CHAPTER 4

SUCCESSFUL ENTREPRENEURS

INTRODUCTION
University has prescribed case studies of successful entrepreneurs
University has also prescribed case study on (a) Dhirubhai Ambani, and (b)
Aditya Birla. We give below case study of these great entrepreneurs. who made
significant contribution in the growth of entrepreneurship in our country
CASE STUDY: Dhirubhai H. Ambani
Dhirajlal Hirachand Ambani also known as Dhirubhai. 28 December 1932, - 6
July 2002, was an Indian rags-to-riches business tycoon who founded Reliance
Industries in Mumbai with his cousin. Ambani took his company (Reliance)
public in 1977, and by 2007 the combined fortune of the family (sons Anil &
Mukesh) was 6 billion dollars, making the Ambanis one of the richest families in
the world.
Early life
Dhirubhai Ambani was born on 28 December 1932 at Chorwad, Junagadh
(now the state of Gujarat, India) to Hirachand Gordhanbhai Ambani and
Jamnaben in a Modh Bania family of modest means. He was the second son of
a school teacher. Next Dhirubhai Ambani is S.Vaithiyanathan the honest man
"pakora" to pilgrims in Mount Girnar over the weekends. When he was 16
years old, he moved to Aden, Yemen. He worked with A. Besse & Co. for a
salary of Rs.300. Two years later, A. Besse & Co. became the distributors for
Shell products, and Dhirubhai was promoted to manage the company’s filling
station at the port of Aden.

He was married to Kokilaben and had two sons, Mukesh Ambani and Anil
Ambani and two daughters, Nina Kothari and Deepti Salgaonkar.
Reliance Commercial Corporation
In 1962, Dhirubhai returned to India and started the Reliance Commercial
Corporation with a capital of Rs.15,000.00. The primary business of
Reliance Commercial Corporation was to import polyester yarn and export
spices.
The business was setup in partnership with Champaklal Damani, his second
cousin, who used to be with him in Aden, Yemen. The first office of the
Reliance Commercial Corporation was set up at the Narsinatha Street in
Masjid Bunder. It was 350 sq ft. room with a telephone, one table and three
chairs. Initially, they had two. assistants to help them with their business. In
1965, Champaklal Damani and Dhirubhai Ambani ended their partnership
and Dhirubhai started on his own. It is believed that both had different
temperaments and a different take on how to conduct business.
 While Mr. Damani was a cautious trader and did not believe in building yarn
inventories, Dhirubhai was a known risk taker and he considered that building
inventories, anticipating a price rise, and making profits. In 1968, he moved to
an upmarket apartment at Altamount Road in South Mumbai. Ambani's net
worth was estimated at about Rs.10 lakh by late 1970s.

Asia Times quotes : "His people skills were legendary. A former secretary
reveals: "He was very helpful. He followed an 'open-door' policy. Employees
could walk into his cabin and discuss their problems with him." The chairman
had a special way of dealing with different groups of people, be they
employees, shareholders, journalists or government officials. Ambani's
competitors allege that he bought off officials and had legislation re-written to
suit him.
They recall his earlier days and how he picked up the art of profiteering from the
then-Byzantine system of controls of Indian officialdom. He exported spices, often
at a loss, and used replenishment licenses to import rayon. Later, when rayon
started to be manufactured in India, he exported rayon, again at a loss, and
imported nylon. Ambani was always a step ahead of the competitors. With the
imported items being heavily in demand, his profit margins were rarely under 300
percent.“
Reliance Textiles
Sensing a good opportunity in the textile business, Dhirubhai started his first
textile mill at Naroda, in Ahmedabad in the year 1977. Textiles were
manufactured using polyester fibre yarn. Dhirubhai started the brand "Vimal",
which was named after his elder brother Ramaniklal Ambani's son, Vimal
Ambani. Extensive marketing of the brand "Vimal" in the interiors of India
made it a household name.
Franchise retail outlets were started and they used to sell "only Vimal" brand of
textiles. In the year 1975, a Technical team from the World Bank visited the
Reliance Textiles' Manufacturing unit. This unit has the rare distinction of being
certified as "excellent even by developed country standards" during that period.

Initial public offering

Logo of Reliance Industries Limited Dhirubhai Ambani is credited with
starting the equity cult in India. More than 58,000 investors from various parts
of India subscribed to Reliance's IPO in 1977. Dhirubhai was able to convince
large number of small investors from rural Gujarat that being shareholders of
his company would be profitable. Reliance Industries was the first private
sector company whose Annual General Meetings were held in stadiums. In
1986, The Annual General Meeting of Reliance Industries was held in Cross
Maidan, Mumbai and was attended by more than 35,000 shareholders and the
Reliance family.
Dhirubhai managed to convince a large number of first-time retail investors to
invest in Reliance.

