AM Naik, Group Executive Chairman, Larsen and Toubro in an exclusive interview to CNBC-TV18's Shereen Bhan spoke about various aspects of the business – planned divestment of non-core business, finance business, restructuring, buying stakes, transition of succession. AM Naik will enter into the non-executive role from October 1.
He said restructuring of non-core businesses will be done in next 30 months. 9 or 10 businesses will either be sold or closed. He also said the company would actively consider buying stake in BEML but clarified they haven't yet expressed interest to the government because it is not on the market.
Below is the verbatim transcript of the interview.
Q: Over 50 years at Larsen and Toubro (L&T), over 17 years at the head of L&T. As you move to your role as Non-executive Chairman, how does life change for you, come October 1?
A: So far as I am concerned, I will be very well occupied on different things that what I have been used to running the company day-to-day, planning on a day-to-day, long-term strategy, vision, implementation. From that, I change the role. One thing is, I am very worried always about the leadership at L&T. I have been there for 18 years. My successor is very good. I have been mentoring him for the last 10 years. Three years back, I had announced him as my successor and eight months ago, I said that he will be the CEO and MD from July 1. So, so far, so good. It had been one of the smoothest transition perhaps in the industry.
Q: You were hesitant to stay on as Non-executive Chairman and I know that the board had to do some amount of convincing to get you to take that role. Is it because you fear that what we seen happen during transitions in other companies, very recently in corporate India made you change your mind?
A: Not at all. I think L&T has, at least I had planned in a manner, L&T transition will be smooth. My continuing has more to do with the board management, shareholder management, looking at vision and strategy when presented to the board. And some time, if the CEO and MD and the director wants to come and consult me, they can.
Q: So, you do not intend being at work everyday now?
A: No, but once in a while, yes.
Q: Once in a while, yes?
A: Yes, Non-executives are allowed to keep an office, so I have an office here.
Q: Let me talk to you about the ambitious target that you have set out for L&T, Lakshya 3 and you were responsible for putting together these five year plan and the first plan that you had put together was in 2000. Let me ask you now about the ambition that you have for L&T. Revenue to be scaled up to Rs 2.65 lakh crore, market cap to be scaled up to Rs 1.5 lakh crore.
A: No, the other way around. Market cap is Rs 2.5 lakh crore.
Q: And revenue Rs 1.5 lakh crore, asset light organisation, control the working capital requirement, divest businesses worth about Rs 10,000 crore odd. From where you sit today, how much of this you believe continues to be achievable, how much of it have you already achieved since the time this blueprint was put in place?
A: I would say quite a bit is achieved, but I will be associated, although I am a Non-executive of half-finished agenda which is not going to remain with L&T. So, restructuring, making the portfolio light, getting rid of non-core or not so core, all of that is not really be a part of long-term L&T's Rs 1.5 lakh crore. So that Rs 10,000 crore will take another year or two to really complete what we had planned. So that I am going to do anyway because we do not want to disturb what the company should be in the future. That part of the focus and concentration in doing things which ought not to be with L&T.
Q: So, on track to divest businesses worth Rs 10,000 crore?
A: Rs 10,000 crore by price or by turnover?
Q: That is the target that you have set for yourself as part of your plan. It says businesses worth Rs 10,000 crore will be divested.
A: If you really look at the divestment in terms of divesting money, it will be more than Rs 10,000 crore, but yes, you can say roughly Rs 9,000-10,000 crore by way of turnover is really what will go. Then that will help us to simplify the company. It is today, four steps of conglomeration. I think that is too many. Too much diversification, 82 businesses, 21 companies, over 100 joint ventures. So, all of that is being worked upon. I have been working on it for some time.
Q: So what would be the ideal structure going forward? As you just laid out for us, you believe that this is unwieldy. What will be the structure for the future then?
A: The CEO should run the company. He has about 7-8 colleagues on the board who have been given the various verticals or various industries and then, number of business people will report to him and that is where the leadership stops. Thereafter, it is really the people who will implement it and to me, this is the ideal. Right now, we have one more level so that level, we want to take it out.
