Ambani, a name that needs no introduction in India. Their journey has taken a long way from starting Reliance as a polyester yarn manufacturer to making it a Fortune Global 500 company. From living in a modest two bedroom flat to building worlds most expensive house Antilia. Let’s take a short trip into the story.
It all started when Dhirubhai Ambani returned from Yemen and started “Majin” in partnership with Champaklal Damani. Majin was to export spices and yarn to Yemen. After a while things did not end well and the cousins had parted their ways. But Dhirubhai started on his own. The reason behind their separation was that Damani was a cautious trader while Ambani was more into taking risks. Their ideologies were in contrast to each other.
Then a year later in 1966, Reliance Textile Industries Pvt Ltd was incorporated by Dhirubhai Ambani. Initial days of Reliance Textile Industries were not so good. The brokers denied to buy polyester from Reliance. Then the determined Dhirubhai himself went on to roads selling his produce directly to the consumers. Then with excellent leadership and business tactics Dhirubhai created a buzz in the Indian textile industries with his “Vimal” brand. Then the company expanded and it was a huge success in the Indian market creating a popular slogan “Only Vimal”.
The Share Market: Ambani’s Play
Once Bear Cartel, a group of stock brokers in the Bombay Stock Exchange, started short selling Reliance shares. Short selling in the share market is selling the stocks that one doesn’t own. In those days the market settles every Friday. That is the delivery of the stocks has to be done every Friday by the sellers.
What Bears thought is that selling huge amounts of shares would cause a decline in the price of the Reliance Share and they would acquire it at a lower price. The Bears started short selling Reliance Shares. They sold 350,000 Reliance Shares which caused the share price to fall to Rs. 121 from Rs. 131. Then suddenly something strange started happening. Some NRI investors based in West-Asian-Countries started buying the shares sold by the Bears. And the Bears continued selling the shares. The total traded stocks reached 800,000. As the supply and demand were equal the stock price remained constant and didn’t decrease.
Everyone in the Bombay Stock Exchange was shocked to know that shares worth 10crores were brought by these investors. Now the time had come, the settlement day, the stocks are to be delivered. But the Bears do not have the stocks. In case the Bears couldn’t deliver the stocks they would have to pay a penalty, “Undha Badla”, of Rs.25 on each stock. Now the Bears have to buy the stocks and deliver it to the NRI investors. There was a huge demand by Bears for the Reliance shares which caused the stock price to go up to Rs. 201. Bears brought shares for Rs. 201 and sold it to NRI investors for the contracted price Rs. 150. There was a loss for the Bears.
But for everyone’s surprise the NRI investor was none other than our king Dhirubhai Ambani. He played a tricky game that made the bears buy shares from him at a very high price and sell it to him at a very low price. That is Dhirubhai Ambani.
Reliance’s Huge Success
It took a great effort and intelligence for Dhirubhai Ambani to build an empire called Reliance for his family. Ambani family holds 46.32% shares in Reliance. On 18 Oct 2007, Reliance Industries became the first Indian company to breach $100 Billion Market Capitalization. The company was listed at 204th place on the list of Fortune Global 500 world’s biggest corporations of 2017.
Dhirubhai Ambani’s story is a very good boost for entrepreneur aspirants. This is some interesting information from Ambani’s life. Thank you have a nice day.