The AM Naik Era Comes To An End At L&T

“The secret of my success is very simple. It is passion and devotion. Devotion is beyond the stage of dedication. And far beyond that of hard work. Devotion is when you worship your God in a temple. My mandir, my temple, has been Larsen and Toubro (L&T).” —AM Naik*

On Saturday, Anil Manibhai Naik will step down as the non-executive chairman of L&T, marking the culmination of a unique and eventful nearly 60-year career at the company. Hailing from a family of teachers (‘Master Kutumbh’) and a movie buff in his childhood who has even bunked exams to see films, after completing mechanical engineering from his home state of Gujarat, he travelled to Mumbai (then Bombay), where he started work at a small Parsi firm called Nestor Boilers. But restless as he was, he was itching to be part of his dream company: L&T. He got that opportunity when, in response to an employment advertisement in a newspaper, he applied and had an interview with one of its managers, Gunnar Hansen. Naik joined L&T in 1965 at a salary of Rs 670 as a junior engineer. He did not let down his stars: by sheer dint of hard work, he worked his way up steadily. Organisational folklore has it that he did not take a single day’s leave in the first 21 years at the company while clocking 18 hours a day.

Many of L&T’s senior officers are known by their initials or abbreviations of their names. AMN, as Naik is popularly called, steadily moved up the career ladder from workshop supervisor to general manager and managing director and CEO, leading to his appointment as chairman and managing director on Dec. 29, 2003. From 2012 to 2017, he was the group executive chairman; in October 2017, he stepped aside from executive responsibilities and became group chairman. In October of this year, he will move to become chairman emeritus.

Says Vikram Mehta, chairman of the Centre for Social and Economic Progress, who has been on the board of L&T for 12 long years, “Naik lives and breathes L&T. He has a clear vision, is a man of people and details, and through meticulous planning, has been able to implement the vision very well.”

While two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro, may have founded L&T in 1938 as a small engineering services company, it was Naik who built it into one of India’s best-known companies in the global league. While much has been written and spoken about Naik’s eventful journey, three aspects in particular define the Naik era.

The first is undeniably talent management. When Naik became CEO in 1999, seniority and not merit were the norm at L&T. He realised that he needed to marry the two. Towards that, at a time when the concept and practice were rare in traditional companies, he piloted employee stock options. Over the years, with the growth of stock prices, quietly and without fuss, thousands of L&T employees have seen their wealth go up phenomenally. Naik also brought in cultural changes and a sense of ownership through a programme called ‘from employees to L&T-ites.’ By creating the corporate anthem, which is sung at every major function, and pioneering the Ladies Club for the spouses of male employees, he brought greater cohesion and a sense of belongingness for the employees. Along the way, he also set up the Leadership Development Academy in Lonavala and the Institute of Project Academy in Vadadora.

The second dimension that changed the character of L&T was a series of restructurings that he pioneered at the company. By the time Naik became CEO, L&T was a complex organisation with multiple divisions, from small to large. He analysed and bucketed these divisions as core, non-core, and ‘grow and sell.’ Over the next decade and a half, he executed this plan to the ‘T’. Along the way, he also discovered another category: those divisions that needed to be closed down. For example, in 2004, while the cement division was demerged and finally exited in 2009, the company sold its electrical business to Schneider India in 2020.

Finally, when Naik took over the reins of the company, the stock was tremendously undervalued. Visionary that he was, he rightly predicted that it was a right and ripe takeover candidate. His fears came true when both Reliance Industries and the Aditya Birla Group made hostile takeover attempts. He retained the professional character of the company and ringfenced it against future takeover attempts through the unique creation of the L&T Employees Trust, which today has a 14% stake in the company. In the process, between 1999 and 2023, the group revenue grew from Rs 5,000 crore to about Rs 1,83,000 crore.

Honoured with Padma Vibhushan in 2019, AM Naik is a true and rare nationalist business leader. Sums up Vikram Mehta, “AM Naik’s contribution to the company has been phenomenal. He is a larger-than-life personality."