FINANCIAL TIMES TUESDAY OCTOBER 15 2013 ★ 23

COMPANIES

By James Crabtreein Mumbai

Reliance Industries, India’slargest industrial companyby revenue, has posted amodest increase in second-quarter net profit, thanks tohigher margins in its petro-chemicals businesses and asharp depreciation in therupee.

Billionaire MukeshAmbani’s energy-focusedconglomerate reported netprofits of Rs54.9bn ($894m)in the period – up 1.5 percent year-on-year, but itwas the Mumbai-basedgroup’s slowest rate ofprofit increase in 2013.

Mr Ambani highlightedthe performance of the pet-rochemicals division, one ofthe largest producers of pol-yester fibre and other mate-rials, which achieved unex-pectedly high margins.

“Reliance’s first-half per-formance reflects the resil-ience of our business modelin a period of volatility anduncertainty,” he said.

“Our diversified and inte-grated petrochemicals busi-ness captured marginsacross segments, deliveringnear-record profit levelseven as the domestic econ-omy slowed.”

This broadly positive per-formance came despite thecontinued weak perform-ance of the group’s oil and

gas exploration division,which has seen regulatorydisagreements and delaysrelating to an easternIndian gasfield it co-ownswith BP.

Reduced productionmeant that quarterly reve-nues at the exploration divi-sion fell 35 per cent year-on-year to Rs14.6bn, even asrevenues for the widergroup rose 14 per cent topass Rs1tn for the firsttime.

BP owns a one-third stakein the company’s KG-DGgasfield following a $7.2bndeal in 2011, but the part-nership has been furtherundermined by indicationsthat India’s governmentmay roll back a plannedincrease in the price theycan charge for the gas.

Negotiations over the pro-posed price rise – whichboth companies say is anecessary precondition toany further investment inimproving output – havebeen marred by wranglingover the reasons behindrecent production falls.

Reliance and BP insistthat the field’s difficultiesare caused by geologicalcomplications, but India’sgovernment has appointedindependent consultants toreview the field’s perform-ance.

Reliance also reported afall in margins at its oilrefining and marketingoperations, which providearound half of the group’srevenue and include itsmain Jamnagar facility inwestern India, the world’slargest oil refinery.

See Lex

Relianceprof its upwith help ofrupee’s fallGENERAL INDUSTRIALS

Petrochemicalsmargins higher

Revenue falls 35%in exploration unit

Twelve years after Indone-sian tycoon James Riadysuffered the ignominy ofreceiving the biggest USfine for breaching electioncampaign finance laws, hisfamily recently marked itsAmerican comeback byacquiring the tallest sky-scraper in the western US,Los Angeles’ US BankTower, for $367.5m throughOUE, a Singapore-listedentity that it controls.

In the intervening period,the well-connected Riadyswere forced to revamp theirproperty, retail and bankingempire in response to theirUS problems and Indone-sia’s 1997 financial crisis.

This set them up to rakein big profits from theremarkable recovery thathas transformed Indonesiafrom basket case into thriv-ing emerging market.

Such trials and tribula-tions are nothing new forthe Riadys who, like theother minority ethnic Chi-nese families that dominatelarge swaths of the Indone-sian economy, have demon-strated an ability to surviveand thrive through boomtimes and crashes.

But, in an ever more com-plex and competitive world,large Asian family busi-nesses such as the Riadys’Lippo Group are beingforced to professionalise ata rapid pace as they try tosecure their future, bring-ing in outside expertise andworking with a greaterarray of partners.

Family patriarchs, such

as 84-year-old Lippo founderMochtar Riady, and hissons James and Stephen,face a tough battle to pulloff this radical change,while ensuring a smoothtransfer of power to thenext generation.

“In the past, many Asianfamily businesses used thesame strategy, to accumu-late assets through creditand that’s why everyonegot into trouble in 1997,”says a senior Lippo execu-tive, speaking on conditionof anonymity.

“We haven’t been perfectin the past and if we wantto be around for another 100years, we have to be morecareful and professional.”

The slide in the rupiahsince May has revivedmemories of the last crisis,but the Riadys insist theyare in stronger shape now,with better managementand fewer unhedged foreigncurrency debts.