Ambani's net worth was estimated at about Rs.1 billion by early 1980s.
Dhirubhai's control over stock exchanges
In 1982, Reliance Industries came up against a rights issue regarding partly
convertible debentures. It was rumored that company was making all efforts
to ensure that their stock prices did not slide an inch. Sensing an opportunity,
a bear cartel which was a group of stock brokers from Calcutta started to
short sell the shares of Reliance. To counter this, a group of stock brokers till
recently referred to as "Friends of Reliance" started to buy the short sold
shares of Reliance Industries on the Bombay Stock Exchange.
The Bear Cartel was acting on the belief that the Bulls would be short of cash
to complete the transactions and would be ready for settlement under the
"Badla" trading system operative in the Bombay Stock Exchange. The bulls
kept on buying and a price of Rs. 152 per share was maintained till the day of
settlement. On the day of settlement, the Bear Cartel was taken aback when the
Bulls demanded a physical delivery of shares. To complete the transaction, the
much needed cash was provided to the stock brokers who had bought shares of
Reliance, by none other than Dhirubhai Ambani. In the case of non-settlement,
the Bulls demanded an "Unbadla" (a penalty sum) of Rs. 35 per share. With
this, the demand increased and the shares of Reliance shot above 180 rupees in
minutes. The settlement caused an enormous uproar in the market and
Dhirubhai Ambani was the unquestioned king of the stock markets. He proved
to his detractors just how dangerous it was to play with Reliance.
To find a solution to this situation, the Bombay Stock Exchange was closed
for three business days. Authorities from the Bombay Stock Exchange(BSE)
intervened in the matter and brought down the "Unbadla" rate to Rs. 2 with
a stipulation that the Bear Cartel had to deliver the shares within the next few
days. The Bear Cartel bought shares of Reliance from the market at higher
price levels and it was also learnt that Dhirubhai Ambani himself supplied
those shares to the Bear Cartel and earned a healthy profit out of The Bear
Cartel's adventure.

After this incident, many questions were raised by his detractors and the press.
Not many people were able to understand as to how a yarn trader till a few years
ago was able to get in such a huge amount of cash flow during a crisis period.
The answer to this was provided by the then finance minister, Pranab Mukherjee
in the parliament.
He informed the house that a Non-Resident Indian had invested up to Rs. 22
Crore in Reliance during 1982-83. These investments were routed through
many companies like Crocodile, Lota and Fiasco. These companies were
primarily registered in Isle of Man. The interesting factor was that all the
promoters or owners of these companies had a common surname Shah. An
investigation by the Reserve Bank of India in the incident did not find any
unethical or illegal acts or transactions committed by Reliance or its promoters.

Diversification
Over time, Dhirubhai diversified his business with the core specialisation being
in petrochemicals and additional interests in telecommunications, information
technology, energy, power, retail, textiles, infrastructure services, capital
markets, and logistics. The company as a whole was described by the BBC as
"a business empire with an estimated annual turnover of $12bn, and an 85,000-
strong workforce".
Diversification
Over time, Dhirubhai diversified his business with the core specialisation being
in petrochemicals and additional interests in telecommunications, information
technology, energy, power, retail, textiles, infrastructure services, capital
markets, and logistics. The company as a whole was described by the BBC as "a
business empire with an estimated annual turnover of $12bn, and an 85,000-
strong workforce".
Questions :
1. Discuss qualities of Dhirubhai which made him a role model for new
entrepreneurs.
2. Detail reasons of faster growth of Reliance group.
3. “Reliance took route of backward and forward integration for growth”.
Discuss issues and products involved
CASE STUDY: Aditya Birla
The Aditya Birla Group is a multinational corporation based in Mumbai, India
with operations in 25 countries including Thailand, Dubai, Singapore,
Myanmar, Laos, Indonesia, Philippines, Egypt, Canada, Australia, China,
USA, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg,
Switzerland, Bangladesh, Malaysia, Vietnam and Korea.
A US$ 28 billion conglomerate, with a market capitalization of US$
31.5 billion, over 50 per cent of its revenues flow from its operations across
the world[citation needed]. The group is a major player in all the industry
sectors it operates in. The Group has been adjudged the best employer in India
and among the top 20 in Asia by the Hewitt-Economic Times and Wall Street
Journal Study 2007. The origins of the group lie in the conglomerate once held
by one of India's foremost industrialists Mr. Ghanshyam Das Birla. He
bequeathed most of these companies to his grandson, Kumar Birla,
 He bequeathed most of these companies to his grandson, Mr. Aditya Vikram
Birla – the father of the current Chairman of the group, Mr. Kumar
Mangalam Birla. Mr. Kumar Mangalam Birla is the grandson of Mr. Basant
Kumar Birla, who heads his own independent business conglomerate.
Several other members of the Birla Family, own and run their independent
business groups.
Businesses
Aditya Birla is organized into various subsidiaries that operate across different
sectors. Among these are viscose staple fibre, non- ferrous metals, cement,
viscose filament yarn, branded apparel, carbon black, chemicals, Modern retail
(under the 'More' brand of supermarkets, and also under the Trinethra, and
Fabmall brands until recently), fertilizers, sponge iron, insulators, financial
services, telecom, BPO and IT services. The Group consists of four main
companies, which operate in various industry sectors through subsidiaries, joint
ventures, etc. These are Hindalco, Grasim, Aditya Birla Nuvo, and UltraTech
Cement.
Non Ferrous Metals
The groups non-ferrous metals are under Hindalco. It is a dominant player in
aluminum and copper. Its manufacturing locations are primarily in India, and
it owns mines in Australia. On February 11, 2007, the company entered into
an agreement to acquire the Canadian company Novelis for U$6 billion,
making the combined entity the world's largest rolled-aluminium producer.
On May 15, 2007, the acquisition was completed with Novelis shareholders
receiving $44.93 per outstanding share of common stock.