Q: But that is the organisational or the leadership structure. What I was asking you about was in terms of further rationalisation. You talked about getting out of non-core businesses, etc. but in terms of further rationalisation of the way the business itself, the group is structured at this point in time?
A: It is a constant process. As new opportunity comes and we think it is a big opportunity, we really take on with that, but non-core is a continuous process. What is core today may not be that core after five years.
Q: So, what is non-core for you today as you look at things and where things stand?
A: I will tell you what we want to be. I would say one is new economy, the new technologies, so we will keep IT company, we will keep technology services company. We have created a new division called Smart World and that is going to grow. Right now, it is Rs 1,500 crore. It started from zero three years ago and it will touch USD 1 billion end of the five year plan.
That means another 3.5-4 years and our project business which is very complicated, we will not do ordinary roads and elevated highway and stuff like that. But right now, you see we are doing a lot of military projects in construction. This is nothing to do with defence, this is the construction part. Underwater construction, complicated construction, border tunnels.
Q: So you will stick with that or you do ot want to stock with that?
A: No, this is our core and that is the building infrastructure, but infrastructure which 20 other companies or 10 other companies can do, we will not do. One or two companies, maybe three, maximum in the country, those who can attempt to do, not that they all can do, but at least they will be qualified in the tendering process. So we will do only those very complicated infrastructure.
Q: So not the low margin kind of infrastructure projects?
A: I think the moment the skill is low, the margin is obviously low. So that is one. Building hydrocarbon projects, hydrocarbon upstream, hydrocarbon mid and downstream, so that is a company we have formed separately now, L&T Hydrocarbon Project LTD. We have a CEO and MD, Mr Sharma who we took.
He is doing very well. So that is the second part. Power, in all its facets, that means power generation either with nuclear or with fossil or with gas and we also build solar plant. So that will remain. Then we have one of the biggest group or division which is really transmission and distribution and we have half the turnover from abroad, half roughly from within India and that has itself gone past Rs 15,000 crore. So that will go to Rs 20,000-25,000 crore over the next four years.
Q: What about the services side?
A: Services, I think engineering service, finance and finance is doing very well. Our issue price was Rs 52. Initially it went down to Rs 35-40, but now it is trading at Rs 210 today. So we have multiplied 4-5 times in the last 2-3 years. So I think that will remain, it will grow. Current market cap of that is nearly Rs 40,000 crore. We think, our target in two years is to cross Rs 50,000 crore. And then we have heavy industry which makes nuclear reactor, which makes nuclear submarines, which makes conventional submarine, which makes space equipment and I would say, defence equipment.
Now what I am saying changes continuously there depending upon opportunity. So about three months ago, we appointed a director on the board of only defence, but the defence includes, navy, army, weapons system and all that except aircraft. We are not going to get into that. And we have seven new facilities created, brand new.
One in Hazira, one in Kattupalli, one in Vishakhapatnam, one in Bengaluru, one in Coimbatore, one in Pune and one in Mysore. So we are all ready for different kind of opportunity that comes in different sphere of activities in defence. We are ready, we do not have to spend money now. We have created that ahead of time. Sometimes, we lose money, we have lost money because the facilities remain unutilised, but now, when the time is coming, in the next 6-9 months, we are ready for that.
Q: Your successor, I think it was said that the defence business for L&T is like a permanent start-up. You just talked about how you have managed to put the capital in place and these facilities are now ready for the orders as and when they do takeoff but on the broader aspect as far as capital allocation is concerned given the experience of the past and where you want to be in future, how do you see the capital allocation policy changing?
A: It is changing a lot because from the development project whether it is power development of infrastructure development, it was a very heavy investment. We are now going to go more and more on a lighter side of the company. So we want to come out of very heavy investment oriented some of these projects and that is part of our noncore now and I hope it is not easy to get out of this because there are no buyers.
Q: You are struggling to find buyers for some of these businesses?
A: Yes because all want to sell.
Q: I also want to specifically ask you about your electrical business because there seem to be concerns that LIC, I believe, has raised on the stake sale of the electrical business?
A: That's news for reporters and it's a new for me.
Q: Have they or they haven't raised any concern on that?
