Earlier this week, ITC announced that its chairman YC Deveshwar will ease out of the executive role from February 2017. He will continue as the non-executive chairman till 2020. It is a momentous occasion for the cigarette-to-hotels group, as the 69-year-old’s tenure had seen an exponential growth in the company’s revenue and market cap. Deveshwar has had a long stint, having taken over at the top in 1996.
AM Naik’s influence over Larsen & Toubro (L&T), the construction behemoth, has been similar. Naik became the CEO of the company in 1999, and was appointed the Group Executive Chairman in 2003. He ably steered the ship through troubled waters and storms. And like his counterpart in ITC, Naik, 73, is also expected to give way to new leadership in 2017, probably in the latter half of the year.
As is with every transition after a long stint of leadership, there has been speculation about how the two companies will fare once their chairmen are gone. It doesn’t bode well for a company to be over-dependent on an individual. The tenure extension the two got for their stints, points to the lack of a credible second rung leadership.
Or was it that the two were unwilling to let go? But apart from the long stints, the careers of Deveshwar and Naik have other parallels as well.
Hostile takeovers
Both have been lifers at their respective companies — well, almost.
Deveshwar joined ITC in 1968, just after graduating from IIT-Delhi. His rise was swift and by 1984, at the age of 37, he became the youngest ever board member in the company’s history. His only break from ITC was between 1991 and 1994, when he served as Air India’s chairman.
Naik, hailing from a family of teachers in a village in south Gujarat, moved to Mumbai after completing his engineering. After working in Mukund Iron & Steel and Nestler Boilers, Naik joined L&T in 1965 as a junior engineer. Within four years, at the age of 33, he became L&T’s youngest manager.
And neither had a smooth ride after taking over the helm.
Naik was just two years into his role as the CEO when Aditya Birla Group chairman Kumar Mangalam Birla (who had bought the Ambani family’s 10 per cent stake in L&T) bared his intention to take over the construction company. Naik was not amused and rallied his employees in protest. In 2003, Birla smoked the peace pipe and exited L&T but not before getting the firm’s cement business, which they later renamed UltraTech.
Deveshwar had also taken over at ITC during a similar tumultuous period for the company. BAT (British American Tobacco), which continues to own a considerable stake in ITC, had fallen out with the Indian company’s management.
Diversification
The tussle for ownership split the company right down the middle and ITC’s experimentation with diversifying into non-tobacco businesses hadn’t gone as expected. But Deveshwar managed to keep BAT at bay, and began a fresh round of diversification that would change ITC forever. Under Deveshwar, often called Yogi by close associates, ITC forayed into FMCG and personal care. The consumer goods business is now worth almost ₹10,000 crore.
Tobacco continues to be its biggest grosser. The market has rewarded Deveshwar, and ITC’s market cap has multiplied many times over, from ₹5,500 crore to nearly ₹3 lakh crore, under Deveshwar’s tenure.
Naik too reorganised L&T, dividing its operations into different strategic business units (SBU). The chairman expanded the company’s horizon into new sectors such as defence. Under Naik, the company’s revenues zoomed from a little over ₹7,000 crore in 2001, to nearly ₹60,000 crore in the last financial year.
But did the two stalwarts hold on to their positions for too long? There have been enough reports and rumours to indicate so. And this is one part of their legacies they could have avoided.