning Process: The Reliance Industries Split-up

CASE STUDY, FAMILY BUSINESS
ET Cases, 9 Pages
AUTHOR(S) : Dr. Sarika Lohana - UGC - Dr. S.Radhakrishnan Post-Doctoral Fellow, Swami Ramanand Teerth Marathwada University, Nanded

Case Preview

Influence of Family on Family Business Succession Planning Process: The Reliance Industries Split-up


Introduction

Reliance Industries Limited (RIL) was originally founded by Dhirubhai Ambani (Dhirubhai) and incorporated on May 8th 1973, as Mynylon Limited in the state of Karnataka in south-western India. In 1977, the headquarters of the company was moved to the state of Maharashtra, north of Karnataka, and the name was changed to Reliance Textile Industries Limited. Later, in 1985, the company was again renamed, this time to RIL. During that period, RIL manufactured synthetic blended yarns and fabrics, polyester filament, yarn polyester, staple fiber chemicals and allied products, color TV glass shells, and color TV picture tubes. In November 1977, RIL offered equity shares, for it to be listed on the Bombay Stock Exchange.1

Since its initial public offering in 1977, RIL grew rapidly at about 28% annual growth rate in sales and about 32% annual growth rate in net profits over a span of thirty years.2 The company at the same time followed a backward integration strategy into the production of petrochemicals and the refining of crude oil. RIL grew into diverse operations, extending into the exploration and production of oil and gas as well as the manufacture of petroleum products, polyester products, polyester intermediates, plastics, polymer intermediates, chemicals, and synthetic textiles and fabrics. Since 1998, when the exploration of oil and natural gas in India was opened for private participation, RIL has been a significant player...............


1 http://infopub.sgx.com/FileOpen/52961923_1_33010025_Final%20OM_book(rec_d%20300113).ashx?App=Prospectus&FileID=15543 (Accessed date: Febraury 18th 2018)
2 Singh Manohar and Goodrich James A., “Succession in Family-Owned Businesses: A Case Study of Reliance Industries-India”, https://ssrn.

Teaching Note Preview

Influence of Family on Family Business Succession Planning Process: The Reliance Industries Split-up

 

Synopsis

This case focuses on the issue of succession planning of the Reliance Industries Limited (RIL), a family business. The reason for the division of the RIL was due to the absence of a proper succession plan, which is uncommon in large business entities in India. The RIL saga has implications beyond the souring of personal relationships among family members. Due to the absence of succession planning, the conglomerate stepped towards a split-up. Also, a detailed analysis of the Reliance Group feud is discussed. Students can learn about the implications that the absence of succession planning can have on a family business.

Prerequisite Conceptual Understanding/Before the classroom Discussion

The students are advised to read the following:

• Read the Hindu Succession Act
• Read clause 49 of Securities and Exchange Board of India

Teaching Objectives

The case provides students with the opportunity to explore to areas such as

1. Factors contributing to conflict in family business
2. Splitting up or dividing a Family businesses
3. Need for succession planning
4. Impact of absence of succession planning in family business
5. Role of government entities, such as the Securities and Exchange Board of India (SEBI) in resolving company disputes

Case Positioning and Setting

This case can be used in a Company Secretary course, post-graduate level course and for second-year MBA students for a course with specialization in corporate finance, Leadership, Family Business and Entrepreneurship

Assignment Questions

I. What are some reasons for the Reliance Industries’ performance before and after the split up?
II. What are some implications of not having a succession plan for a family-owned business like the Reliance Industries? Discuss.
III. How did Anil’s political relations affect the family business? How did these relations influence conflicts in the family?
IV...........

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Abstract

On July 06th 2002, the death of Dhirubhai Ambani left the operations of Reliance Industries in complexities, as he had left no legal will and proper successor. The reason behind Reliance Industries family feud between the Ambani bothers i.e., Mukesh and Anil was due to the absence of proper succession planning, which is uncommon in large business entities in India.


The Reliance Industries Ltd. (RIL) stepped towards a split-up, with implications that went beyond the souring of personal relationships among family members. Given the fact that, RIL being one of the largest and most successful exchange traded conglomerates stepped towards demerger. Further, detailed analysis ex post-facto of the Reliance Industries Feud is covered.


The case reveals an impact of family conflict on business operations and would provide a platform for analysis of the same as per Hindu Succession Act. The case also touches aspects of Clause – 49. Students/participants would be able to learn how succession planning for a family business should be handled.



Pedagogical Objectives

  • To make students understand the importance of Need of Succession Planning in Family Business and its Impact on business in case of its absence.
  • To make students undergo a critical analysis of Family Business Conflict and to study its relevance as per Hindu Succession Act.
  • To make students understand Clause – 49 in the interest of protecting investors of RIL.

Case Positioning and Setting

This case can be used in a Company Secretary course, post-graduate level course and for second-year MBA students for a course with specialization in corporate finance, Leadership, Family Business and Entrepreneurship



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- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
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