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'The Wall' at L&T

Suman Layak | Print Edition: Apr 1, 2012

One wall fell, another opened a crack. Around the same time Rahul 'The Wall' Dravid announced his retirement from Test cricket in Bangalore on March 9, another man in Mumbai, closing in on 70, said he was far from hanging up his gloves.

A.M. Naik, the feisty Chairman and Managing Director of $11-billion Larsen & Toubro Ltd (L&T), will continue to play a long-term strategic role as Executive Chairman while the newly appointed Managing Director and CEO K. Venkataramanan will run the company and worry about delivering on its quarterly promises, starting April 1.

Naik, who was to retire in September 2012, will focus on the incomplete restructuring of L&T and hand over operational control of "almost 90 per cent" to long-time lieutenant Venkataramanan over six months. The new MD & CEO's attention will be on making L&T, with about 150 businesses, "more competitive". He has worked at L&T since June 1969, Naik from 1965. "For me it will be a three-day Test match now," Naik told reporters in Mumbai.

Venkataramanan, set to retire in June when he turns 67 (that is when L&T executive directors retire), now gets three more years by virtue of his new title. The retirement age for the chairman has now been raised to 75 from 70, giving Naik another five years - a decision with question marks around corporate governance. A governance expert views Venkataramanan's appointment as a welcome example of change but questions Naik's continuing executive role. "...it would have been good had the board made Mr Naik a non-executive chairman or a chairman emeritus like N.R. Narayana Murthy of Infosys," says Shriram Subramanian who runs InGovern Research in Bangalore.

The stock markets, however, cheered the new arrangement, essentially continuity, taking the L&T scrip up by over five per cent to Rs 1,302.35, while the Sensex moved up by two per cent on March 9.

The business of L&T is extremely complex and it is difficult to find people who can handle this complexity - AM Naik, Chairman and MD, L&T

Naik reiterated what he has been saying all along. "The business of L&T is extremely complex and it is difficult to find people who can handle this complexity." Early in 2011, L&T had announced it would split into nine "virtual companies" with the aim of infusing agility and management bandwidth. Business Today questioned the logic of this move in April 2011 predicting Naik would stay beyond his September 2012 retirement date. "September 2012, that's my term and it ends," he had said in an interview then.

The L&T board now has Naik (70), Venkataramanan, V.K. Magapu (66), M.V. Kotwal (64), Ravi Uppal (60), R. Shankar Ramanan and S.N. Subrahmanyan (both 51). Shailendra Roy (59), a senior vice president, was also inducted on the board on March 9. In three years, Venkataramanan, Magapu and Kotwal will retire leaving a younger crop at the board, with Naik still as chairman. It is anybody's guess whether 'The Wall' at L&T will still call it a day.

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