A: At least that is news to me, so now you know.
Q: Where are you finding trouble getting suitors or finding buyers?
A: We are not talking about switchgear and some of the industrial products like valve and welding electrode and all that. I am talking about the infra development, power development. There are 25,000 megawatt power plant available today for buy but there are no takers because everyone is in a bad shape from the point of view of financing some of these projects and people who want to dispose off, need money because they have to repay the debt. So our role economic equilibrium of selling and buying, both at the moment are stagnant because there is no real buyer.
Q: Since you are talking about economic equilibrium, let me ask you about the state of the economy today. The last conversation that you and I had, you were hopeful that there would be a pickup and there would be a revival but things haven't worked out as per expectations? How do you feel about the state of the economy today?
A: It could be better. You have seen that the GDP has somewhat gone down but I continue to be very hopeful that six-eight months from now, as I had said before except that it has got extended, it will continue to do, come back to 7.5 percent - that is what I think because what did not move at all in infrastructure, now at least have started moving; the harbour project that is connecting Mumbai to Navi Mumbai, its Rs 18,000 crore project. The tenders are out, the results are out and the order will be placed within a month and that is Rs 15,000 crore worth of order that will be placed to the industry. Now that's one mega project.
The second project is several metros in the country; they have started moving at least in Mumbai, last year we got. The next metro already opened but they found that the estimate is high, so they are looking at it. Of course it's once in a while project. We are also looking at building Chhatrapati Shivaji's statue like we are building a statue of Sardar Patel and it will be ready next year, it's early than what we had planned and the coastal road of Mumbai, so around Mumbai there are many projects. In another place, there are not many very complicated infrastructure projects. Yes, you can have defence project in civil work but such projects are not that many.
We did build a very complicated bridge across Ganges; its 2 km long and the competition because World Bank was financing, the competition was all over the world and two Chinese were also in it and in no way we could have stopped it because it was international financing. We turned out to be the lowest in price. So we could keep the Chinese out and that was Rs 3,500, but such kind of mega projects where L&T excels. We do not really try for small projects because there are many others who can do that but there are not many, so we need to have more projects come up like high speed railway; it's going to take some time. The foundation stone is laid.
Q: You believe it will be a viable project?
A: I think considering the fact that it is a financing of 60 years and grace period of 15 years, at half a percent, it is as good as free money over a period of time, if you take the value and so on, from that point of view and the fact that 20,000 people will get job for few years it looks like an interesting project. Second, it is a symbol of more development of the country and that you are not an underdeveloped country; France has high-speed railway, China has and other countries which does not have that fast bullet train because they do not depend on train like US doesn't depend on train, all over they have 500 plus airports and therefore plane is very well connected and so is in Europe.
Q: You think this will take India into the league of high-tech nations. You think this is a good bet for the future but let me ask you this since we are talking about many years that you have spent here in L&T and the many milestones that you have been able to achieve. One of your big milestones has also been in a sense to protect the company from many possible takeover threats and I remember reading where you said that a big marketcap will protect us from a future potential takeover threat as well. Does that continue to concern you? Does that continue to be a worry for you?
A: Less than ever before because at that time we didn't have even a single share with employees or -- you can say if Mr. Larsen and Toubro were promoter, we are actually an extension of that promoter and today our foundation like Tata Trust, similar foundation, L&T Employee Foundation owns 12.5 percent worth Rs 21,000 crore. To an extent that was done to ring fence that time when we sold cement to Mr. Birla and bought over all the engineering part of the shares in a split company and that is today worth Rs 21,000 crore because when we did it in 2004, it was worth Rs 3,000 crore but the company's marketcap has gone up 70 times since then.
I took over in April '99 and had a problem immediately. It was a bad year, Rs 212 crore profits and there were some contracts given which should not have been given and it took me some time to sort it out and in November 2001 Mr. Birla bought the shares from Reliance and then in 2002 he started buying more shares. So it was clear that they possibly want some control and that is a time all these tussles started, if you want to call it a tussle and it went on for a year-and-a-half, at the end it ended well. I sold the cement, which was anyway noncore. I had already declared that I would sell it and we bought engineering. We got 12.5 percent worth few hundred crore which today is Rs 21,000 crore. The total marketcap was 250,000. So I think it has worked well.
