THERE are only two Indians for whom Mumbai’s great and good will turn up en masse and on time. One is whoever is the sitting prime minister. The other is Mukesh Ambani. This is not just because he is India’s richest man, worth $23.5 billion. It is because he runs India’s biggest private firm (measured by profits), Reliance Industries—and, some say, the country, too. One balmy night last year Mr Ambani addressed a punctual audience of bigwigs at the Taj Mahal Palace Hotel as part of a discussion on “Reimagining India”. He spoke about the impatience of the nation’s 700m living in poverty with the authority of a man raised in the city’s tenements and the sanctimony of someone who now lives in a personal skyscraper that towers above them, a 27-storey perquisite of being the world’s 26th-richest man.

At the celebratory dinner that followed, Mr Ambani circulated wearing the forbearing smile of a monarch. Though he complains that his staff are too protective and that he would like to mix with people more, he does not seem entirely at ease; his eyes dart around as he tries to anticipate which of the throng of well-wishers, sycophants and supplicants will accost him next. And a fair number of the eyes looking back were ill-disposed. A private-equity chief confessed that he felt disgusted with himself for applauding Mr Ambani. The boss of a bank spat out his contempt for that “damn company”. To such critics, Reliance represents one of India’s besetting problems: a huge concentration of wealth and power in the hands of dynasties that determine the country’s fate.

A conglomerate spanning energy, chemicals, retail, telecoms and media (see chart 1), Reliance accounts for 15% of India’s exports, 4% of its stockmarket’s value and 3% of its tax revenues. India’s other giant conglomerate, Tata, is more admired, but Reliance has better finances. Although its ownership is fiddly, its industrial assets are largely consolidated in one listed entity, rather than spread over a cascade of companies, the favoured approach of Asia’s tycoons. After India’s boom turned to bust in 2010 many of its rivals ran up debts. Reliance generates piles of cash—$8 billion last year, before capital investments. It has modest net debt and a higher credit rating than the government. It invests more in India than any other private firm.

Father and sons If you believe Mr Ambani, his firm’s strategy and India’s development are synonymous. Reliance would work with “zeal and intensity” to support India, he told his shareholders recently. Reliance does not wring its hands, or throw them up in disgust; it applies them to the sort of ambitious industrial projects that India needs so badly and other companies fail to deliver. The firm’s refinery in Jamnagar, in the western state of Gujarat, is one of the world’s ten biggest, providing 2% of global crude-oil processing capacity. Its big gas-exploration project on India’s east coast involved draining swamps and drilling deep beneath the sea. Its telecoms arm wants to bring broadband to the masses and start an e-commerce revolution. “People don’t acknowledge how much Reliance has contributed to the country,” says one of the company’s executives. Having started, in 1957, as a textile company, it made successive moves up the supply chain, first to making polyester, then to petrochemicals, refining and, by the early 2000s, oil and gas exploration. Each step involved huge investments. In making them, company veterans argue, the firm opened up the stuffiest, cartelised corners of India’s economy. The subsequent price wars benefited consumers. Its founder, the late Dhirubhai Ambani, became a hero for millions, hosting vast jamborees for the small shareholders he made rich. Although he died in 2002, Dhirubhai’s legacy is unavoidable at Reliance. His portrait stares down from the bulkheads of company jets. At the annual general meeting shareholders stand by his image and wave their fingers at Mukesh, reminding him of his father’s promise to pay bigger dividends. The inheritance can also be unwholesome. As chronicled in “The Polyester Prince”, by Hamish McDonald, a journalist, Dhirubhai was the consummate crony capitalist, influencing officials and politicians in ways that let him run rings around rules. He also fought brutal turf wars with the business establishment.

Sibling rivalry

Be it never so humble Within a couple of years of Dhirubhai’s funeral (pictured), discord broke out within the family, too. In 2005-06 Mukesh and his younger brother, Anil, broke up the company: Mukesh kept Reliance Industries while Anil got the 2G telecoms, infrastructure and finance arms, collectively now known as Reliance Group. Anil’s bit has performed badly since; it is indebted, scandal-prone and has a market capitalisation about a quarter that of Reliance Industries (see chart 2).

