The appointments, approved by the board of Larsen & Toubro today, will mark a major change in leadership positions at the company where Naik has served for over 52 years, including as its head for over 17 years.
He became CEO and Managing Director in 1999 and was appointed as chairman in 2003.
Naik will assume the new role of non-executive chairman for a period of three years beginning October 1, immediately upon his retirement as Executive Chairman on September 30, the company said in a statement.
The company's market capitalisation increased to Rs 1.58 lakh crore in 2017 from Rs 4,400 crore in 1999, it added.
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Naik led the company's foray into international markets and consolidated presence overseas with its global operations now account for around 30-35 per cent of the total turnover.
Recognising Naik's contribution, Subodh Bhargava Chairman of the Nomination and Remuneration Committee said: "A M Naik has been the soul of L&T, and has given his whole life to L&T. We are delighted that he has agreed to continue to help the company for the next 3 years."
He had joined L&T in 1984 and rose through the ranks to be inducted into the company's board in 2011. He led many large infrastructure projects, including airports in major cities, metro and freight corridor projects across India and the Middle East.
Under his leadership, L&T's construction business has been ranked among the top 25 global contractors besides being the largest EPC player in India.
On Subrahmanyan's elevation, Naik said: "Across the last ten years, and especially after he was identified as the likely successor three years ago, I have been personally mentoring Subrahmanyan and grooming him for the enlarged responsibilities of the CEO."
Subrahmanyan was earlier appointed chairman of L&T's largest investment at Hyderabad Metro Rail as well as the Naval Shipbuilding facility of the group.