Lifetime achievement award: Meet AM Naik, the Oracle of Indian engineering

A M Naik transformed L&T into an aggressive private sector company run by professionals, with a continuous focus on shareholder returns

When the 78-year-old group chairman of Larsen & Toubro (L&T), A M Naik, heard he would be conferred the Lifetime Achievement Award for 2020, his first reaction was to not only credit the success of L&T to Team L&T but also to the construction major’s business associates and clients, which have been with it for decades. “I must thank all my colleagues, L&T associates and the Business Standard Jury for this award,” said Naik.

It is Naik’s folksy leadership style and down to earth work culture that marked much of his tenure at one of the country’s oldest engineering companies. Whether it is former employees or competitors, all have admiration for the man who was known to work 16 hours a day and still keeps track of the progress of every project L&T is working on.

In the five decades that Naik spent at L&T, his ability to maintain a personal relationship with employees and rivals held him in good stead. The common sentiment among his colleagues was that behind the tough boss was a generous gentleman waiting to hear the problems of employees.

Naik’s dogged persistence helped build an organisation that has pugnaciously held on to its independence and vision, in a tumultuous business environment. And now, three years since he walked out of the corner office in the sprawling campus in Powai, these are the qualities that are helping him rebuild his life as a philanthropist and mentor to young students and professionals.

Naik, the school teacher’s son who made it in the big city, joined the company as a rookie engineer in 1965 who never forgot the power of the shop floor. As he grew in his career, Naik never let the trappings of his office get between him and his colleagues. His booming voice in L&T’s Ballard Estate office is now part of L&T’s folklore as he presided over meetings, making tough decisions while thumping the table to drive home a point.

As he made his way through the corporate corridors, there were many issues that proved to be hurdles. His poor command of English, the language that opened doors and won contracts in the Indian corporate sector at the time, was among the big ones. But he let none of that overwhelm him, or his desire for the top job. And in 1999, he took over as managing director and CEO, going on to become chairman in December 2003.

From a company controlled by financial institutions with a lethargic work culture, Naik transformed L&T into an aggressive private sector company run by professionals, with a continuous focus on shareholder returns. While a large chunk of L&T’s stake is still held by institutions, employees now own a 14 per cent stake and that has entirely been Naik’s doing.

He held the company together through some of its most challenging times, steering it deftly through some tough corporate battles and throwing a protective ring around it when predators came too close for comfort. When the Ambanis cornered a major chunk of L&T’s shares in the early nineties, the company’s employees revolted — leading to the Ambanis’ exit from the engineering giant. The Ambanis later sold their stake to the Aditya Birla Group.

While many thought that Naik and L&T would cave in to the pressure, Naik made sure that L&T did not go to the Birlas and after a long war, hived off L&T’s cement business to the Birla group but retained control over the flagship company. But he kept a steady head and kept L&T safe through the hostile takeover storm, winning his employees’ trust by buying out Birla’s stake in L&T.

Soon after the cement unit was hived off to Birla’s Ultratech, Naik asked employees to take on the mantle of ownership at L&T. “We should perform so well that it should become impossible for anyone to buy shares in our company because good results will make the stock expensive,” Naik told them at the time. His words have been prophetic: The market value of L&T has escalated over 25 times since June 2003, from Rs 6,000 crore to Rs 2.06 trillion as of March 2021.

With employees now owning nearly 14 per cent of the company, it is almost impossible for anyone to think of a hostile takeover. Indeed, the tables seem to have turned, with L&T’s acquisition of Mindtree for close to Rs 10,000 crore.

There have been tough times in business, too, when L&T was under pressure due to its high exposure to infrastructure assets. There have also been times when it has restructured businesses and divested some key divisions. But, it’s also created businesses such as L&T Technology Services and L&T Infotech, which now command a combined market cap of nearly Rs 1 trillion. L&T holds over 74 per cent stake in each of these companies.

L&T Finance Holdings (where L&T owns a 63.65 per cent stake) is another business, which is currently valued at over Rs 26,000 crore. Together with its 61 per cent of the software firm Mindtree, which is valued at Rs 28,500 crore, the stakes in these subsidiaries account for a little over half of L&T’s market capitalisation.

Naik was conferred the Padma Bhushan award in March 2009 for his contribution to Indian industry. A family man, Naik’s children are based in the US, and post-retirement, he lives in Mumbai with his wife Geeta, and wants to focus on charity — he has promised to donate 75 per cent of his lifetime income to charity. As for the man who now seems to have the world at his feet, he says, “No one made me. It was introspection that brought me here.”