AM NAIK, THE WORKING CLASS HERO
This excerpt from a biography of L&T’s AM Naik by Minhaz Merchant details how he ensured employee ownership of the company
Throughout the tug of war between RIL and L&T, Naik played the role of a mediator. He had the Ambanis’ trust. And L&T’s top brass reposed full faith in the man who was rising rapidly up the company’s hierarchy and whose loyalty to L&T over the past twentyfive years had been beyond reproach.
In 2001, Grasim was India’s third largest cement producer, with an annual capacity of 13 million tonnes. L&T was at the time the largest cement producer, with a capacity of 18 million tonnes a year. By then L&T’s market value had climbed to ~8,350 crore, having grown considerably under the stewardship of Naik, who had been CEO for over two years.
In November 2001, in a surprise move, Reliance sold its shareholding in L&T to the Aditya Birla Group. Naik was in Chicago on business. He retells the story, adding context to it. ‘I received a call at 2.20 am from my colleague, the late Mohan Karnani. His first words, were: “Maalik badal gaya hai.” That was the first time I came to know that I had a maalik! I asked him what had happened. He said the Ambanis had sold all their shares in L&T to Kumar Mangalam Birla, around 10.5 per cent. Anil Ambani called me a few minutes later. Anil said that since L&T had never wanted them, they were going — “We have sold our shares to Kumar Mangalam Birla.” I did not reply directly to him, but made general talk. Then at 7 am, Kumar Mangalam called. He said, Naikji, you did not come to us, so we are coming to you...
In windy Chicago, Naik wrapped up business and left for Mumbai immediately... Says Naik: ‘I asked Kumar Mangalam, why have you bought this shareholding in L&T? He said L&T is a grossly undervalued company, there is a lot of money to be made. Then he asked if he could meet Holck-Larsen. So we all met. Three months later Kumar Mangalam started buying shares in the open market. L&T’s stock price went up and up. From ~178 it started rising... I realized then that he is buying because he wants to take over L&T... S Gurumurthy came to my rescue... I was a man from the village. I did not know a single secretary in the government or even the chairman of LIC. I did not know any minister or politician, I knew nobody. I was sitting here, doing my job as a professional...’ Gurumurthy took Naik to meet Prime Minister Atal Bihari Vajpayee. He then took him to see Deputy Prime Minister LK Advani and Defence Minister George Fernandes. Says Naik: ‘Fernandes was like me, a working-class man. He understood what L&T is. He said L&T cannot be sold — and remember, he was NDA Chairman at that time. He told Vajpayee: we cannot sell L&T. Now don’t forget that the BJP had a cordial relationship with the Birlas. I had nobody. I am a man from the village. I wanted to sell our cement division anyway. It was not something we wanted to grow. So I brought an offer from England to buy our cement business. Kumar Mangalam got worked up as he had come in only to buy cement. And here I had created a competitor. In meeting after meeting there was a stand-off.’
As tensions rose the government became concerned... By now the Birlas had brought up their stake to 16 per cent in L&T. Finance Minister Jaswant Singh told Kumar Mangalam not to buy any more... Those were fraught days for Naik and L&T...
‘...The stand-off continued for two more months. One day the banking secretary, a lady, called and asked me if an L&T board meeting could happen that day... She said she would give me a one-line note okaying L&T selling cement. I said yes, provided there is competitive bidding. So they found a way to do it...’ Naik stood firm throughout the negotiations. ‘I told Gurumurthy that we cannot do any deal till the remaining shareholding comes back to us. The L&T Employees Welfare Foundation was then formed, and the structuring was done...’ ‘You will be surprised to know that today our employees welfare foundation has several hundred crore rupees,’ says Naik. ‘...That is how so many employees of L&T have become... crorepatis.’
Naik recalls: ‘After signing the cement deal, Kumar Mangalam extended his hand to me and said, “History should never, never forget you. You know what you have achieved: employee ownership of the company.”