How A.M. Naik transformed L&T into a multinational conglomerate

What is common to Mumbai Trans Harbour Link, the light rail transit system in Mauritius and the Abu Dhabi International Airport Complex? They were all built by Larsen & Toubro.

Founded in 1938 by Danish engineers Henning Holck-Larsen and Soren Kristian Toubro in Mumbai, the company made its name in the engineering and construction space building landmark projects like bridges, airports, nuclear plants, factories, metro rail systems, defence installations, defence vessels, hydroelectric projects among many other things.

On track: The light rail transit system built by L&T in Mauritius.

Though the engineers from Copenhagen laid the foundation of the company, the credit for what L&T is today goes to the Navsari-born Anil Manibhai Naik. He joined L&T in 1965 as a junior engineer and, after 58 years, stepped down as the group’s chairman on October 1.

Naik’s father was a schoolteacher, who left Bombay for his village in Gujarat in 1952. After earning a degree from Birla Vishvakarma Mahavidyalaya Engineering College in Vallabh Vidyanagar, Anand, Naik joined Nestor Boilers, but soon left it for L&T. “My dream was to go to L&T and serve the nation. L&T was the only platform, and today also is the only platform, which can serve our country,” he said in an exclusive interview.

L&T founders Henning Holck-Larsen and Soren Kristian Toubro | L&T photo Archives

Naik’s dedication and hard work saw him rise quickly in the company. He did not take a day off for 21 years, and used to sleep on his office desk frequently. He was appointed the CEO in 1999 and chairman four years later. Under him, L&T grew into an engineering and construction power house. Along the way, it also expanded into areas as diverse as information technology, financial services and real estate. “Naik has been instrumental in making L&T what it is today, a nimble-footed tech-driven engineering and solutions conglomerate,” said S.N. Subrahmanyan, who succeeded Naik as L&T’s chairman and CEO.

And Naik could connect the vision for the industry, the long-term strategy and short-term tactics with seamless ease. “He brought the spirit of entrepreneurship into the mindset of professional managers within L&T,” said R. Shankar Raman, chief financial officer of L&T.

Big family: A.M. Naik and wife, Geeta, at the annual general meeting of L&T in Mumbai in August | PTI

But, it has not always been smooth sailing for Naik. In the late 1990s and early 2000s, he had to resist hostile takeover attempts by the Ambanis and the Birlas. Naik rarely talks about it, but he succeeded in keeping L&T independent. “To me, L&T is like a temple, and I consider myself its keeper. If anyone tries to take over L&T, I am like a wounded tiger. I will do everything within my power to ensure that L&T stays independent and adheres to the highest standards of governance,” Naik told Minhaz Merchant, who wrote the book, The Nationalist (published by HarperCollins), about him.

Naik had a knack for turning crises into opportunities. When the company’s captive IT services business was plagued by high attrition, he converted it to an IT services provider, L&T Infotech. Over the years, the company expanded to overseas markets, securing clients such as Motorola and Chevron. In 2019, L&T acquired Mindtree to become the sixth largest IT company in India.

But, Naik’s standout achievement could be L&T’s manufacturing complex in Hazira, Gujarat. L&T bought the saline wasteland and the initial investment at Hazira was Rs42 crore, mentions Merchant’s book. Now the Hazira campus, or the A.M. Naik Heavy Engineering Complex, is a multi-facility manufacturing campus for heavy engineering, defence, shipbuilding and power equipment.

Another of his big contributions was, perhaps, bringing in meritocracy at L&T. Earlier, promotions were entirely based on the years of service. Naik himself got a promotion only after 12 years. Now merit is the only key metric.

Even as L&T was spreading its wings across sectors, the engineering, construction and contracts (ECC) business remained at the heart of the company, and Naik’s impact is visible the most here. He restructured the business, separating the heavy civil engineering business into one division and building factories into another. He decided not to take up projects that are less than Rs25 crore. As projects got bigger and bigger, it now does not do projects less than Rs1,000 crore.

The tremendous growth under Naik reflects on L&T’s financials. Between 1999 and 2023, its revenue rose from Rs5,000 crore to around Rs1.83 lakh crore. “One aspect that makes Naik all the more special is his ability to visualise the future and plan for it well ahead. L&T’s evolution and staying relevant can be largely attributed to this quality of Naik,” said Subrahmanyan.

Naik groomed Subrahmanyan for more than a decade, and was proud that it was one of the smoothest transitions of power in a publicly held company. “He kept away his family from the business,” said Merchant. “There is no dynastic thing going on like we see in other companies. He could not only have become a promoter, but also promoted his family to positions of power. But, it is a completely professional succession,” said Merchant.

And Naik is happy man. “Why am I happy? Because the leader L&T has will take the company forward,” he said.

Naik dedicated his life to L&T, but he was clear that he will not own it. When the Birlas sold the stake Grasim owned in L&T, an employees trust was created to hold the shares. L&T Employees Trust now holds around 14 per cent, and is the largest shareholder in the company.

Naik spent a lot of time with employees on the shop floor, and that helped him build excellent relations with union leaders. Merchant has quoted Shailendra Roy, a former director on the board of L&T, in his book as: “Trade union leaders and workers always recognised Naik as a fair person and held him in high regard. This quality helped him negotiate and settle their charter of demands successfully over the years.”

Naik is not hanging up his boots just yet. He will remain the chairman of L&T Employees Trust, and the IT and technology subsidiaries for another year. He is also mentoring a clutch of future leaders in the 35 to 42 age group. They should be ready to take up leadership roles by 2032. “Mentoring is a big thing I do. Right now I am mentoring 40 people as a part of creating future leaders,” he said.

The leadership development involves a management education programme in association with IIM Ahmedabad, a global leadership development programme at Ross School of Business, Michigan, a programme in association with INSEAD Asia campus in Singapore, and a global CEO programme with Harvard Business School.

In the past few years, Naik has also been devoting a lot of time to philanthropy. He pledged 75 per cent of his income to charity, setting up the Naik Charitable Trust, which focuses on education and skill building, and Nirali Memorial Medical Trust, which focuses on providing health care facilities. The Nirali Memorial Medical Trust is named after his granddaughter whom he lost to cancer at two. Naik turned his personal loss into a philanthropic goal. The trust runs several facilities, including a multi-specialty health care facility in Mumbai, a radiation centre in Surat, and a health campus in Navsari, which has a state-of-the-art cancer care centre and a multi-speciality hospital.

“He was ahead of the times in philanthropy and generosity as well, giving 75 per cent of his wealth to charity,” said Merchant. “His contribution to building a school and hospitals is extraordinary and predates the philanthropic work of many others.”

“My life and legacy are L&T,” Naik wrote in his letter to shareholders this year. And he was “happy and content” that he was leaving it in “capable hands” to continue its exemplary record of service to the nation and society.

The famous Raj Kapoor number ‘Jeena yahan, marna yahan, iske siva jaana kahan’ is Naik’s favourite song. Nothing sums up more aptly his legacy and his sense of belonging at L&T.