Today, the Lippo Group,which is an amorphous col-lection of hundreds of com-panies rather than a singleformal entity, has invest-ments in property, health-care, retail, technology andeducation across Asia.

It works with a long listof international investorsincluding Temasek, the Sin-gapore state investmentfund, Mitsui, the Japaneseconglomerate and CVC Cap-ital Partners, a privateequity firm that trebled itsmoney in three years byworking with the Riadys ona buyout of their Mataharidepartment store chain.

Their eagerness to expandoverseas, and their aggres-sive approach to business,has landed the Riadys indifficulties several times.The most painful was in2001 when James was fined$8.6m by the US Depart-ment of Justice after admit-ting to breaching federalelection laws restricting for-eign campaign financing bycontributing to familyfriend Bill Clinton’s run forthe White House.

But the Riadys’ foreignforays from the US to SouthKorea, China and the Phil-ippines helped them to pre-

pare for an era of toughercompetition.

Forbes estimates thatMochtar Riady is now the11th richest man in Indone-sia, with a net worth of$2.2bn, while the Riadys’Globe Asia magazine pre-dicts Lippo will earn reve-nues of $5.7bn this year, upfrom $4.8bn last year.

The family has come along way since Mochtarstarted his business careerin the early 1950s, runninga small bicycle shop in East

Java, where he was born. Itwas only in 1954 when hemoved to Jakarta, the capi-tal of newly independentIndonesia, that he was ableto pursue his dream ofbecoming a banker.

After developing goodcontacts in the Chinesetrading community, hesecured a position as adirector of a strugglinglender and helped to revital-ise its prospects – the firstof a string of bank turn-rounds that made his name.

It was after he waspoached by Liem SioeLiong, a crony of long-ruling dictator GeneralSuharto, to run his BankCentral Asia that Mochtarmade his fortune, increas-

ing the lender’s assets by390 times in 15 years.

“He was never afraid toleave and start again, hewas never sentimental,”says the senior Lippo execu-tive. “When he thoughtbanking was no longer anarea where family busi-nesses could compete, hesold Lippo bank to Khaz-anah [the Malaysian sover-eign wealth fund].”

Lippo’s day-to-day inter-ests are now controlled bytwo of his children, James,who handles Indonesia, andStephen, who is in chargeof business in Singaporeand the rest of Asia.

The third generation ofRiadys are also moving intokey roles in the business,led by John, one of James’sons, who is heavilyinvolved in the family’smedia and education com-panies. The family’s lack ofsentimentality when itcomes to business sits,some would say awkwardly,alongside their devout faithas evangelical Christians.

James is an avid pro-moter of religious educationand, in addition to the fam-ily’s flagship universitynear Jakarta, which exhortsits 12,0000 students todevelop a “godly charac-ter”, and its private schools,they plan to establish 1,000schools across Indonesiateaching a Christian curric-ulum to those with lowincomes.

John, a 28-year-old US-trained lawyer, says that heturned down the chance towork as an attorney inNew York to help developIndonesia through the fam-ily’s media and educationconcerns.

“People of my generationhave to think beyond thebusiness and take owner-ship of the future of thiscountry,” he says.

But for the tight-knitRiadys – who live nearJakarta in their own LippoVillage development, andwill be buried in their SanDiego Hills cemetery, whichincorporates a country club,helipad and Italian restau-rant – family is alwayslikely to come first.

Family first for Indonesia’s tight­knit Riadys

Asian dynastiesThe clan faces newchallenges as itseeks to thrive atthe helm of Lippo,writes Ben Bland

James Riady: was fined $8.6m in 2001 over US election campaign financing Bloomberg

ASIAN DYNASTIES

MORE ON FT.COMFor the complete seriesexamining the companies andtheir roles in the economywww.ft.com/asiandynasties

Legal Notices

Legal Notices

Contracts & Tenders

Businessesfor sale

FT BUSINESS.........................................................Classified Business AdvertisingUK: +44 20 7873 4909Email: omar.el­madani@ft.com

OCTOBER 15 2013 Section:Companies Time: 14/10/2013 - 19:15 User: wrightj Page Name: CONEWS4, Part,Page,Edition: LON, 23, 1