our journey wasnt a bed of roses

Written by Kavitha Venkatraman | Updated: Feb 5 2009, 06:54am hrs
The idea of getting into family business did not enthuse Lagadapati Madhusudan Rao at all. In fact, he was double minded when his elder brother and founder chairman of the Lanco group of companies, L Rajagopal, asked him to come back to India to join the business. But, today, this 42- year-old second generation entrepreneur, is spearheading the Rs 3,000-crore Lanco Infratech Ltd as its executive chairman.

The foundation of the company was laid by L V Rama Naidu and his two brothers. Hailing from an agricultural family and with no formal education, they got into the truck business. In 1990, when the Vishakapatnam Steel Plant was taking shape, they decided to become contractors by floating Uma Maheshwar Rao Engineering Company. Their first contract was with the Vishakapatnam Steel Plant and it was for grading and civil works. When Telugu Desam Party came into power in 1983 and initiated new irrigation projects, they managed to bag a handful of projects.

"Right from my school days, I used to accompany my father (L V Rama Naidu) to various sites even during my vacations. The whole idea of being at the site was quite repelling to me, as I would feel untidy at the end of the day. I never even dreamt of joining the family business. So, I did my BTech in mechanical engineering and MS in design engineering before going for my second MS in industrial engineering from Wayne State University, Detroit. After completing MS in 1989, I worked for two years in in the US. Life was pretty nice. I even developed a penchant for basketball, American football and Formula 1. Even today, when I am not travelling, I try to follow these sports, he says.

The partnership between the first generation brothers came to an end in 1988-89. But his father Rama Naidu continued with the construction business in the name of SV Contractors and asked L Rajagopal to take an active role in it. In 1990, after his father decided to retire, Rajagopal started running the show.

The growth path for the company started in 1991 when Rajagopal decided to leverage on the new state industrial policy and foray into pig iron business. So, in August 1991, I was called back to India. I did some serious research on the pig iron industry before flying back home. This is what I call destiny, he chuckles.

Once I came back, we worked on giving a new name to our business. In fact, we wanted to name it after our uncle Lagadapati Amarappa Naidu, who has been a great source of inspiration for us. Thus was born Lanco -- a name with has a strong brand recall today, especially in the power business. Lanco is nothing but an abbreviated form of Lagadapati Amarappa Naidu and Company," he says.

Pig iron was the first line of business for Madhusudan Rao. The company was started as Lanco Ferro and he was the managing director.

In 1993, Lanco Ferro got rechristened as Lanco Industries. After that there was no going back. The company grew rapidly both upstream and downstream. We set up a slack cement unit, casting unit, and a ductile iron pipe unit and made it a fully integrated efficient plant near Kalahasti in Andhra Pradesh. In 2002, we were looking for a joint venture partner but ended up giving management control of the company to Electrosteel Castings Ltd, Kolkata. We still hold 26% stake in the venture, he explains.

Year 1993 also saw change in the name of the construction company to Lanco Construction. It is what is today called Lanco Infratech -- the holding and operational company of the entire group. This happened in 2000. Over the period, the construction business grew rapidly as the company started looking at larger projects through JV partnerships.

Once the government started looking at privatisation of the power sector, Lanco Infratech tapped into the opportunity and successfully commissioned the 368-MW Kondapalli power project in Andhra Pradesh in October 2000 with an outlay of Rs 1,200 crore. While on one hand, we were stabilising our operations in the power sector, on the other hand we were diversifying into engineering and EPC business to execute power and industrial projects, he says

With the success of the Kondapalli project, the power sector became the calling for the company. Today, the company has 4,000 MW of power projects under construction. The journey of Lanco was definitely not a bed of roses. We have had our share of troubles in between, especially when the banks were not coming forward to fund power projects, he recalls.

In 2002, founder chairman Rajagopal decided to take active role in politics and Madhusudan Rao, who was the vice-chairman of Lanco Infratech, took charge as the executive chairman. Talking about his role, he says, Steering such a company is a humungous task. Over the years, we have developed a strong team of professionals to manage key positions. Today, I do not interfere in the day to day affairs of the company. My role is restricted to chalking out strategies. It allows me to pursue my other interests like travelling with my wife Rajalakshmi, browsing through the net, reading a lot of management books and history and most of all watching movies. He adds, I love to watch English movies when I travel. I also have a penchant for antiques especially clocks. You will find a good collection of antique clocks at home.

In 2005, the company, further diversified its business and forayed into realty and infrastructure space. During the period, the management also decided to consolidate all its operations and move ahead as a single entity. And subsequently, Lanco Infratech was made the operating and holding company. The company has stake, say anywhere between 51% to 100%, in all the subsidiaries within the group. The company came out with an IPO in 2006, and raised Rs 1,040 crore from the market.

Though Lanco Infratech is the flagship company with a diversified portfolio mix, power sector contributes significantly to its turnover. Nearly 90% of the revenue comes from the power sector and only 10% is from other segments, he says. The overall topline of the company is expected to go up to Rs 28,000 crore by 2012.

The projections given are achievable despite the slowdown in the market, he says, adding Lanco is expected to grow over the next five years rapidly on the power and the EPC business. In fact, it is trying to acquire an international EPC company to bring in credentials to participate in outside bids. This should happen in the next one year, he says with confidence.