Father and sons At the time, it seemed possible that Mukesh might take advantage of the split to transform his company’s way of doing business. Asked by the New York Times in 2008 about Reliance’s legendary network of fixers in Delhi, India’s political capital, Mr Ambani said that these activities had been overseen by his younger brother, adding, “we demerged all of that”—suggesting he wanted Reliance’s reputation for cronyism to be seen as a thing of the past. In 2009 Mr Ambani tried to buy LyondellBasell, a global chemicals firm then in bankruptcy. The deal would have catapulted Reliance Industries onto the world stage, putting it into the same multinational bracket as Tata or Samsung, a South Korean conglomerate, and positioning it as a possible rival, in time, to big Western firms such as BASF and Shell. If it had come off, the deal would have forced Reliance to adapt its insular culture to global practice. It would also have made Mr Ambani a great deal of money. Lyondell relisted in 2010 and today it is worth $55 billion, slightly more than Reliance itself. The deal, though, came to naught. A former Lyondell executive says Reliance was out of its depth. Though it conducted exhaustive due diligence it had a “nickel-and-dime” approach to negotiations that might have worked in India but appeared naive and arrogant abroad. Lyondell managers found Mr Ambani tough and charming, but felt his underlings were not up to snuff. “Their style...would not ever get them serious consideration in the boardroom of Exxon or Chevron,” says the executive. In the aftermath of this failure (and having paid over the odds for stakes in several American shale-gas companies) Reliance cut back its investments. It eschewed buying other distressed assets during the global financial crisis. When its offshore fields came onstream in 2010 they pumped out less gas than hoped for, and perhaps Mr Ambani took his eye off the ball. Reliance’s shares fell by a third between 2009 and 2012, making it “the biggest value destroyer in India”, in the words of a tycoon a bit further down the billionaire rankings.

Though his firm remained secretive, Mr Ambani became more visible. Having invested in the Indian Premier League, a cricket competition, he spent time mingling with sports stars. The completion of his new home, Antilia, a skyscraper designed by American architects, was a sensation. With storey after storey of lounges, gardens and temples, it looms over Altamount Road, the Mumbai neighbourhood once home to the business elite and the civil servants whom Dhirubhai defied.

Reliance has since recovered its poise—and in some ways this is good news for India. It is midway through a three-year, $30 billion capital-investment programme. Part of this is directed at the core petrochemicals and refining divisions. These industries are low-margin affairs, but by making its plants more complex and efficient at using feedstock and their own byproducts, Reliance hopes to make them more profitable than the global average. It continues to invest in oil and gas production and expects profits, currently paltry, to rise—assuming India’s new government puts up the regulated gas price.

At least a quarter of the capital budget, though, will be spent on two immature consumer businesses. One is Reliance’s retail arm, which is already India’s largest chain by sales, with 1,691 shops. The other is Reliance Jio, a 4G telecoms operation started afresh after the company’s old mobile business went to Anil Ambani in the split. It will probably be launched next year, offering both mobile handsets and set-top boxes. To bolster its content and web presence, on July 7th Reliance completed the $665m purchase of Network 18, a broadcaster and e-commerce firm, giving Mr Ambani access to India’s living rooms.

These investments will increase the group’s debt, and they carry risks: the telecoms industry is fiercely competitive, with more than ten operators. But if they succeed the rewards will be big. Analysts expect the group’s profits will rise by over 60% by the year to March 2017, compared with $3.8 billion in the year to March 2014.

Despite (or perhaps having learned from) the failure with Lyondell, the firm is opening up to outsiders at an operational level, as it must do to become a global competitor. In retail it is collaborating with Western brands such as Brooks Brothers and Marks & Spencer. It has agreed to a $7 billion investment by BP in its flagging gasfields, partly to tap the British firm’s expertise. Mr Ambani, who enrolled in but did not complete an MBA course at Stanford, seems to enjoy recognition from abroad, serving on many boards and advisory bodies for institutions including the World Economic Forum (a talking-shop), McKinsey (a consulting firm) and the UN.

Investment on the scale needed to make Reliance of global significance matters for the country, too. Under the lacklustre previous government the amount private firms invested dropped from 17% of GDP in 2007 to 9% last year. Some business houses, such as Aditya Birla and Tata, seemed more comfortable investing abroad. By bucking this trend Reliance now accounts for 6% of private corporate investment in India.

The catch is that India’s most enthusiastic investor is a how-not-to guide to good governance. Reliance often seems secretive and old-fashioned. Deep cultural reform of the kind that other firms keen to conquer the globe—such as Samsung—underwent in preparation is off the agenda. Indeed, outdated governance may be one reason why foreign fund managers are wary of Reliance: they are typically “underweight”, owning fewer shares than the benchmark index suggests they should.

Start with the board. As of June 2014, the average independent director had served for 14 years; and three of the eight were aged over 80. In June Mr Ambani’s wife joined the board. Lines of responsibility are fuzzy. Many believe one of the most powerful men at the firm after Mr Ambani is Manoj Modi, an otherwise obscure university friend who is not a director of the firm and does not appear to have an official post. (Nor is he a relative of Narendra Modi, the new prime minister.)

