So, today we are going to talk about who is richer between Tatas And Ambanis. Before that, we will know about the background of Tatas & Ambanis, how they started and what are their ethics or values. So, that you understand this case study even better
History of Tata group
Let us start with the history of the Tata Group. It was started by Mr. Jamsetji Tata who was born in 1839 in Navsari, Gujarat. Till 14 years of age, he was brought in there and after that, he shifted to Mumbai. After completing his graduation from Mumbai, he worked with his father for a few years, and then he thought about doing business.
But that period was not supportive of business, as India’s condition was volatile, and most of the businesses were under Britisher’s control. And, under such circumstances, starting any business was a big challenge.
In 1868, when he was 29 years old, he started a Trading company with Rs. 21,000. He wanted to start with a textile business.So, he went to England. Once he returned to India he decided to buy a bankrupt oil mill and converted it into a cotton mill in Chinchpokli, MumbaiSoon, he made the cotton mill profitable and then sold it as a good profit
He again went to England to study the cotton mill business and studied the textile business in detail. He was shocked by the expertise of the textile mill workers and the superior quality of the products thus, he thought of starting such a textile industry in India as well. During that time, Mumbai was the ideal location for starting any business.
Still, he opened his first company, not in Mumbai but Nagpur,because he wanted such a city that would fulfil 3 important criteria -good cotton production, Railway junction for easy transportation of textile goods and easy availability of fuel and water.
Nagpur was the ideal city that fulfilled all these three conditions. Thus, he started his textile mill there. At that time he introduced new initiatives for his workers like Provident Fund, good workplaces. These things were uncommon in those days and the workers had to work in bad conditions and bad workplaces.
Three main aims of TATA
After running his textile business successfully he started to focus on three goals.
- His first goal was to set up an iron & steel Company.
- The second goal was to generate hydroelectric power.
- And the third goal was to set up world-class educational goals in India.
When he was on a visit to the US he saw an ongoing hydroelectric project on Niagara Fall. After that, he decided to start a hydroelectric power project around the area of Lonavala Khandala location of Western Ghats.
But, he could not complete that project. Later that project was completed by his son, Dorabji Tata. In his lifetime, Mr. Jamsetji Tata could not finish three of the goals but he has started working on those projects, after him, his son Dorabji Tata started to work on these projects and completed them as well.
Once upon a time, Mr. Jamsetji Tata was not allowed to enter inside a 5-star hotel because he was Indian. After that, he thought of opening a 5-star hotel, where all Indians were allowed to enter. Finally, he opened the first 5-star hotel in India, which was not only fancy but had a 24-hour electricity supply.
The name of the hotel is known to all of us in today’s time – Taj Mahal Hotel. Due to the success of his businesses he became a wealthy person. Since the time he started his business.
His focus was to pull India out of poverty and make it a strong nation because of which he actively worked towards philanthropy. He started JN Tata Endowment Fund in 1892, through which he used to help students who wanted to go to foreign countries for higher studies.
This endowment was for students of all castes. Mr. Jamsetji Tata himself loved to study and he had high interests in academics. Thus, he thought that if we want to take India ahead and take it out of poverty then we have to help all the talented people of our country.
Therefore, later he decided to start the Indian Institute of Science, which is one of the top colleges in the world in today’s time. For setting that college up, he gave 30 lakh rupees from his wealth. But, IISc also could be completed during his lifetime.
Later, again his son Dorabji Tata completed his dream and in 1911, IISc was finally started. So, he used his wealth to empower India and he used to think a lot of all the Indians. We also saw that one of his goals was to start a steel company so he had already planned for it. He even prepared the concept of a township and he told his son Dorabji that whenever the township would get ready. It would be used to give a place to stay for all the workers.
He said that the township should have a lot of trees, lawns, playing grounds, temple, Mazzids, and Church. He used to think beyond caste and religions. For him, only one thing mattered which was- India. Mr. Jamsetji Tata passed away in 1904 and after that, his business was taken over by his son Dorabji Tata.
