Mumbai: It’s official, finally. S.N. Subrahmanyan, deputy managing director and president of engineering and construction giant Larsen and Toubro Ltd (L&T), will succeed A.M. Naik as group executive chairman next year.

Naik, 74, ended all speculation over who his successor would be at the company’s 71st annual general meeting (AGM) on Friday.

In response to shareholders’ request to stay on beyond his planned retirement at the end of September 2017, Naik patted Subrahmanyan’s back and said: “This is a very strong man here, you know." He added that he was confident the company will prosper under Subrahmanyan’s leadership.

Subrahmanyan, 55, will lead L&T from 1 October 2017, Naik said.

Naik has previously identified Subrahmanyan, who was appointed deputy managing director and president in September 2015, as the clear No. 2 at L&T. He said in May that given the complexity of the company, with 82 businesses, an executive hired from outside might not be able to steer L&T.

But on Friday, for the first time, he clearly identified Subrahmanyan as his successor.

In 2012, L&T split the role of chairman and managing director, elevating Naik as executive chairman; K. Venkataramanan took over as managing director and chief executive officer. His term ended in September 2015.

SNS (as Subrahmanyan is called within the company) owes his meteoric rise to Naik, who spotted him over a decade ago when he was a general manager in the company’s construction unit.

Subrahmanyan, a civil engineer who started in 1984 as a project planning engineer at L&T, was named to the company’s board in 2011. In his three decades at L&T, Subrahmanyan has driven many of the company’s large infrastructure and construction projects, including the construction of the airports at Bengaluru, Hyderabad, Delhi and Mumbai. He also oversaw major international projects, including the Metro systems in Qatar and Saudi Arabia.

Besides anointing his successor at the shareholders’ meeting, Naik spelt out the medium-term goals of L&T, which he said expects to almost double sales to 2 trillion by 2021, benefiting from an expected economic turnaround.

L&T plans to achieve the target without compromising on margins and is aiming at order inflow in excess of  2.5 trillion per year by 2021, Naik, who will retire next year, said in his speech to shareholders.

“We believe that the economic conditions are now starting to turn in favour of your company," Naik said.

L&T, a corporate proxy for the broader economy, has in recent years been hurt by stalled industrial projects and a private investment cycle that’s yet to take off, coupled with slower growth in key overseas markets. Investment demand growth in India has languished at sub-5% levels for the past four fiscal years.

Naik sees India at the cusp of a turnaround as economic growth accelerates, paced by government initiatives to reinforce infrastructure and boost manufacturing.

“All indicators are positive. With a projected GDP (gross domestic product) growth rate of 7.4% in 2016-17, India is the fastest growing large economy in the world. The government’s thrust on infrastructure and its ‘Make in India’ initiatives provide a range of opportunities for your company," said Naik.

The company expects the opening up of the defence sector to bring business opportunities worth  13 trillion over the next decade, Naik said. He estimated the opportunity from the nuclear power sector over this period to touch  50,000 crore.

L&T is focusing on sectors such as defence and potential new markets such as Africa as it pursues its target. Simplifying its management structure and reducing the number of subsidiaries will also help sharpen its focus, Mint reported on 4 August, quoting senior executives.

L&T has partnered with two global strategic consultancy firms to obtain an “outside-in" perspective of its businesses. 

“I would like to share with you a few of the key focus areas that will help us achieve our target revenues of  2 lakh crore by 2021. The first is a requirement to sharpen our business focus. We have identified select growth businesses in your company’s broad portfolio. These include IT, technology services, defence, smart world (smart city business) and water management," Naik said.

The company’s strategic plan involves reallocation of resources—both talent and capital—to businesses with visible value creation potential. 

Naik said on Friday that infrastructure, including roads, ports, airports and railway corridors, has over 1,000 projects in the pipeline with an estimated total value of over 14 trillion.

“As the country surges forward, with a focus on technology-led initiatives, your company is future-ready," Naik told shareholders.

Since 2000, L&T has developed and rigorously implemented a five-year strategic planning process and it is in the fourth wave of the programme.

“In the coming years, digital levers on profitability and growth will extend deeper into the organization, alter processes and yield dramatically superior outcomes. Our group companies, L&T Infotech Ltd and L&T Technology Services Ltd, will play a key role in this process. For our technology arms, these enterprise-wide initiatives will act as a ready-to-market showcase, enhancing client confidence in their capabilities," Naik said.

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