The purpose was to ring fence L&T and to an extent it is ring fenced plus 15 percent stock options were given to 250,000 employees and if you look at today, 7-8 percent have not yet sold. So, if you combine the two, the block of shares is 20 percent and do not forget we are the second largest shareholder after LIC; LIC is 16 percent, we are 12.5 percent. So things have somewhat changed. Not making it easy for anyone to take over.
Q: I also want to ask you a question on the government holding via SUTTI in L&T and very recently they did offload about 2 percent odd in the company. There has been this talk around whether the government should continue to hold on, why does it continue to hold on, it is a strategic investment because L&T is a defence play. Where do you stand on this and have you had any conversation with the government on them retaining the stake via SUTTI?
A: I had more active discussion before 2004 because we had nobody to protect. Now we have ourselves 12.5 and plus 8, 20 percent.
Q: Now you are not concerned if they were to sell?
A: If they sell 3-4 percent I really don’t mind or I am not going to run to them and say please don’t sell.
Q: So they are currently hold about 4 percent via SUTTI?
A: SUTTI is 3.5 percent.
Q: It does not matter to you any longer whether they continue to hold or not.
A: Anyway it is going from one pocket to other. They sold it to LIC, so, it has not gone into private hands, neither it such a big plot that anyone who wants to control the company will come and buy.
Q: Let me then ask you as you look at the targets that you have set out for yourselves as part of Lakshya 3 and given the fact that the domestic environment continues to be a little soft, the international environment looks better in comparison.
A: Middle East is bad.
Q: Middle East is bad but the global recovery seems to be underway at this point in time. In the future the 30 percent odd that you get from international operations today, do you see that changing significantly, would that be a larger consideration for you going forward?
A: No, because Middle East was our main stay, and that was doing about USD 4 billion a year and now it has come down to USD 3.5 billion. So I would say 20 percent is coming from Africa, Middle East, and so on and 10 percent is technology, service and infotech. So, altogether 35 percent has become 30 percent now. So it is not going to grow much more unless we develop new markets.
Q: Is that a priority, developing new markets at this point in time?
A: It is a priority in where you can say Indians are more at ease to work. Like Africa we can work some part of Africa, Middle East we can work, far East we can work, but we are not going to go to Europe and say we will do projects there, or for that matter in United States. So we are already at Rs 1,20,000 crore as a group, Rs 1,50,000 crore is doable. Even with this not so favourable situation that we are in, we would be more than Rs 1,50,000 crore. Maybe we would have surpassed the target by 10-20 percent, but Rs 1,50,000 crore what we have targeted as such as an internal five year plan remains and that I think we will achieve. We have already touched Rs 1,70,000 crore worth of market cap. When I took over, it was Rs 2,500 crore, so now Rs 2,500 crore to Rs 1,20,000 crore is roughly 70 times what I told you and that to go to Rs 2,50,000 crore should not be difficult. I think we will be able to achieve that by 2021. So our five year plan is on track. I won’t say that the situation is much better from the point of view of exceeding our target. However, we will just about meet it.
Q: Talking about the future, in terms of possible listings in terms of where you see the core verticals of the conglomerate. Is that going to be something that you will push forward, is that going to be an area of priority?
A: We have already done it. As I said, we have separated out in our strategic plan all the businesses which possibly are non-core or relatively less core and that is what I told you was my main responsibility even beyond October 1 because they are half done. I have to finish that in a year or two and they are not going to be part of L&T, so, CEO and MD does not have to worry and if he tries to divert his attention, the company will suffer. As a Chairman I am doing it and I am going to make sure that the company is much better organised, leaner, and fitter.
Q: Are you looking at the possibility of more listings, I mean you listed Infotech for instance, are you looking at the possibility of more listings?
A: Next two to three years, no. Our next review will be in 2020 whether there are one or two business which possibly could list like Hydrocarbon. Long time back we had idea about two three year ago to list power but situation is so bad in power that the listing will not make any shareholder happy. So that we have shelved for the time being but Hydrocarbon is on the cards in two to three years.
