It was the year 2001; one day in November, then CEO of L&T, A M Naik received a call at 2.20 am when he was in Chicago. The other person said, "Maalik badal gaya hai." Here's how he then stopped the company from slipping away to this new 'Maalik'.
It was the year 2001; one day in November, then CEO of L&T, A M Naik received a call at 2.20 am when he was in Chicago. The other person said, “Maalik badal gaya hai.” It came as a surprise to A M Naik, the steward who is known to drive L&T’s growth lately, to know that he had a Maalik (owner). What had happened was the Reliance Industries had sold all their 10.5% shares in L&T to Kumar Mangalam Birla.
The story is how A M Naik then thwarted hostile takeover bids from the Ambanis and Birlas in the early 2000s, authored by columnist Minhaz Merchant in his biography titled ‘The Nationalist’ based on the former’s life. Interestingly, both Mukesh Ambani, chairman of Reliance Industries and Kumar Mangalam Birla, chairman of Aditya Birla Group, were present on the occasion when AM Naik nostalgically recollected how he battled against the two powerful Indian conglomerates.
After RIL sold its shares, Kumar Mangalam Birla started buying more shares in the open market, saying, the company was undervalued and a lot more money could be made. A M Naik believed that L&T was an independent company and should have remained so. It was not only L&T, the Aditya Birla Group was also eyeing A M Naik. As he recalls, Aditya Vikram Birla, the father of Kumar Mangalam Birla, had persuaded A M Naik many times to join the Birla Group, and even told late Dhirubhai Ambani that he would take A M Naik away.
A M Naik, a village man who was trying to a professional job at the company, was faced with a battle against India’s two biggest conglomerates. He recalled that he did not know anybody in the government to stop the “take-over” of the company. S Gurumurthy and R V Pandit then came to rescue and arranged a meeting between A M Naik and the then Prime Minister Atal Bihari Vajpayee, Deputy Prime Minister LK Advani and Defence Minister George Fernandes. It was George Fernandes, a working-class man according to A M Naik, who took a stand saying, that L&T cannot be sold.
A M Naik wanted to sell company’s cement business, so he bought an offer from England, which upset Kumar Mangalam Birla further leading to stand-offs. When Kumar Mangalam bought 16% of company’s stakes, the Finance Minister Jaswant Singh asked him not to buy anymore. Slowly, government stake was also brought down from 37% to 30%. A M Naik then decided to sell the cement business to the Birla group without competitive bidding. The government agreed after two months of the stand-off.
A M Naik stood firm throughout negotiations with the Birla group and the L&T Employees Welfare Foundation shareholding in L&T grew to 14.9%. Another 15% was with individual employees as stock options – making a total of 30% stakes in the company.
“In the end we kept L&T independent. We ringfenced it from future takeover attempts by setting up the L&T employees welfare foundation that eventually bought Birlas stake. And the Birlas got our demerged cement business that added to
their cement production capacity.
“It relieved us of a non-core asset-heavy business making us an AAA rated company by drastically cutting out debt equity ratio. It was a win-win for all,” Naik said in the book. “What seemingly started as a conflict situation with Grasim ended in a win-win solution for both the companies. Grasim became the largest and top quality cement producer and L&T emerged as one of the best engineering, manufacturing and projects company in this part of the world,” Naik remembered.
Since the time Naik took over as the chief executive officer in 1999, the group revenues between 1999 and 2017 have grown from Rs 5,000 crore to nearly Rs 1,25,000 crore on a like-to-like basis. During the same period, market capitalisation rose from around Rs 2,000 crore to over Rs 1,70,000 crore. Describing L&T as a temple, the 75-year-old corporate honcho and Padma Bhushan awardee says in the book, “I am devoted, committed and married to L&T. Do you know that in my first 21 years in the company, I didn’t take a single day off?