Next, consider Reliance’s ownership. Although the conglomerate’s operating assets are organised simply, the chain of vehicles that controls the firm is anything but. Mr Ambani’s “promoter group”, an Indian term that refers to him and his allies, owns 45% of the company. Its holdings are split between 66 legal entities. At least some of these are invested in by a mesh of further legal vehicles. For example, in 2013 Kankhal Investments and Trading owned 4.6% of Reliance Industries and was in turn invested in, or held in the trusteeship of, at least nine further layers of holding vehicles, involving at least 50 other entities, according to The Economist’s estimates, based on regulatory filings. Some of Reliance’s holding companies use its e-mail address. Reliance says we have got all this wrong, but by the time we went to press it had declined to explain how.

Reliance says that “the ultimate ownership” of all the entities lies with Mr Ambani and his family. But shown a diagram approximating this structure, one of the firm’s main regulators admits his agency doesn’t fully understand the control chain. “It’s an example of where people are trying to obfuscate who owns them.”

Third, some analysts worry that Reliance Industries pays too much cash to other parts of the Ambani empire. For example, the family gets payments for facilities used by Reliance. Total “related party” costs, mostly to family-owned entities, were $1.2 billion a year, equivalent to 26% of Reliance’s pre-tax profit, making this issue critical for outside shareholders. The board is responsible for ensuring these deals are at arm’s length.

Finally, Reliance is accused of making an $86m illegal gain trading derivatives linked to an affiliate’s shares, in a case from 2007, which is ongoing. Reliance rejects, and says it is still contesting, this charge.

Knowledge and power

Other worries focus not on the company’s internal workings, but its external influence. Ahead of the election held in May, Arvind Kejriwal, an anti-corruption campaigner, alleged that the then government planned to raise gas prices to suit Mr Ambani, and that he had undue influence over India’s two main parties. Rival telecoms firms also grumble that Reliance has too much influence over policy. Reliance rejects these allegations. It notes that gas prices in India are well below international levels.

A copy of what appears to be a draft report by India’s national auditor, which an anti-corruption campaigner says he has filed with the Supreme Court and which The Economist has seen, is critical of the process in which Reliance won its 4G spectrum in 2010. It describes the “apparent rigging and mockery of the auction” and suggests the spectrum be cancelled. Reliance denies any wrongdoing.

Some argue that it is one of a group of firms that will benefit unduly from the national-election victory of Mr Modi, formerly the chief minister of Gujarat. Reliance has perhaps a third of its assets in Gujarat and Mr Ambani is Gujarati. Their relations appear warm.

The idea that Mr Ambani covertly runs India is far-fetched. He is not successful enough for that. Even if the new government does increase gas prices, Reliance will be lucky to make a return on its share of the $15 billion-20 billion to be invested in its offshore gasfield over its lifetime. Many investors attribute a paltry value to his telecoms unit. For a firm that supposedly manipulates India for its own benefit, Reliance’s return on equity is mediocre—at 11% after tax, it is below the company’s cost of capital. Even once its new investments come to fruition, and assuming the gas-price rise, this is unlikely to rise above 16%.

Reliance has in the past been closer to the defeated Congress party than to Mr Modi and his Bharatiya Janata party. Its big bet on Gujarat predates Mr Modi’s time there. But Reliance does have an uncomfortable degree of clout. A former cabinet minister says of Mr Ambani: “His influence is huge. Whatever is happening he knows. He is able to post [bureaucrats] to positions and get ministers appointed who are favourable to him.” That may be an exaggeration of his actual power but it illustrates how powerful he is perceived to be.

A former boss of a giant multinational, who saw Mr Ambani’s dealings with a senior politician, says: “It was not what you’d normally expect to see between an industrialist and a minister. Normally the industrialist was subservient. This was the other way around.” A former securities regulator says: “There is an enormous amount of pressure when you make decisions that influence Reliance…You get 100 telephone calls from a who’s who of India.”

Can Reliance change? Some of its executives argue that the firm will evolve naturally towards becoming a multinational with more open and modern practices. Yet tradition appears to be entrenched. Mr Ambani, who is 57 and has three children, is unlikely to retire soon but seems to be keen on dynastic control. On June 18th he told shareholders that “I want this to be a multi-generational relationship.”

The winds of change

If Mr Ambani’s investments pay off, and Reliance ends up controlling large chunks not just of India’s energy supply chain and petrochemicals sector but also of its retail, telecoms and media industries, a persistently closed culture and opaque governance may clash more with the desires of a new generation of Indians which wants more transparency. Antitrust regulators may become wary. Reliance may end up being the Standard Oil of India—a giant that ultimately fails the test, not of business prowess, but of public opinion.

Mr Ambani could head off this risk by starting a deeper reform of his firm. In his speech to the great and good of Mumbai he warned them that the 700m Indians with little to their names were less tolerant of tradition and authority than ever before. “The youth are not going to be sitting on the sidelines,” he said. He and his family should themselves bear this in mind. They have made Reliance India’s most powerful and feared company. For the sake of their fortune and their country, it is time to try to make it one that more people trust.