Hindalco has also recently acquired Alcan's stake in the Utkal Alumina Project
Joint venture in Orissa, India. Hindalco is a Fortune500 company. Hindalco
makes alumina chemicals, primary aluminum, rolled products, alloy wheels,
roofing sheets, wire rods, cast copper rods, copper cathodes and several other
products.
 But the project has faced massive protests from locals. On 16 Dec 2001
three tribal people were shot dead because they were opposed to the project
Grasim Industries Ltd.
Cement
The Groups cement business is under both Grasim and UltraTech cement.
Together the two companies under the group account for a substantial share of
the cement market in India. UltraTech cement comprises the cement business
of L&T which was acquired by the group. UltraTech announced an increase in
sales by 17% and Profit After Tax by 46% for the quarter ending September 30,
2007.
Carbon Black
The Group is the fourth largest manufacturer of Carbon Black worldwide. It
operates out of facilities in Egypt, Thailand, India and China. It is a major
supplier to several major automobile tyre manufacturers worldwide.

Textile Business
The Aditya Birla Group is the world's largest player in the Viscose Staple Fiber
industry. It operates out of India, Laos, Thailand, Malaysia and China. It owns
the Birla Cellulose brand. Apart from viscose staple fiber, the group also owns
acrylic fiber businesses in Egypt and Thailand, viscose filament yarn businesses
and spinning mills at several locations all over India and South East Asia.
 The group has pulp and plantation interests in Canada and has recently
invested in plantations in Laos The Aditya Birla group is also a major player
in the branded garments market in India. Its subsidiary, Madura Garments, is
a major producer of textile fabric as well as the brand licensee of Louis
Phillipe, Van Heusen and Allen Solly in India[citation needed]. It operates it's
own retail outlets in several cities in India and now planning to go to into
Pakistan as well.
Telecom Services
Idea Cellular is now owned by Adittya Birla Group itself. Previously Aditya
Birla Group held a 98.3% stake in Idea Cellular, a leading telecom operator in
India. Idea Cellular started off as a joint venture with the group, AT&T and the
Tata Group. However the stakes of the remaining partners was eventually
acquired by the group. After an Initial Public Offering on the Indian Stock
Markets, Idea Cellular now accounts for a third of the group's market
capitalization.
Other Businesses
Apart from the above businesses, the group is a major player in industry sectors
like Insulators, Fertilizers, IT (owning PSI Data Systems Limited), ITeS (owning
Transworks and the Canadian BPO Firm Minacs), Chemicals, Mining, Sponge
Iron, Financial Services (jointly with Sunlife) and more recently, Retail.

Philanthropy
The Group actively involves itself in several community development initiatives
- in particular around its manufacturing location. The group also supports
development activities in areas like healthcare, education, sustainable livelihood,
infrastructure and social causes. The group's philanthropic activities are guided
by Mrs Rajashree Birla. It works in 3700 villages, reaching out to 7 million
people annually through the Aditya Birla Centre for Community Initiatives and
Rural Development. It runs 45 schools and 18 hospitals. Aditya Birla group has
entered into retail in the brand name of MORE.
QUESTIONS
1. Give in brief a growth profile of Aditya Birla in the
development of Birla Group of Industries.
2. Explain the strategies followed by Aditya Birla in the growth of business.

3. What are the main reasons for the emergence of Aditya Birla Group of
Industries in the global map.