Subrahmanyan is L&T CEO; Naik nonexecutive chairman
ADDING VALUE Under Naik, L&T’s market cap rose to ₹1.58 L cr from ₹4,400 cr
Larsen and Toubro Ltd (L&T), India’s largest engineering and construction firm, on Friday appointed current deputy managing director and president SN Subrahmanyan as chief executive officer and managing director of the company, clearing the path for him to succeed group executive chairman and longtime leader A.M. Naik.
Subrahmanyan, 55, will take on the top job from July 1.
In a separate announcement, L&T said it has appointed Naik, 74, as non-executive chairman with effect from 1 October for a period of three years – for seamless transition of leadership and to provide guidance and mentorship to the management, L&T said in a statement.
Naik’s current term as group executive chairman ends on 30 September. In 2012, he had received a five-year extension for the post until the company’s annual general meeting in 2017.
Subrahmanyan will have large shoes to fill in.
In Naik’s tenure, L&T has gone global, fought bruising battles with competitors, staved off a hostile takeover and diversified into several new businesses, including the manufacture of defence equipment.
Now, L&T has a target of doubling revenue by 2021 with an average annual growth of 15%. As part of this five-year strategic plan, L&T also expects to expand margins by 100-120 basis points, or bps, to 11.2%, improve return on equity by 6 percentage points to 18%, and reduce working capital by 6 percentage points to 18%.
With about $16 billion in revenue, L&T operates in businesses including construction, heavy engineering, power, defence manufacturing, information technology, finance and realty. Often referred to as a corporate proxy for the broader economy, L&T is a complex structure running across numerous verticals and over 150 subsidiaries and special purpose vehicles.
“It’s business as usual in L&T. Mr. Naik has been grooming me for the last three years, it’s a wellthought out process. Most divisions (of L&T) have involved me in, most of the other businesses I’m already fully involved into, so from that point of view it is business as usual and stability,” Subrahmanyan said over the phone.
“Being a professional-driven and process managed company, we have a strategic plan through 2021; most businesses have thought through the plan and what we need to move into and move out of. Our way forward is to follow that strategic plan. We have said we will look more seriously into the defence business, aggressively push our water business,the smart world communication business, and lay importance on our services and infrastructure business, which is the key growth driver,” he said.
Naik has over the past year clearly spelt out Subrahmanyan, who was appointed deputy managing director and president in September 2015, as the clear No. 2 at L&T. Mint had reported that Subrahmanyan will lead L&T from 1 October, when Naik ended doubts over his successor at the company’s 71st annual general meeting in August. (http:// bit.ly/2nKRS6p)
Naik’s decision to be around at the company in the non-executive role would be important for L&T’s turnaround plan, according to Nitin Bhasin, analyst, Ambit Capital.
“Mr. Naik’s staying around at the company is very important for L&T’s turnaround plan or the RoE (return on equity) recovery for the growth plan they have. Clearly, Mr. Naik has built the business over the years and if he had gone, it would not have been the best case scenario for the company. L&T has got multiple businesses, they are looking to divest some businesses, building the tech business, and correcting the capital
Subrahmanyan, a civil engineer and a post-graduate qualification in business management who started in 1984 as a project planning engineer at L&T, was named to the company’s board in 2011. In his three decades at L&T, Subrahmanyan has driven many of the company’s large infrastructure and construction projects, including the construction of the airports at Bengaluru, Hyderabad, Delhi and Mumbai. He also oversaw major international projects, including the Metro systems in Qatar and Saudi Arabia.