Minhaz Merchant - The Nationalist: How A.M. Naik Overcame Great Odds to Transform Larsen & Toubro into a Global Powerhouse

THE NATIONALIST

THE
NATIONALIST

How A.M. Naik Overcame Great Odds to Transform Larsen & Toubro into a Global Powerhouse

Minhaz Merchant

For my wife Kahini
and children Suhail and Tehzeeb

Contents

WHAT BEGAN AS a biography of an extraordinary business leader morphed, during its writing, into a compelling story of triumph against the odds.

Anil Manibhai Naik was uprooted from a comfortable suburban life in Mumbai at the age of ten. His father, a senior teacher at a prestigious Mumbai school, was influenced by Mahatma Gandhis call: India lives in its villages. The Naik family moved lock, stock and barrel to rural south Gujarat. Young Anil spent the next several years sitting in a village school classroom on a gobar floor. It toughened him for the challenges that lay ahead.

Over the decades, with an engineering degree in hand, Naik would rise through the ranks at Larsen & Toubro (L&T) to become its chairman and managing director. L&T is not an ordinary company and Naik not an ordinary business leader. Outspoken in his views, Naiks candour and clear-headed assessment of the challenges that face the country and its economy mine a rich vein of insight.

L&T is involved in virtually every critical national project: Indias first nuclear-powered submarine; strategic weapon and missile systems; space exploration, including maiden missions to the moon and Mars; global infrastructure; airports; metro rail systems; and almost all of Indias nuclear power plants.

A highlight of Naiks fifty-three-year career is the successful demerger of L&Ts cement business, UltraTech, and its sale to the Aditya Birla Group. Fiercely protective of L&Ts professional character, Naik structured the historic demerger in such a way that it ringfenced L&T from hostile takeovers. He created the L&T Employees Welfare Foundation, which was enabled to acquire a 15 per cent shareholding in the company. A takeover target for both the Ambanis and Birlas, L&Ts independence was preserved by Naik.

THIS IS a story of remarkable grit, ambition and entrepreneurial management on the part of a man who put in sixteen-hour workdays over more than half a century. As Naik says today: L&T is my temple.

Work is Naiks worship. And it has been so from the time he joined as a junior engineer in March 1965 and up to the present day. At sixteen hours a day, he says, only half in jest, he has devoted 106 years to L&T: I will be a happy man when I retire from this wonderful company of ours.

What emerges emphatically from Naiks storied career is his sense of nationalism. It permeates his thinking and informs his actions. Naiks nationalism is synonymous with advancing the national interest by building a strong and self-reliant India.

Naik has an intimidating presence but a soft core. Throughout his long career, he has demonstrated how uncompromising standards of excellence can blend seamlessly with a humane approach.

While growing L&Ts revenue twenty-five times and market capitalization eighty times since becoming CEO and managing director in 1999, Naik has successfully fought battles with Indias largest business groups, safeguarded L&T from future takeovers, made thousands of company employees millionaires through stock options, and transformed L&T into a global engineering and technology powerhouse. International operations today contribute 34 per cent to L&Ts total group revenue.

L&T, under Naiks watch, has diversified into new-economy businesses, including high-end technology and engineering services, finance and global infrastructure. It has simultaneously strengthened its footprint in defence, manufacturing and complex turnkey projects. As Naik says, rhetorically: There is no company in the worldshow me onewhich can do what L&T does. In the US there is a shipyard that does only aircraft carriers, another shipyard that does only nuclear-powered submarines, but they dont do anything else. Here we do nuclear-powered submarines, aerospace, nuclear reactors, all kinds of things.

Indeed, no other company worldwide comes close in comparison. The American engineering giant Bechtel, Japans Daiwa House, South Koreas Doosan, Chinas CSCEC and Swedens Skanska are roughly the same size as or smaller in cost-adjusted revenue than L&Tbut they lack its breadth of operations, range of heavy engineering skills and the ability to design, develop and execute some of the worlds most challenging infrastructure projects.

ABOVE ALL, Naik is a devoted family man and a generous philanthropist. He has already donated over 75 per cent of his income to a slew of charities through family trusts focused on healthcare, education and social transformation.

Naiks father, Manibhai, a teacher who devoted his life to serving the rural poor, is his role model. Manibhai taught his son to be fearless and honest. He said to him: If you are in the right, you have nothing to fear.

Naik has displayed courage and an inexhaustible reservoir of energy during his long career in L&T, dealing with violent union leaders as well as taking calculated risks in new businesses. With annual sales of Rs 1,20,000 crore and market capitalization of Rs 1,60,000 crore, L&T is today one of Indias most valuable companiesand in market cap ahead of public sector giant National Thermal Power Corporation (NTPC) and private sector telecom major Bharti Airtel.

This then is the story of a man who surmounted great odds to reach the pinnacle of success. It demonstrates more than anything else that honesty, the quality Naik prizes most, in the end pays the greatest dividend of all: the respect of your peers, the loyalty of your colleagues and the affection of your family.

Making of a Global Leader

CHICAGO, 17 NOVEMBER 2001 , 2.20 a.m. Anil Manibhai Naik, CEO and managing director of Larsen & Toubro (L&T), stretched his legs in his hotel room as he prepared to turn in for the night. It had been a cold, windy Chicago day and he was tired after an exhausting round of meetings with leading American CEOs keen to partner with L&T in a slew of technology projects.

Naiks mobile phone rang. He was surprised at receiving a call so late at night, but he immediately recognized the crackling voice at the other end: Mohan Karnani, president of L&Ts cement business. Sir, Karnani said without preamble, apna maalik badal gaya hai. We have a new maalik.

The new maalik was Kumar Mangalam Birla, chairman of the Aditya Birla Group.

Within minutes, Naiks phone rang again. It was Anil Ambani, managing director of Reliance Industries. Charming as ever, though unmindful of the ten-and-a-half-hour time difference between Mumbai (where it was early afternoon) and Chicago, Ambani said softly: Anilbhai, you never wanted us. So we are going. We have sold the entire shareholding of Reliance in Larsen & Toubro to Kumar Mangalam Birla.

Naik absorbed the information calmly. His mind was whirring but he remained impassive. After exchanging pleasantries with Ambani, he tried to sleep.

At 7 a.m., Chicago time, Naiks phone rang again. This time it was Kumar Mangalam Birla. He was, as he always is, unfailingly polite. Apologizing for calling so early in the morning (in Mumbai it was already evening), Birla said quietly: You didnt come to us, Naikji. So we have come to you.