Larsen & Toubro Limited (L&T) is one true Indian multinational that serves customers in over 30 countries, across various industries. And still at the helm of its affairs is a man who has masterminded L&T’s transformation into a world-class conglomerate. A. M. Naik, Group Executive Chairman, L&T, speaks about what it takes to lead a multinational giant, designed to deliver engineering solutions globally.

Interview by Anishaa Kumar | July Issue 2017 | The Dollar Business

TDB: You have been a part of Larsen & Toubro Ltd. (L&T) since 1965 and have witnessed it go through major expansions and changes. Where do you see the company heading from here?

A. M. Naik (AMN): L&T has always been a ‘national sector’ company. We have always operated in areas where we feel the country needs our services. And the idea has always been to discover our core businesses’ competencies and excel in those businesses. I also believe that the core businesses have to be re-evaluated every five years. This evaluation of course, also depends on the nation’s economic growth trajectory and GDP.

We will have to keep reinventing ourselves to meet the needs of a changing India. For example, we started defence manufacturing almost 30 years ago with Defence Research and Development Organisation (DRDO) and Indian Space Research Organisation (ISRO), with small components manufacturing, and are now positioned as a leading defence manufacturing company in the country.

Alongside an eye for the future, one also has to have great execution skills, which I feel we have at present and which we will have to keep honing in order to succeed in the future.

TDB: L&T is one of India’s most reliable companies across a variety of sectors. What do you think has been the company’s biggest achievement so far?

AMN: We have indeed seen huge progress over the last 10 years. While one must always strive for more growth, our most notable achievement has been that instead of just focussing on growth we have always been on the frontlines of the industries which India has needed. Whether it be nuclear power, defence or infrastructure, L&T has always been at the forefront and has delivered when called upon by the country.

We have successfully played a pivotal role in the growth story of India and that is what I consider our biggest achievement. “We make things that make India proud” has always been our pledge.

TDB: Last year, L&T announced a strategic five-year plan called ‘Lakshya’ through which the company plans to double its revenue by 2021. How do you plan to achieve the target?

AMN: Building on our inherent strengths of engineering excellence, professionalism and financial prudence, a new L&T is emerging – one that is innovation driven, agile, asset-light and delivers superior value to all stakeholders.

Our goal is to double our revenues and achieve a revenue target of over Rs.2 lakh crore by 2021 under the strategic five-year plan ‘Lakshya’ – without compromising on our margins and achieving an order inflow in excess of Rs.2.5 lakh crore per annum and I believe we are on track to achieve those targets.

We believe that the economic conditions are now starting to turn in our favour. So, combined with the right strategy and on-ground execution, our target, though ambitious, is most certainly achievable.

TDB: L&T, as you have rightly stated, is today a leading player in defence manufacturing. How conducive is the Indian defence manufacturing environment and what do you think needs to be done to bring it on par with defence manufacturing sectors in other countries and reduce import dependency?

AMN: The indigenous defence manufacturing sector in India has been historically plagued by bureaucratic red tapism and delays. However, the current government has taken appreciable steps towards involving the private sector in defence manufacturing.

L&T recently won an order to manufacture 100 tracked self-propelled howitzers. This is so far the largest defence contract to be awarded to a private party. So, there has been positive activity.

Talking about the domestic environment, I would say that the recently announced ‘Strategic Partnership Policy’ will also go a long way in building domestic capabilities and technologies in the defence sector and reduce Indian dependency on imports.

TDB: When it comes to the infrastructure sector, what challenges do companies like yours face and what can be done to overcome these challenges?

AMN: The private capex cycle has been tepid in the infrastructure sector for a while now. The only investment in infrastructure is currently that which is coming from the government.

This implies that something has been lacking in the models followed by us in the past as far as public-private partnerships are concerned. The slew of bad debt in the banking sector also is an indication of this. We need to look at best practices followed by the developed countries and develop models that would work in the Indian environment.

TDB: L&T, undoubtedly, has a strong foundation in the domestic market which continues to strengthen further. How does the company plan to expand its presence in international markets?

AMN: L&T has been present in the Middle Eastern market for more than three decades now, and it is has become one of our major markets. With that said, we are also looking at East African, South African and South-East Asian markets, where infrastructure development is picking up and where we feel that we can add some value.

TDB: Last year, the global market proved to be a mixed bag. How do you see the market shaping up this year and are you taking any precautions to tackle the global issues that you foresee arising in the years ahead?

AMN: Yes, it’s true. Be it the price competition in the thermal power market or the domino effect of a fall in crude oil prices on the heavy engineering sector, the global market proved to be a mixed bag last year.

But, as I mentioned earlier, we are now planning to expand into new international markets. While the Middle East continues to be a focus market, we are also looking at other regions or countries whose economies are not heavily dependant on crude oil prices.

Apart from that, we also have burgeoning engineering services and information technology arms, where we have made substantial progress and we believe that we can do much more globally.

TDB: L&T’s youngest subsidiary, L&T Infotech, announced an initial public offering (IPO) last year. How do you see the information technology business growing in the near future?

AMN: Well, as I mentioned earlier, we need to reinvent our core every five years. We believe that the future is digital, and with L&T Infotech and L&T Technology Services (which has also issued an IPO), we have forayed into IT services to transform the businesses of global companies. And, yes, in the years to come, I see great potential in the business.

TDB: Many Indian companies are now taking the inorganic route (mergers and acquisitions, joint ventures, etc.) to expand their footprints in both domestic and overseas markets. Is L&T also pursuing the same approach for portfolio and market expansion?

AMN: As a company, we have always been on the lookout for global partners who can enable us to deliver world-class technology and products to the country.

For instance, we have collaborated in the power sector with Mitsubishi Hitachi Power Systems of Japan for manufacturing high efficiency boilers and turbine generators for the Indian market. We also have a joint venture with Hanwha Techwin of South Korea for the manufacturing of howitzers, the self-propelled battle guns for the Indian Army.

In addition, we have many collaborations with Russian and European companies in diverse sectors such as defence, heavy engineering, nuclear power and infrastructure.

TDB: L&T’s involvement in CSR activities, particularly related to environment protection and preservation, has been widely acknowledged. Could you throw some light on these initiatives?

AMN: We have been involved in various corporate social responsibility (CSR) activities even before the term was coined. Since most of L&T’s operations are energy and material intensive, we have been extremely focused on reducing the environmental damage.

Over the years, L&T’s sustainability efforts have been regularly receiving global acclaim. We have also been tireless in our efforts in building the social infrastructure of the country, from healthcare to skill building and education.

These are all areas of great national relevance, and I am happy that we have always been regarded as one of the leading Indian corporations when it comes to sustainable practices.

TDB: After spending over 50 years in the company (15 years as the Group Executive Chairman), you plan to retire this year. What have been the biggest successes and challenges over your illustrious career at the helm of one of India’s largest conglomerates?

AMN: Looking back, I would not like to single out any achievement or challenge. For me, the growth that the company has delivered to its shareholders and employees has been my biggest success. While the challenges have been many, I believe that we have overcome most of them and always emerged stronger than ever.

But, if I were to highlight one challenge, I would say that the biggest challenge I have ever faced has been succession planning for the company. L&T is such a diverse company that finding the right person to lead the entire conglomerate has been a difficult and complex task. I knew that this would be a challenge and hence I have been planning the succession for the last five years. I feel that Mr. S. N. Subrahmanyan, who will be taking over as CEO and Managing Director of L&T, from July 2017, is the best person to take the company forward into the future. I wish him the very best.