Connection between Reliance and L&T associated with Dhirubhai Ambani

What is the story behind Dhirubhai Ambani's attachment with L&T company and its shares

L&T logo: The beginning of the story

Everything started back in 1987. When Manu Chhabria an Indian born Dubai based businessman picked up 1% stock in L&T.

Manu Chhabria was also known for his hostile takeovers of Indian business. He had already made his name by taking over Dunlop, Shaw Wallace, etc.

When the news of Chhabria cornering 1% share of L&T was out. There was fear everywhere in the company.

Then Dhirubhai Ambani came to rescue. N M Desai, the erstwhile chairman of L&T approached Dhirubhai Ambani for rescue..With this Sensing an apportunity, Dhirubhai Ambani picked up 18.5% share of L&T in 2 year by spending around Rs. 192 Crore.

With this the threat from Chhabria was neutralised and everyone thought this was happy ending. With 18.5% stack in L&T, Dhirubhai got seats for him and his sons in board of directors.

Dhirubhai was elected a chairman of L&T. And the man who bought Dhirubhai to the company N M Desai was shown to the door. L&T was a cash rich company with an over increasing cash flow.

Dhirubhai used his position to offer a line of credit from L&T to Reliance and asked L&T to buy a huge chunk of Reliance shares.

In 1989, Congress lost the general election and VP Singh was elected as a Prime Minister.

V P Singh had general dislike towards big businessman. He bought back the control of government and government agencies in businesses.

V P Singh instructed LIC ( LIC had a sizeable shares in L&T already) to increase its stokes in L&T and block every move Ambani make in this company.

Things turned so sour that Dhirubhai was forced to resign from post of Chairman.

V P Singh's government didn't last long. In 1991 Congress again came bake to power. By, then Ambani had enough shares and man power to vote Dhirubhai back to the Chairman post.

But with the minority government and mounting economic crisis, Congress government could not support Ambani's openly.

The vote bring back Ambani's to the power was stalled by LIC acting on the instructions from then finance Minister Manmoham Singh.

Loss of interest, with things not going in their favour, Ambani soon lost their interest in L&T. And Since September 1991, the remain as a passive investors in the company.

Dhirubhai dropped his bid for the chairmanship as well. Reliance completely exited from the company in 2001 by selling their entire stack to Kumar Mangalam Birla's Grasim.

It was one of the rarest occasions, when Dhirubhai Ambani had to concead a defeat.

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