Succession Season Finale: L&T’s AM Naik steps down to make way for SN Subrahmanyan

AM Naik, non-executive Chairman of Larsen & Toubro Ltd

In 1964, the 22-year-old AM Naik appeared for an interview at Larsen & Toubro Ltd. He was initially offered the role of an assistant engineer for a salary of Rs 760 per month. But after a final interview with Gunnar Hansen, who later rose to become the Deputy Managing Director, the offer was downgraded to Rs 670 a month for the role of a junior engineer.

“Hansen thinks you are overconfident,” Naik was told.

Naik accepted the role anyway. After 58 years with L&T, 25 of which he spent in top roles, the man who drove the conglomerate’s growth and made it a $23-billion multinational with a diversified portfolio, is finally hanging up his boots.

AMN, as Naik is popularly known, will step down as the Non-Executive Chairman of the L&T group at the end of his tenure on September 30, 2023. The board of L&T has decided to confer the status of Chairman Emeritus on him.

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“L&T has been my life,” Naik said in a statement announcing the change in leadership.

“I am immensely proud that I could play a significant part in its growth. The growth trajectory that the company has charted in the last two to three decades is exemplary. The emphasis we laid on IT and technology services has had a significant positive impact on the profitability of the organisation. Going forward also, I am sure that Mr Subrahmanyan will continue to foster the high growth and entrepreneurial culture at L&T. In him, L&T has a highly capable, passionate and empathetic leader,” Naik said.

SN Subrahmanyan, who is currently the Chief Executive Officer and Managing Director of the company, will take over as Chairman and Managing Director with effect from October 1.

Subrahmanyan, who was promoted to the role of CEO and MD in 2017, was selected after a rigorous process. Naik groomed him for the top job for three years before his elevation.

“I must humbly submit that all that we have been able to achieve has been with the utmost support of all L&Tites, and of course with the firm backing of Mr Naik. Mr Naik contributed significantly to building what we know today as L&T. I would humbly like to take up this responsibility and take the legacy of trust, customer focus, timely delivery, quality, people centricity, and professionalism forward,” Subrahmanyan said.

Soon after the company informed the bourses about the change in leadership, responding to a question by Moneycontrol’s reporter in a conference call, L&T Chief Financial Officer R Shankar Raman said, “The company has been planning the succession for quite some time now. I think we have very big shoes to fill.”

L&T’s storied history is witness to how Naik faced, resisted, and succeeded in bitter takeover battles. L&T retained its ownership twice in the past when Grasim, and later the undivided Reliance Industries, made attempts to take over.

Naik was instrumental in ring-fencing L&T against takeovers by setting up an employees’ welfare trust which owns stake in the company, along with institutional investors.

Naik led L&T’s many diversifications, most notably in information technology, as also the initial public offerings of its subsidiaries. He also helped the company change gears by divesting non-core assets and becoming an asset-light leviathan.

There were some brickbats too, about Naik not making way for a successor. For years, there was speculation about when Naik would pass on the baton to his successor. Every time a succession deadline would draw near, Naik would surprise everyone.

In 2012, when he was scheduled to retire, L&T split the post of chairman and managing director, retaining Naik as Chairman while extending his tenure,  and appointed K Venkataramanan as Chief Executive Officer and Managing Director.

In 2015, when Venkataramanan was due to retire, instead of appointing someone to the job, L&T yet again split the position and appointed Subrahmanyan as the Deputy Managing Director and President. This move was seen to be aimed at making Subrahmanyan’s march to the MD’s post (and then the Chairman’s) longer, allowing Naik to continue. But that was then.

While Naik faced many challenges during his tenure, Subrahmanyan, or SNS as he is widely called, steered L&T through the most unprecedented times during the Covid pandemic.

Subrahmanyan battled the migration of workers from project sites on the one hand, and focused on value accretive growth on the other. As the pandemic accelerated the shift to digitisation, he triggered L&T’s next growth spurt by setting up and expanding new age digital and technology-led businesses.

L&T has in the past designed strategic plans and executed them under the stewardship of Naik. It has now embarked on its most ambitious strategic 5-year plan thus far — Lakshya ’26.

This plan aims to double revenues and order inflow in five years, by 2025-26, targets exiting non-core operations, and expansion  of the services business. L&T is aiming for a revenue of Rs 2.7 trillion by FY25-26 as against Rs 1.4 trillion in FY20-21. It is eyeing an order inflow of Rs 3.4 trillion crore by FY25-26, as against Rs 1.7 trillion crore in FY20-21.

This will be Subrahmanyan’s  biggest test.

“Mr Naik will be available to all of us for consultation, given his long history with the company… you can't take L&T out of him,’’ said Raman.

In March 2015, when Naik completed 50 years at L&T, he spoke to employees, former executives, and members of different unions in the presence of former President APJ Abdul Kalam and the then Shiv Sena supremo, Uddhav Thackeray, and shared his ideas about L&T’s future.

Naik stood right next to the C Block on L&T’s campus at Powai, Mumbai, where he started his career in 1965 as a junior engineer, and signed off after his speech by singing “Jeena yahan, marna yahan, iske siva jaana kahan.” (You live here, you die here. Where else can one go but here?)