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Thursday, March 22, 2012

L&T gets ready for generational shift in power; SN Subrahmanyan may succeed current CEO K Venkataramanan


Larsen & Toubro Chairman AM Naik, who on March 9 announced the board's decision to bifurcate the position of chairman and managing director, has begun the process of selecting the engineering and construction giant's next MD & CEO three-and-a-half years before the incumbent K Venkataramanan is due to retire.

In the running to succeed him are three directors: SN Subrahmanyan, 51, R Shankar Raman, 52, and Ravi Uppal, 59. The favourite is Subrahmanyan, who is in charge of 40% of L&T's business of Rs 60,000 crore. Selected by Naik as a potential leader five years ago, Subrahmanyan has had five promotions in as many years.

Uppal, the ex-ABB honcho who was considered a contender for the top post when he joined L&T in 2009 to head power but lost out to Venkataramanan this time, may still in be in the running - but only if he continues at L&T. Raman may be a choice if L&T is unable to find a suitable CEO with an engineering background. "L&T traditionally chooses an engineering person for the corner office, the sole exception being SD Kulkarni, Naik's predecessor, who was a finance man," says a senior executive familiar with the matter. MV Kotwal, who runs heavy engineering, may not be considered as he will be 67 when Venkataramanan retires in 2015.

At the press conference to announce the new structure, Naik said the positions of chairman and MD would henceforth be separate (as they were before he took over a decade ago); that the CEO after Venkataramanan may have a run of 7-8 years in office; and that it's difficult for an outsider to take charge at a conglomerate that has some 64 businesses - from nuclear power to switchgear.

Senior L&T executives familiar with the succession plan say Subrahmanyan, who runs the building & factories and infrastructure businesses, is ahead in the race for the top job simply because of the size and potential of the portfolio he looks after. Also, at 51, Subrahmanyan is the youngest member of the L&T board.

"Subrahmanyan got five promotions in five years. Today, he is 51 and runs a significant business. Aise 3-4 ghode taiyyaar karne hain(I need to prepare three-four such horses)," Naik told ET last month while explaining his priorities on the HR front. A former L&T executive who keeps track of the company says Naik favours construction and heavy engineering people and Subrahmanyan earns Naik's support because of his construction background.

A civil engineer with a post-graduation in business management, Subrahmanyan joined L&T in 1984 as a project planning engineer.

Subrahmanyan has Played Key Role in Bagging Contracts

Subrahmanyan has played a significant role in securing and managing contracts for building international airports at Bangalore, Hyderabad, Delhi and Mumbai. He has also been at the forefront of executing landmark projects such as the ICICI Bank and National Stock Exchange buildings in Mumbai. If there is one point that may go against him, it is location. Subrahmanyan is based in Chennai, away from L&T's corporate headquarters in Mumbai, says a former L&T executive.

The building & factories and infrastructure verticals are expected to gain in importance in the L&T scheme of things at the mid-term review of the current five-year plan, codenamed Lakshya, on April 7. The board is also expected to relook its strategy on businesses that haven't lived up to expectations, such as power (including nuclear power), machinery & industrial products and electrical & automation.

A professor at a management school, who does not want to be identified, sounds a note of caution.

He says if Venkataramanan gets an extension on expiry of his current term in 2015, all equations will change. L&T is infamous for extending terms of its top brass. In 2006, it raised the chairman's retirement age to 70, giving Naik five years at the helm till September this year. When his retirement was due this year, the board gave Naik another extension as executive chairman.

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