AM Naik, who completed 50 years at Larsen & Toubro (L&T) this week, wants to ensure that the company is on a strong platform before he retires in two- and-a-half years. To do this, he is keen on creating a launch pad for his successor to take the company to the next level.

Naik is in the process of setting in place a strategy for the next five years. This includes reducing the complexity of the Group by rationalising its portfolio. In an interview with BusinessLine , Group’s Executive Chairman Naik details the game plan. Edited excerpts:

In the next two-and-a-half years, what are your plans for L&T?

What I have said is that very little time is left and L&T is a very complex organisation with 21 businesses. The point is that when the new man comes, even if he is from within, he knows only one part of it.  So, it is absolutely essential that we look at our businesses once more, as we do once in five years. In April, we are going to launch our next five-year strategic plan — from April 1, 2016 to March 2021.

As a part of this, we are relooking at what businesses we are in and do we have any compelling reason to be in all of them. Can we really do away with some of them? And, can we restructure some of them into a subsidiary company which we can subsequently take to the market while still retaining majority control. I am going to work at as much accelerated speed as possible to complete the task in two-and-a-half years.

What is the thought process behind which businesses to move on or otherwise?

The idea is to relatively simplify the structure than what it is today. This takes time because people are involved. You have to find buyers but not all businesses have buyers, so some you have to close. Then there come the unions and other matters.

Any particular vertical you plan to consolidate and move ahead?

I cannot tell you now. You will know in December, when the strategic review exercise is over, because it is people sensitive.

What are the challenges your successor will face?

The world is becoming increasingly more competitive. My challenge was to have created L&T to this extent. The future challenges will be to consolidate what we have and become smarter in every business so as to be globally competitive. Between 1999 and now, the company has grown 18 times and the market cap has gone up 45 times. So, a platform has been created. How to maintain these growth levels going forward is the challenge. For example, the IT and technology services businesses are together $1.2 billion now. How to take it to $3 billion will be the challenge for my successor.

How difficult is to find right talent?

India does not have talent for the old economy. Almost 99 per cent of the young engineers from IITs want to go to the new economy business. Nobody wants to come here. So, we go to the next level of college and improve our training inside to see if we can make some improvement in them so that they can take up the task. But then, L&T people are targeted all over as many companies want them. Retention is a challenge.

Do you see L&T becoming a far more global player than what it is today?

Everything depends on how the Indian economy grows. I have said our international business will be between 25-35 per cent. When the going in India was terribly slow in the last three-and-a-half years, we took the international business to 35 per cent.

On the government policy making, between announcements and things happening on the ground, it takes one-and-a-half to 2 years. Now that the time period can come down if each ministry has a monitoring cell, where actually an industry man (representing the CII or FICCI) is on the committee.

So the share of your international business will shrink if Indian economy improves?

The economic downturn over the last 2-3 years has taken its toll. Hardly a dozen companies may have money to invest. So, there is no big capital formation in the private sector which is going to take place. The PPP is not going to be great success from the point of private sector participation. Lots of resources have to come from abroad and investment comes only if you make it attractive. Give guaranteed return on equity or guaranteed IRR of 14-16 per cent. They will come if there is assured returns and stable policy.

This government has shown the right direction so there is hope that the Indian economy will improve. Land Bill, for example, is important for major projects.

How do you see the way forward for your power business?

We now have orders for six power plants and two boiler plants. This is going to keep us busy for another 2 years to the extent of 65-70 per cent capacity load. Another 10-15 per cent we are trying to export. As far as the gas turbine market in India is concerned, there is no market because there is no gas. Therefore, we picked up two gas power plant orders in Bangladesh and I think we will get one more. Situation in power is recovering now from a disaster situation, but it is still very challenging. If private players continue to bring Chinese equipment then Indian industry will be in trouble. The ‘Make in India’ will get tested here.

comment COMMENT NOW