At his last L&T AGM, A.M. Naik outlines firm’s plans for the future
Mumbai: A.M. Naik, who steered Larsen and Toubro Ltd (L&T) for 18 years, said on Tuesday that the group would continue to look for opportunities in the defence and infrastructure sectors to drive growth, besides evaluating options to restructure and monetize some of its businesses.
At the company’s 72nd annual general meeting (AGM), L&T chairman Naik said that the company expects to get orders worth up to Rs30,000 crore from defence in the next 3-4 years. Anticipating a lot of defence orders, the company has already set up seven new facilities across cities and built leadership teams for it.
“Our leadership is ready and lastly, the board has also recognised that it (defence) is an important growth area.... We have to grow big and we have to become a Rs10,000-15,000 crore company in defence...over the next five seven years,” he said. As part of the strategy to build its defence and aerospace business, the company has appointed J.D. Patil as whole-time director and senior executive vice president for its defence business.
Both L&T and Reliance Defence and Engineering Ltd have recently made bids worth around Rs25,000 crore to build four defence ships.
S.N. Subrahmanyan, the newly appointed managing director and chief executive officer, said L&T may win at least two of the major bids. Two of the bids may be opened soon, he said. “We have fairly good chance by fourth quarter one of the contracts could be signed,” he said at the AGM. The four bids are for landing platform dock, submarine warfare ships, subway vessels and deep sea diving vessels, he added.
Subrahmanyan pointed to some of the upcoming infrastructure projects, especially in Maharashtra including the trans-harbour link, the coastal road, Mumbai-Nagpur highway, Bandra-Versova link and Phase-IV of Metro which L&T could win. “Even if 20-30% (of these projects) go through, we have major orders from our point of view,” he added.
Naik said the company has continued to redefine its core areas in keeping pace with the market demand and growth opportunities. “Every few years, a new opportunity emerges in the market. So, we started our five year plan way back in 2000 which was called project LAKSHYA. We are in the fourth strategic plan now. We are seeing a lot of opportunity in smart cities, new technologies, in information technology and new technological application in engineering and defence. We want to focus on these areas,” he said.
Besides, Naik said the company has identified a few businesses within the company which it plans to sell off as part of its restructuring and monetising plan. “This year, we should see two or three companies which might find its rightful place elsewhere in the world as part of a much bigger company,” he said, but did not disclose the companies.
In an emotional speech, Naik said this would be his last AGM as a chairman of the company in an executive capacity though he would continue to be non-executive chairman for the next three years. He also recollected his tenure at L&T, how the company grew its business, fought off a tough takeover attempt and prospered. His time at the top of L&T, Naik said, has “few parallels in corporate India”.
During Naik’s tenure, L&T expanded overseas, took on rivals, averted a takeover bid and entered several new businesses.
“Between 1999 and 2017, the group revenues grew from Rs5,000 crore to nearly Rs120,000 crore on a like to like basis. This surge, achieved entirely through organic growth, has few parallels in corporate world,” he said. During the same period, the company’s market capitalization climbed from Rs2,000 crore to around Rs160,000 crore at a compounded annual growth rate (CAGR) of nearly 28%.
He said he walked in through the gates of L&T’s Powai complex in 1965, “with an application in my hand and a dream in my heart”.
“All through college, my ideal career destination was L&T, for it was only here that my career aspirations as an engineer could converge with my passion to serve the nation,” Naik said.
“In the latter part of 2001, the unique professional character of your company was threatened as it faced the imminent prospect of being taken over by as business house. It took astute leadership to turn conflict into a win-win solution,” he told shareholders.
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