Q: You just talked about how the situation is very bad in the power sector. If you look at the portfolio today, and again, this links back to the state of the economy, where do you see the recovery will take the longest?
A: You mean recovery will take faster?
Q: The longest, it will take more time to be able to recover?
A: Power will take a long, long time. When I tell you how we entered into building a brand new world's latest plant – I think some day you have to go to Hazira, last time also I told you ¬– it is one of the pride of India. That is where we have made a new shop for conventional submarine. We make the outer body of nuclear submarine, we build nuclear reactor, we build mega reactor for hydrocarbon, we make boilers, brand new plant, up to 1,000 megawatt turbine, the biggest fort shop in this part of the world.
It is like a little city tour, but industrial city tour and I would say that a lot of those facilities which we had created are partially idle, that is the power plant. Turbine is not even 40 percent busy. Boiler only because we are able to export, we are busy for the next two years.
Q: So, when you hear things like the Commerce Minister is now calling private investors to look at the possibility of getting private investment to move, to pick up, do you see any signs of that because as you pointed out, capacity utilisation?
A: I really do not see any major investment forthcoming because you can say 65 percent of those who invested heavily in the past are under financial restructuring with respect to banks to repay the loans and so on. And balance 30-40 percent, the cycle of investment is nearly over. You see, Reliance had tremendous liquidity and credibility, but their investment, whether it is Jio or whether it is petrochemical complex is over.
And L&T, what facility we to create from engineering perspective is already over. So, people asked me, what are you going to invest on? So I said, if I find a fantastic opportunity to acquire, I will acquire, but to the core, engineering only. I am not going to acquire four more roads and one more power plant and so on.
Q: So is there anything that you are looking to acquire? There is a bunch of stressed assets that are on the block at this point in time. Anything that looks interesting from your core business perspective there?
A: We are just looking at it. We have started looking at it now and we are in touch with the banks and if they have anything kind of more suitable to L&T, we will look at it.
Q: What would be most suitable to L&T today?
A: Anything to do with infra building, anything to do with engineering, anything to do with hydrocarbon, but there is no hydrocarbon company other than us.
Q: What about the government strategic divestment programme? Would you be interested in the government strategic divestment programme of companies which have a defence play as well?
A: We will look at it when it comes because there is a lot of talk but it takes time to really come to the market, but we will certainly look at that.
Q: BEML would be something that you would consider?
A: We can.
Q: Have you expressed interest to the government?
A: No, because it is not on the market yet.
Q: But they have appointed advisors.
A: A lot of advisors are appointed, we will see what comes out of it.
Q: But that would be something that you would actively look at?
A: I think we can look at it, but certainly not Air India.
Q: You said very clearly aviation is not something that you would consider, but are you feeling confident about the Air India divestment taking off, so to speak?
A: If there is a will, it can take off because the player would be global provided simultaneously you also modify the foreign direct investment (FDI) norms.
Q: To allow foreign companies to invest in Air India. That could be a possibility, we are given to understand. So from October 1 now, and I believe you have already planned a 40-hour week for yourself?
A: 35-40, yes.
Q: The unfinished agenda, as you pointed out, that is going to be priority for you to get that done over the next two years?
A: Yes. Plus, I have a lot of activities on trust, philanthropy, we have two trusts, my own trusts which builds hospitals and schools and all that. So there I used to spend 2-3 hours a week. I had people working of course at different places. But I am going to spend one hour a day that means 5-6 hours, double the time. Similarly, restructuring I told you, that is going to take away roughly two hours a day because we have a lot of business to be disposed of, those which are non-core and that takes time.
Then, the real estate. I started real estate five years ago. It has come off very well, I would say. And the brand is so good that people trust us. But there are 2-3 pain points. I am going to get rid of that 2-3 pain point in 18 months and April 1, 2019 I told Subrahmanyan I will hand over because if you try to get rid of these three pain points yourself, a lot more other work will suffer.
Q: So three pain points within the real estate business is what you hope will be able to get rid of?
A: We will try.