To implement his father’s vision, in reality, Mr. Dorabji Tata gave his best. He completed the Hydroelectric Power Plant thought by his father and later worked on the Tata Iron & Steel company. He started a steel company in the village named Sakchi. The township conceptualized by Jamsetji Tata was turned into reality by Dorabji Tata. Later that township was named Jamshedpur. So, Mr. Dorabji Tata completed the 3 goals of Mr. Jamshetji Tata.
This means he started college like IISs, built a hydroelectric power plant, and with that started the steel company as well. Dorabji Tata followed the principles set by his father Mr. Jamshetji Tata and continued the efforts of philanthropy. He gave financial support to the first Olympic team of India. Later he started the Tata Institute of Social Science to promote social work education in India.
After Dorabji Tata, Mr. JRD Tata became the chairman of the Tata Group in 1938 and he was 34 years old. There were a total of 14 companies operating under Tata Group. Mr. JRD Tata was a very passionate businessman who worked aggressively to take the Tata Group ahead and started new businesses. Also, He started Tata Airline and he operated its first flight from Karachi to Mumbai. Tata Airlines was India’s first airline and Mr. JRD Tata made it the best airline company.
Later, its control was taken over by the Government and was renamed Air India. Even after taking control of Air India, the government kept Mr. JRD Tata as its chairman. And, he headed the Air India airlines efficiently.
Later in 1977, when Morarji Desai became the Prime Minister, he removed JRD Tata from the position of chairman of Air India. So, JRD Tata started Tata Chemical, Tata Tea, Tata Motor(TELCO), and the second-largest company of India TCS was started by him in 1968.
Similarly, he started many other companies. When he became the chairman of the Tata Group, there were 14 companies. But when he left the Tata Group Chairmanship in 1991, there were a total of 95 companies under him.
Social work by Tata group
Along with the businesses he kept his focus on philanthropy as well. In 1941, he established the Tata Memorial Centre so that people can get cancer treatment at lower costs. He served as the chairman of Tata Group for 53 years.
Despite that, he did not have his personal plane. He used to live in a rented house and not in a house of his own. For him, the principle of the group was the foremost thing. Once he lost his pen that he bought from England. He shared this incident with one of the executives of the company. and told that he had lost his pen and if anyone gets it then he must return the same.
After some time, one of the executives of the company went on a trip to England and he remembered about the pen Mr. JRD Tata lost. So, he bought a similar pen from England and gave it to him. JRD Tata became very happy after seeing that pen but refused to take it. Then the executive asked him why he would not take it. He replied that as per the policies of the Tata Group, it is not right to take any gift from the company executives.
The company executive said that he brought that pen especially for him and he would not share this thing with anyone. Mr. JRD Tata replied that it is his duty to follow the principles of the Tata Group and he cannot go against those principles. So, JRD Tata was a man of principles and values.
After Mr. JRD Tata, Mr. Ratan Tata became the chairman of the Tata Sons and expanded the business rapidly not only in India but globally. Just like Dorabji Tata and JRD Tata, he worked on the visions of Mr. Jamshetji Tata and made it more strong. So, one can say that the vision of Tata Group was laid by Jamshetji Tata and worked accordingly. Dorabji Tata made that base even stronger, JRD Tata made its walls strong, and later Ratan Tata gave it a roof.
Now, let us talk about the story of Ambanis.
Mr Dhirubhai Ambani was born in 1932 in Junagarh, Gujarat. His father was a school teacher despite that he did not have any interest in studies. He left school after completing 10th and went to Aden, Yemen. For some time he worked at a gas station there and he grabbed every opportunity he got.
During that time, silver coins were available in Aden. Now, Dhirubhai Ambani saw that the value of silver that the coins were made from was more as compared to the coin. Hence, he started to melt that silver and then started to sell that melted silver.
He returned to India in 1957. After returning to India he started living in a chaul and started his first company Reliance Commercial Corporation. That firm used trade-in species and polyester yarn. Later, he entered into the textile segment and launched Vimal Brand that did not get a good response. Thus, he started to sell that brand directly to the customers. Mr. Dhirubhai had strong convincing power. During that time people did not invest in companies.
Despite this fact, he launched an IPO during 1977-78 and he went to different cities to convince people to invest. He told people that if people invested in Reliance Industries IPO then they would be benefitted. He explained the business model, the company’s expansion plan and convinced the people to invest. Later, Reliance IPO was oversubscribed 7 times.
