Ambani feud worries CLSA, Merrill Lynch

Foreign brokerages are clearly getting worried about the long drawn out spat within the Ambani family. In a recent report to clients, foreign brokerage CLSA said: "The energy of the owner-family may get dissipated in resolving the dispute."

Further, it says, "If resolution of this issue gets out of the realm of the family (either through a politicisation of the dispute, or through a court battle or otherwise), the repercussions could well be many-fold."

The Reliance 'ownership issue'

In much the same tone, DSPMerrill Lynch has said that a prolonged family dispute may delay upcoming projects in the Reliance group. "A prolonged dispute over asset division could harm the company," it said.

Reliance has strong growth potential in its refining and infocomm businesses, it said. Arguing that the Reliance Industries stock has been a major underperformer among Sensex stocks in the last three months, CLSA says: "The overwhelming factors that will drive Reliance's stock performance in the near-term will not necessarily be related to business fundamentals."

CLSA says: "There is no denying the fact that Reliance offers good value at current levels, especially with both refining and petrochemical cycles being in a sweet spot."

Among the key issues to be resolved, CLSA says, the foremost relates to the ownership of the web of investment companies listed as "Persons acting in concert."

Commenting on speculation on the division of assets within the Reliance group, CLSA notes: "In our view, Reliance Industries as a single entity can create more value to its shareholders (given the synergies it has), and thus any re-organisation will have to be carefully evaluated.

"The best case scenario is an obvious one -- the family amicably resolves the issue and the entities are left as they are. The worst case scenario is a prolonged legal dispute, as this could well sap a lot of familial energy that has been a key force for the success of the group."

Further CLSA says corporate governance issues in the company are an issue, especially, "issues relating to how independent the board is and whether the interests of the minority shareholders have been compromised."

The brokerage says "Reliance's corporate governance rankings have always been on the lower quartile, and lack of transparency and doubts about board independence have always been known."