The new deal was possibly ordered by the political establishment and means little in real business terms, especially since it is inconceivable that Mukesh Ambani would get into finance and telecom

The press release issued on Sunday afternoon was matter-of-fact: “Reliance Industries Ltd. (RIL), led by Shri Mukesh D. Ambani, and Reliance ADA Group companies, Reliance Communications Ltd., Reliance Infrastructure Ltd., Reliance Natural Resources Ltd., and Reliance Capital Ltd., led by Shri Anil D. Ambani, have today approved and signed an Agreement canceling all existing non-compete arrangements entered into between the two groups in January 2006 pursuant to the scheme of reorganization of the Reliance Group and entered into a new simpler, Non Compete Agreement with respect to only Gas Based Power Generation.”

The reaction was of utter surprise across media, the corporate sector and market players. Does this mean that the two brothers are now bhai-bhai? Or does this mean that Anil has finally thrown in the towel in the high-stakes fight he was fighting? Analysts were quick to point how Mukesh Ambani is now free to get into telecom, a dream business for him until the fight broke out and he had to give it away to Anil. He can also get into power and then financial services. The market, of course, believes all this. Reliance was up 2.72% by the end of the day. Anil Ambani’s companies too made smart moves. Reliance Natural Resources was up 22.70% and Reliance Communications was up 10.99%.

This writer, whose first brush with a Reliance balance sheet was in 1984, 26 years ago, has a different view. Knowing Anil Ambani and Mukesh Ambani, their business motivations, personal bent and their current financial status, this truce is temporary and means very little in real business. According to a long-time Reliance watcher I spoke to, the truce was directed by political bigwigs who literally ordered them to arrive at some sort of settlement that can send a signal to the public that all is well now. “All this is drama. They have been asked to display friendship which is what they are doing.”

In which case, what does it mean, in business terms? For one, Anil Ambani can now look to sell a part of his telecom business which is what he tried to do when he struck a deal with MTN in 2008. That deal came unstuck because Mukesh Ambani scared MTN out of the deal by saying that he was holding the first right of refusal and therefore a deal with Reliance Communications would lead to a long-drawn legal fight. MTN subsequently tried to tie-up with Bharti.

Second, as part of the deal, Anil Ambani will now get some compensation for higher gas prices. This can come in the form of RNRL being taken over by Mukesh Ambani since RNRL is a shell company now.

What about the speculation regarding Mukesh Ambani’s moves? Those who know even a little bit about him (and there are so few of them) would find it hard to believe that he will enter a business as fragmented, risky and volatile as finance which offers so little potential for scalability. He has no interest in owning a mutual fund and fighting it out with 38 others. Mukesh Ambani running a stock-broking company? Nothing can be more ridiculous. The Reserve Bank of India will not give a license to an industry house and therefore he cannot set up a bank. Experts who have predicted that Mukesh Ambani will now enter finance have no clue as to how Mukesh Ambani’s mind works.

Those who know that the telecom business was dear to Mukesh Ambani (he was truly rueful when he had to give it up to Anil as part of the settlement) will assume that Mukesh Ambani will jump into telecom now that the non-compete clause is gone. Indeed, all analysts have broadcast this, today morning. Once again, it seems most unlikely to me that Mukesh Ambani would still be interested in a business whose business model is broken after five years of incredible growth. There are too many players aping each other. There is little competitive advantage today. Maybe Reliance will enter this business someday but only when several of its competitors have gone belly up.

The only possibility is Mukesh Ambani entering power which involves all the skills that Ambani is famous for: execution skills of mega-projects, massive fund-raising, managing the environment and so on.

So, if the friendship was all a drama and businesswise little has changed, will the constant behind-the-scenes sniping by the brothers at each other come to an end? Don’t bet on that either.