After that, he entered various business segments like a petrochemical business, refinery business, etc, and became the top businessman of India. His business rule was to make quality products and sell them in volumes, even if the profit margin is less. Now, we see that the way Mukesh Ambani has managed Jio and Reliance Industries is similar to his father’s way.
Later Dhirubhai Ambani entered into various segments like communications, infrastructure, and power. Due to the successful business, he could complete the promise he made to his shareholders and they became rich. Before its IPO, the revenue of Reliance Industries Limited was 70 crores and by 2002 its revenue surged to more than 75,000 crores.
People supported Dhirubhai Ambani by investing in Reliance IPO, which is why he made his company a shareholder-friendly company. He started to regularly give dividends to his friends and started to share the future plans of the firm via regular annual meetings.
In the Annual Shareholder meeting, he used to invite all his shareholders and used to book big grounds to conduct the meeting. Due to its business, Reliance Industries Limited was India’s first company that made it to the Fortune 500 list.
Mukesh Ambani and Anil Ambani
Mr. Dhirubhai Ambani passed away in 2002 and after that, the businesses were divided among both his sons, Mukesh and Anil Ambani. In the year 2007, the net worth of Anil Ambani was $45 Billion and the net worth of Mukesh Ambani was $49 Billion.
The companies that came under Anil Ambani like Reliance Power, Reliance Infrastructure, Reliance Communication, etc could not be run efficiently by him. And, due to this reason, the Anil Ambani Group of companies started to perform badly and some even became bankrupt. Recently he made a statement in the court that his net worth is nearly zero.
On the other hand, Mukesh Ambani kept following the principles of his father and pushed his business to the heights of success. As a result, his net worth as of February 2020 stands at $57.4 Billion which is nearly 4 lakh crores in rupees.
Conclusion: Who is richer – Tata or Ambani
Now the question arises that among Tata Group and Ambani Group, which group is richer?
The main company owned by Mukesh Ambani is Reliance Industries Limited and its subsidiaries are Reliance Jio, Reliance Retail. So, if we want to see the size of Reliance Industries or if we have to find out how big Reliance Industries is then we need the market capitalization of Reliance Industries. As of 16 February 2020, it is 9,42,422 crore, and Mr. Mukesh Ambani owns about 48% stake of Reliance Industries and due to this his net worth is nearly $57 Billion.
A total of 28 companies of Tata Group are listed on the stock exchange and their combined market capitalization is more than 11 lakh crores. So, if we talk about size then Tata Group is bigger than Reliance Group. A question that arises here is that if the Tata Group is bigger than the Reliance Group. then why Mr. Ratan Tata is not on the richest person’s list. The answer to this question can be found out by observing the shareholding pattern of the Tata Sons.
Mr Ratan Tata holds less than 1% shares in Tata Sons. If that is the case then who owns the rest of the shareholding?
The rest shareholding belongs to the charitable organizations owned by Tata Group like Sir Dorabji Tata Trust, Sir Ratan Tata Trust, RD Tata Trust, Tata Education Trust, etc. All these organizations work towards public welfare, education, healthcare, social services. About 66% shareholding of Tata Sons is held by these charitable organizations.
If Mr Ratan would own this 66% then he would be the richest person in India. And, not only this he would be the richest person in Asia. But, for Tata Group social impact matters and not the money. Since its establishment, Tatas have focussed on empowering Indians and removing poverty.
So, because of these business principles, Tatas are considered as the second name of ‘trust’.So, be it education, healthcare or the treatment of victims of the 26/11 attack, the social organization of Tata Group has always helped. The money donated by Mukesh Ambani in 2018 was 402 crore which was around 0.1% of his total net worth.
So, it may be said that the Ambani companies take good care of company shareholders. On the other hand, Tata Group of companies take care of their employees, shareholders and society.
If we talk about employment generation then both of these groups are generating employment in lakhs.
In terms of donation, Ajim Premji is the second person on the list. He is the founder of Wipro and last year he donated around 50,000 crores.Before he made this donation, he was the second richest person in India and after the donation, he became the 17th richest person in India.