The self-made CEO

LUNCH WITH BS/A.M. NAIK

This is a story Anilkumar Manibhai Naik clearly loves to tell. In 1964, Larsen & Toubro's (L&T's) works manager E T Baker interviewed a young man who had about 18 months of work experience at Nestler Boiler, a small engineering outfit run by a Parsi businessman. Baker was impressed with the young man's dynamism and promised him a supervisory grade job at a salary of Rs 760.

The trouble was that the general manager, Gunar Hansen, found the applicant over-confident. "How many people work under you at Nestler?" Hansen asked. Three hundred and sixty, came the reply. "It will take a long time to get 360 workers under you at L&T."

The young man's response was: "Who knows? Time will tell." The young man of 1964 is 62 years old now. He was made CEO and managing director of L&T in April 1999. On December 30, he was made chairman. And, as he pointed out, he occupies Hansen's chair and his room at L&T's Powai facility.

A month after he joined L&T, Baker invited Naik home and offered him a glass of beer and some useful advice. "Act like a man, be tough," he told Naik as they sat at the semi-circular bar in his house. For the past 28 years, Naik has been living in the same house at Bandra that Baker lived in.

Naik is a good raconteur. He can spend hours talking about his schooldays in a small village called Kharel in Gujarat, the influence his Gandhian father has on him, his engineering education at Vallabh Vidyanagar and life at L&T.

He accepted Business Standard's invitation to lunch but lack of time meant my colleague Mansi Kapoor and I had to make do with a meal at his office on a Saturday afternoon. The next morning, he was to catch a flight to the US to meet his executives at L&T Infotech and there was a mountain of paperwork to clear ahead of that.

Lunch was served at a small conference room next to the chairman's secretariat. It started with sweet corn soup followed, rather strangely, by yellow dal that none of us touched.

Naik's self-assurance is clearly that of a self-made man, and he's not afraid to show it. A mechanical engineer from the Sardar Patel College of Engineering, Naik's ambition was to become a manager at L&T when he joined the company.

When he reached that goal within three years of joining, he said, he knew that he could become a director at L&T. In 1989 when he joined the L&T board, he knew that one day, India would open its economy and the company would have to compete with multinationals.

In readying for that challenge he took credit for creating the "two most important divisions of the company "" engineering and construction and heavy engineering." This was, he explained, in keeping with his motto of self-reliance. "About 95 per cent of L&T business will not be affected by globalisation," he told us confidently.

He was happy to enumerate several other business decisions he took that turned out to be sound. The one that makes him most proud was his decision in 2000 to get out of non-core businesses like cement, packaging and glass and focus on engineering and allied activities to improve shareholder returns.

Of course, we were keen to know all the ins and outs of the battle for control of this blue-chip engineering giant. But the otherwise loquacious Naik proved far more reticent on this head.

He had watched the boardroom battle from a distance in 1988 when Reliance mounted a bid to take over L&T, which dwindled into a minority shareholder interest. More recently, when the A V Birla group bid for L&T, Naik was the protagonist in the board room battle "" a professional manager defending his company.

For the Birlas, what was initially a pure financial investment "" a 10.5 per cent stake bought in November 2001 from Reliance "" became a rallying point for full management control.

What was it like, as a professional manager, to take on the shareholders? Naik refused to be provoked. Chewing on fried rice and hakka noodles with vegetables, he said in a matter-of-fact manner: "This sort of thing happens. For generations, L&T employees have believed that it's their company. They are all emotionally involved. During the Reliance India Ltd investment in 1988, I was not in the middle of things. Later, we [ including the Ambani brothers Mukesh and Anil] were all on the board."

After some persuasion, he opened up a bit. "Both Reliance and the Birlas are our outstanding customers. I had been involved with Reliance when it was building its Patalganga and Hazira plants. We have a tremendous personal equation. In a way, I was a technical advisor to Mukesh [Ambani]. The chemistry has always been very good. But then, there can be conflicts at times and you need to take a position. I have always been a good moderator."

If that's the case, why did he seek the services of S Gurumurthy to negotiate with the Birlas to sort out the L&T imbroglio? Pat came the answer: "Dr Badrinath of Shankar Netralaya is a common friend of both Gurumurthy and me. He said that Gurumurthy can help us. He knows Kumar [Kumar Mangalam Birla] well. Badrinath is a very respected figure and I accepted his advice. After all, no one wants to create a situation from where one cannot return. So you need a buffer and Gurumurthy played that role. There is no mystery."

It seems Naik enjoys good relations with Kumar Mangalam Birla too. "I have a fantastic relationship with Kumar. In 1976, his great-grandfather G D Birla wanted me to join as CEO of Birla Consultancy Pvt Ltd.

When I did not respond, 15 days later his secretary contacted me again and this time I was asked to take over as chief of engineering. Finally, Kumar's father Aditya Birla called me and asked me to take up the CEO's position anywhere "" Malaysia, Indonesia and the Philippines. I was the only L&T executive to attend Kumar's engagement ceremony. And mind you, at that time I was not the CEO of L&T."

When the Birlas bought out the Reliance stake at L&T in November 2001, Kumar Mangalam Birla called Naik in the US and told him, "You did not come to us. We are now coming to you."

For all the mutual bonhomie, Naik admited that the final negotiations were quite tough, but hastened to add: "All of us were working for our objectives, but nobody had anything personal against anybody."

The plates were taken away and small bowls of fruit salad were placed on the table. For us, there was papaya, strawberry and pineapple but Naik had only sweet lime.

The emerald stone on the ring on his right hand caught my attention. It was given by Satya Saibaba of Puttapatti four years back. The topaz on the left hand was recommended by an astrologer. Did he believe in astrology? Naik hedged the question. I prodded a bit more and ask him what the astrologers predicted for his future. "More tension," was the brief reply.

Does he have a life beyond work? "My children always grumble about my work. Even though I have been working for 37 years with this company, actually it could be 75 years because I work 18 hours a day. I relax playing badminton at Khar Gymkhana once a month with my batchmates at L&T. I have five dogs at home "" a German Shepherd and four Pomeranians."

We asked him whether the L&T transformation story was complete with the demerger of the cement unit. Far from it. Naik hinted that more business divisions could be hived off in the future if they do not fit with L&T's core business plan.

"What is core today can turn out to non-core tomorrow. Our current vision plan comes to an end in 2005. This year we will work on the blue-print for the next vision plan. We are changing the company in every way. Even the socialistic structure of the HR practices is being changed. It has degenerated into a seniority-based system like that of IAS. We are making it performance related," he said.

Despite these shortcoming, Naik thinks the L&T transformation story can be a case study for business school students. "I may write a book on this if I get time," he said.

By now, it was well past 2 p m and we had already exceeded the allotted time. I slipped in two quick questions. Did he find his engineering background a hindrance in running a company? "I run an engineering company," he said, "so, it's an advantage for me. Frankly, I am more of a commercial man today than an engineer. I am the architect of the cement demerger plan."

And finally, had this been his biggest challenge at L&T? His answer suggested that he is free of the pangs of false modesty. "I was a village boy from a vernacular school.With my poor knowledge of English I competed with IIT students, beat them and reached here. I tell my sta ffers 'You can be me'."