Q: Over the next two years or less than that?
A: 18 months.
Q: Why are they specifically causing you so much pain?
A: Anything which has, you can talk to any real estate. The number of government permissions which are required are so large, second the rules are changed and some of it, we got into a crossfire, but we have our way forward now. I can see the light at the end of the tunnel.
Q: Where else can you see the light at the end of the tunnel? I am focusing more on the divestures because that clearly, as you articulated, is going to be your focus area. So where else do you see light at the end of the tunnel? You have given me a very specific timeline for the real estate divestures, give me some more.
A: The restructuring is 30 months period within which all the companies or businesses we want to transfer or get rid of or close will be finished.
Q: How many are likely to be closed?
A: 9 or 10. Not closed, maybe sold or closed.
Q: And what is then left balance?
A: Still 72. Number of companies will reduce by two and if we can reorganise something which Shankar Raman and others are doing under my guidance at the moment is the development project of power and the development project of infrastructure. If we can restructure that or get rid of it, we get two more down and that is non-core.
Q: Over the past 50 years that you have spent here at L&T.
A: 53.
Q: Over the past 50 years which means yes, 52-53 years, what has been, to your mind, the most challenging aspect of running this company?
A: One thing is, I spent 22 years in manufacturing. So I grew up from catching the dust to where I am.
Second, I came from the village. The village was 2,500 people. I studied in vernacular language and even when I went to college in Vallabh Vidyanagar, that is because my father who was in Mumbai decided to go back a way back in 1950 to serve poor people, so I had to also go. Then he said, you go to Vallabh Vidyanagar, so I went to Vallabh Vidyanagar. And there, though 25 percent seats were from outside Gujarat, still people were talking more Gujarati and so on.
So when I came to Mumbai, I had a very tough time being able to let us say, meet you, talk to you and so on and so forth. So I bought a dictionary. It was very difficult. I said in this environment, how will I survive where everyone is from convent, IIT, by the way, L&T took only IIT.
They did not call me for interview. I went to Nestor Boilers and after 18 months, my experience was so appropriate to what L&T wanted to do, so I got the job after 18 months. Otherwise this would have been my 55th year. But, therefore, even in my interview I could not speak well and first interview, I went to Mukund, the personnel manager told me, don't you think your English could be better?
I said yes, because I had seven mistakes in the form, spelling mistakes. So, I took it at heart and then I bought a dictionary, I bought cassettes. That time, there were no DVD and CD and I started playing that hearing the pronunciation and so on. Then you have to correlate that with your thought process.
So I would stand in front of mirror and start talking and then, to learn English, which is well written, I would see the dictionary because the spelling has to be correct. It took me 3-4 years to come to terms with how I could deal now with generally everyone. So that was a very big challenge. But I was in manufacturing dealing with workers, dealing with union. So there, it did not matter so much. So I got away with it, you can say.
So that was my first big challenge. The second big challenge was really growing from a dairy manufacturing shop to a nuclear reactor. When I came, the company had just signed the first nuclear reactor in 1964 and Mr Bhabha invited L&T to be the manufacturing partner and I was in manufacturing. The new shop was coming up. That is the stage where so much was happening and nothing much had happened previous 40-50 years because it was a marketing and sales company.
Manufacturing was very little, that was dairy and that started in 1958, 20 years later after 1938. So to build a nuclear reactor, first nuclear reactor is a huge challenge and 1965 we got the job. I joined in 1965, 1971 we delivered. On that success came Vikram Sarabhai telling would you become our partner. So that was in 1975. So since then we got into aerospace. Then 1988, these are all big challenges for which L&T is known today or rather they think L&T is high tech is because of all these.
So 1988, the Defence Research and Development Organization (DRDO), we partnered with them and started doing development work. We were not allowed to manufacture anything because it was only reserved for public sector and Ordnance Factory. So we did the various missiles, which you see missile launches and we hand over the drawings at the end and the samples and after that, it is not ours. They will give it to Ordnance Factory who never makes it but we could.
