The long-awaited succession plan for the country’s largest engineering major finally got formally announced on Friday. The long serving group executive chairman of the company, A M Naik becomes the non-executive chairman from October 1, creating space for S N Subrahmanyan to take over as the chief executive officer and managing director from July 1. After the announcement, Subrahmanyan spoke to FE’s Shubhra Tandon on his new role, responsibilities and vision for L&T. Excerpts:
As you take on this new role, what would be your priorities?
The vision and the strategic plan for L&T till 2021 has been well laid out and this change in management structure is not going to alter the goals that have already been set for the company. So the decisions made are already well known and those will continue.
There are several challenges that L&T faces in the current economic scenario. How do you plan to address them?
We remain cautiously optimistic. We are at present mainly in four sectors and all of them are seeing headwinds. Infrastructure sector is heavily leveraged and issues around clearances, land acquisition still need ironing out. Private sector investments are not taking place as companies need to address their highly leveraged positions first. In capital goods, though the Make in India programme of the government is well intended, it is yet to get rolling. Defence is a big ticket item, but given the complexities in the decision making process, it is still slow. Services, mainly information technology, engineering, real estate and construction are fine. Although automation and the talk around protectionism concern our IT business, we need to see how those things pan out.
What are the plans of streamlining the various non-core businesses of L&T?
Like Naik has said in the past, we have identified some of the key growth businesses where we will have our focus namely IT, technology services, defence, smart world and water management. Naik has said that businesses that are non-core will be exited over a period of time. So, like it has been said there is a strategic plan that involves re-allocation of resources of both talent and capital.
Due to weakness in oil prices, Middle-East market has not been performing well in the last few quarters, and given that spends need to go up for the Indian economy to grow faster, what is your outlook?
India is definitely the main market for us and the positive reform moves that we have seen from the Indian government, we are hopeful that the economy grows faster and the capital spends increases. Middle-East, has been weak but with some stability in the oil prices between $50 and $60, we feel situation will improve in that market because they have their social spends to make. However, we are also entering new markets like in Africa and the far east, and we are venturing and exploring some other markets as well.
The company announced in November that it had to let go of 14,000 employees due to challenging business environment and digitisation of operations resulting in redundancies. Do we expect such moves in the future as well?
Let me tell you that L&T group has hired 15,000 employees last year and will continue to increase its manpower strength as we go forward. Our prime objective is to enhance productivity across the board and, in today’s world, it is imperative to remain competitive. We are constantly adding and on a look out for fresh talent, so we will continue to do that. Automation and digitisation are tools to move forward and we will adopt them for growth.