Henning Holck-Larsen and Soren Kristian Toubro set up Larsen & Toubro (L&T) in Mumbai in 1938, initially as a representative of some Danish dairy equipment companies. In 1940, it got into construction and execution of big projects. By the 1950s, it had already made a name for itself for its ability to take charge of complex construction and engineering projects. In the 1960s and 1970s, it diversified into a number of areas, mostly businesses where some degree of engineering expertise would come into play, even though construction and engineering projects brought in the bulk of the sales and profits.
In 1965, Anil Manibhai Naik joined L&T as a junior engineer. He rose through the ranks and became CEO and MD of the company in 1999. In 2003, he became the chairman. He fended off at least a couple of takeover bids, and vastly expanded the company. L&T has a retirement age of 65, but in 2007, when Naik reached the age of superannuation, the company had become so big and so complex in its operations that the board thought it best to give Naik a five-year extension. A successor was supposed to be groomed in these five years, but in 2012, there was again no suitable successor in sight and Naik was asked to handle L&T for another five years. In 2017, those five years will be up, and Naik hopes to finally retire.S.N. Subrahmanyan, like Naik, is an L&T veteran having joined it in 1984. Naik first ran into him in 2004, when Subrahmanyan was handling a construction project, and started grooming him for higher responsibilities. By 2012, Naik had started entrusting Subrahmanyan with more and more responsibilities, and currently Subrahmanyan is Deputy Managing Director of L&T and handles businesses and divisions that bring in roughly half L&T's revenues.
Subrahmanyan is expected to be ratified by the board as Naik's successor soon, and Naik himself has planned a smooth takeover. Naik and Subrahmanyan are also now engaged in changing L&T dramatically. A number of businesses are being shed, while a few others will be spun off. The L&T that Subrahmanyan finally takes over will be a much slimmer version than the one Naik has built up over the years. A lot of non-core businesses are expected to be sold off or closed down over the next six to eight months. Simultaneously, new thrust areas have been identified, which Naik and Subrahmanyan expect will bring in tremendous growth for L&T.
Subrahmanyan will be taking over at a tough time. Though L&T is doing exceedingly well, it has not been immune to the slowdown in the overall economic environment. Its order book is showing slow growth, while some of the big infrastructure projects it undertook are progressing very slowly. Also, Naik has been a legendary overachiever and it is inevitable that Subrahmanyan's first few years, at least, will be scrutinised very carefully by analysts, who will constantly compare his work with that of his predecessor.
In our cover story this issue, Senior Editors Nevin John and P.B. Jayakumar take a look at how L&T will change, and also what Naik plans to do once he retires.