L&T's A.M. Naik: The man who raised an army to fight a hostile takeover

‘Mr Naik, do you realize what you have done? You have made sure that L&T is not easily taken over,’ Birla said. Naik smiled modestly.

‘When the history of L&T is written, your name should be inscribed in letters of gold,’ continued Birla. How prophetic those words would be!

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The battle that had just concluded had originated before either of the ‘generals’ had entered the scene. By the mid- 1980s, L&T had become one of the more respected engineering companies in corporate India. It was large, had developed remarkable engineering and construction capability, and employed a sizeable, talented workforce, led by professionals.

But it was vulnerable—a loosely held company with widely dispersed shareholding. This was an Achilles heel that had remained hidden from public gaze until it was brought to light in the aggressive, acquisitive business climate of the late 1980s. The company became tempting prey for buccaneer business leaders in search of a quick buck, corporate raiders whose modus operandi was to rapidly acquire a controlling stake in target companies and then proceed to put their hands in the till.

One such corporate raider, with a fearsome track record of seizing control of profit-making companies, was Manu Chhabria, who had made his vast fortune in the Gulf states as an agent for foreign manufacturers of consumer electronics. When he first turned his eye towards L&T, alarm bells went off in the boardroom. In corporate circles, hearing his name was akin to an ancient king getting word that the Huns were headed in his kingdom’s direction.

A year before in 1988, N.M. Desai, L&T’s chairman and managing director at the time, had celebrated its golden jubilee at a function in Mumbai (then Bombay). Few among the executives who had gathered there would have known a minefield lay in their path. Desai soon recognized the threat and tried to fend it off. In his hour of crisis, a white knight appeared in the form of a trailblazing businessman who was rapidly making a name for himself in industrial circles—Dhirubhai Ambani. Dhirubhai was in the process of rewriting the rules of the game in Indian industry. He acquired a sizeable stake in L&T, triggering a period of uncertainty. But none of it had much of an impact on the company’s performance. L&T continued on its planned growth trajectory. The Ambanis faced resistance from a section of stakeholders, and while they managed to retain their holding in L&T, they had to cede control. But the company found a buyer in another family business group—the Birlas. This large and storied business family had major plans for expansion in cement, and L&T was a coveted acquisition. They took Ambani’s holding and looked for more to clinch their acquisition.

Nothing seemed to be able to stop them except for one stubborn leader. Chieftains of family-run conglomerates tend to look with a mixture of emotions upon executives who have risen up the ranks. The executives are respected for expertise in their chosen domains, but it is felt that an inter-corporate battle is beyond them.

They are usually at a loss, not knowing what to do, whom to approach in the corridors of power or how to safeguard their controlling interests. But Naik turned out to be very different from the typical white-collar executive. Right from the start, he made his intentions clear—he was opposed to any attempt at a takeover. But you don’t step on to the battlefield without raising an army. And so, Naik and his lieutenants prepared themselves for what was going to be a long and complex phase.

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A lot had to be done, much of it in the corridors of the North Block in the country’s capital, where the destinies of corporates can be made or unmade.

Naik flew to Delhi to muster support; at that time, North Block was unfamiliar territory to him. In the high-stakes game of influence peddling, L&T had been a novice, unlike family-owned organizations, for whose satraps it was customary to cultivate the powers that be. But Naik was passionate about his cause. There was always some support to be found for a lone individual battling an organization, and Naik tapped into it.

Excerpted from A.M. Naik: The Man Who Built Tomorrow, by Priya Kumar and Jairam N. Menon, with permission from Harper Collins India.

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