Market connected contributions of Dhirubhai- who changed India's equity mindset.

sh50

Active Member
#1
Dhirubhai Ambani is credited with wide spreading if not introducing the equity cult in India. The very fact that some shareholders meetings had to be held in stadiums is testimony to his sway over his stakeholders. The number of investors he benefited(marriages, businesses, studies abroad etc have been said to be financed by reliance). I had written an article a couple of years ago which featured Dhirubhai. Here are some of the extracts related to the share market partly from Gita piramals book among others:-

Dhirubhai was the first Indian Industrialist to appreciate the needs ot the ordinary nvestor and his needs. He turned for funds to the only other option he had: the public.Mobilizing funds from the small investors was a major departure from normal practice at that time as most businesses used to raise funds from state owned financial institutions such as IFCI and IDBI. Ambani believed that the most generous dividends could not make the shareholder rich but capital appreciation of his shares would. It took him half a decade to propagate his philosophy but once it took root, it changed the mindset of corporate India. He coined the term mega issue and with the exception of 1977, the honor of the years largest issue goes to Reliance for almost a decade and a half.. He introduced the equity cult in every small town in India. He single handedly energized the Indian capital market.
Although he was not a pioneer in introducing the conversion of convertible debenture into shares, he was the first to do it on a mega scale.Dhirubhai relentlessly lobbied the govt until it accepted the concept. Investors liked the idea so much that the 1979 issue was oversubscribed six times and convertible debentures became the instrument of choice for management and workers. and succeeded to such a degree that he even coined the idea to convert non- convertible debentures because on conversion of non convertible debentures to shares , the return to the shareholder would have been much higher than what he would have got from debentures.

At a time when India's equity market was in the bear phase, the Ambanis were the first major to tap the overseas debt market with long-term debt, including the 100-year Yankee bond
Paper Shuffling. Examples: the first Indian company to make a GDR issue, the first to get a Moody's and S&P rating, the first Asian issuer of a 100-year Yankee bond.

There was an interesting incident when a bear syndicate tried to hammer down his share prices. Reliance bought all the shares and demanded delivery. In India , technically management cannot buy its shares and so friends of Reliance association was an organization created to buy shares. The stock exchange had to close down because of this which was an unprecedented incident in Indian business history.
 
#3
I fully agree.
Dhirubhai was an institution in himeself. He revolutionised the Indian capital Market. But he was also a smart businessman having learnt his trade not thru any MBA school but thru his intellect, hardwork and experience.
We need such people today.
 

sh50

Active Member
#4
In my view , Dhirubhai Ambani was successful because he was a brilliant lateral thinker in addition to being a superb implementer. Lateral thinking is unconventional thinking or thinking out of the box.. A couple of examples:-

There is a story of a salesman in America who became a multimillionaire selling life insurance. On being asked about the secret of his success, he answered that he told his clients he was there to buy life insurance for them rather than sell it to them. He did this to pre-empt the instinctual American scepticism and abhorrence of salesmen.

Henry Ford, regarded as a business genius was also because of lateral thinking when he lowered the price of his car and double the wages of his workers to create a market.:-
Henry Ford shocked the world with what probably stands as his greatest contribution ever: the $5-a-day minimum-wage scheme. The average wage in the auto industry then was $2.34 for a 9-hr. shift. Ford not only doubled that, he also shaved an hour off the workday. In those years it was unthinkable that a guy could be paid that much for doing something that didn't involve an awful lot of training or education. The Wall Street Journal called the plan "an economic crime, adopting biblical teachings where they do not apply" and critics everywhere heaped "Fordism" with equal scorn. But as the wage increased later to a daily $10, it proved a critical component of Ford's quest to make the automobile accessible to all. The critics were too stupid to comprehend that because Ford had lowered his costs per car, the higher wages didn't matter--except for making it feasible for more people to buy cars.
He increased his market share from 10% to 40% while the share commanded by General motors slipped from 23% to 8%. After cutting the prices 30% during the 1920 economic crises, Ford commanded a 60% share in the market that had grown by a factor of 12 in a decade. Within a decade and a little later his net worth increased from the original $ 28,000 to $ 715 million.

Dhirubhai is probably the most outstanding lateral thinker India produced. An indication of how Reliance runs from inside is given in the people section of their website. It is the most wonderful education anybody can ever have if unaware(examples of lateral thinking). Unfortunately, they have clipped it down drastically.

http://www.ril.com/eportal/VirtualPageView.jsp?page_id=388
Examples:-
http://www.ril.com/eportal/VirtualPageView.jsp?page_id=419
 
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