So after 10-12 years they realise that we have to now get people who have designed to at least start build and that is how we got into now, almost 90 percent of the missile launches and we make Brahmos missile that is supersonic. So I would say the seeds were sown in 1988. Seeds were sown maybe in mid-90s and we got into first nuclear submarine in 2004 and then that got delivered in 2013 after nine years.
And now, we are working on more and more. So those were all challenges and believe me, I would not have come to L&T. I dreamt of L&T as a student because it had all these challenges or potential challenges and the company which would serve the nation. My grandfather served poor people, my father served poor people, 116 years, as a family, we spent in villages and I wanted to follow their footsteps, but being an engineer, I cannot become a teacher or a principle.
So I said, let me work where good is done for society and the people at large. So I said L&T is the only one that fits it. There were only two major companies, Tatas and L&T and Tatas were more in automobile and steel and all that which did not excite me. So I came to L&T, I could not get in as I told you, I was not in IIT, but my destiny brought me here 18 months later.
And then the biggest challenge came in 2001. Of course there were challenges of takeover targets for many years, but I do not want to go into that. But coming to 2001 and that lasted till 2004, that change the complete L&T in the sense that we had gone up to 1.1 debt to equity and were lowered from AAA to AA+. We went back to AAA, our debt equity came down from 1.1 to 0.1921. our equity had bloated because of the cement plant to Rs 250 crore. I came down to Rs 25 crore. Proved to them, from 1979 to 2003, balance sheet of 24 years, you will not believe I could not even find the old balance sheet.
So I had to find so many basements and finally I put things together. Why we raised money, for what purpose we raised money, how much we raised, how much we raised equity and proved it to the board that we cannot be more than Rs 25 crore and we cannot be more than 0.19. The rest of the money has gone into cement. We have a negative EVA of Rs 350 crore. After the restructuring and after selling the cement, we became positive plus 50.
Then we got the shares in L&T Foundation. That is nothing but equivalent to Tata Trust and then, we got the employee shareholders and employee got stock options so they are very happy. The shareholders, many times they tell me, I have the shares 20 years old and I have now become 50 times richer. So that makes me happy that I think though they were challenging period, it worked out well. I would say God is great.
Q: Your successor says that you are like a father figure to him and you have helped this company dream of doing the biggest things, the tallest buildings, the most ambitious projects and so on and so forth. What is the dream that AM Naik now has?
A: I have a dream that this company will become, one day, one of the largest engineering companies in the world. It is already on of the, but still go into the upper end. If you really look at the cost of building infrastructure in India and cost of building infrastructure in US and Europe, it is 2.5-4 times more. So when we say we are USD 18 billion company, if I transplant this company into Europe or USA, it will become USD 32-35 billion company.
So we are that way, from considering the cost balance, one of the biggest and I think this growth will continue at the rate of 10 percent or so and there is no doubt in my mind that over 20 years it will go past Rs 3.5-4 lakh crore, about USD 30-40 billion which will be equal to USD 70-75 billion internationally. This business is very competitive. So the profit is always 5-6 percent after tax. So, it will have a market cap from Rs 2.5 lakh crore which we are now assuming to go past Rs 5-6 lakh crore.
Being an engineering company, I do not think there are many in the world which has so much. There are other companies which are in consumer product, consumer durables, which has a high market cap, but this type of business, one-off, tailor made projects heavy industry, defence, perhaps, this will be one of the few.
So I dream of that, but more so, the dream can only fulfil if it has a top-notch leadership. So one of the projects that I am taking over now, I mentored 24 people in the last three years from where came five board members, executive board, including Subrahmanyan and seven company heads, CEOs of subsidiaries and all.
Now I have taken 29 and I am going to go as a non-executive, I will be kind of mentoring them. I have started mentoring six months ago and that will take the company with good leaders up to 2030-2032. Now I said, I am not satisfied upto 2030-2032. Company should be strong till 2045-2050. Beyond that, I am not able to see and a lot of people would have retired, so completely new crop would have come.
So, I have taken an age group 35-45 as a team two succession plan and from November, 8, I will start mentoring them. So team one and team two. One team is up to 2032, another one is upto 2045. Till that far, I am planning to think L&T will be strong. Beyond that, God is great.
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