L&T wants to be 'number-one' in IT biz: Naik

Ready to list Larsen and Toubro's 'second baby' in the stock market with over Rs 1,200 crore IPO of L&T Infotech, the conglomerate's Group Executive Chairman A M Naik today said his aim is to make this company "number one" as he has ensured in all other businesses of the group.
He also said the immediate target for L&T Infotech, whose public offer will open on Monday, is to double its revenue to USD 2 billion (nearly Rs 13,500 crore) in next three years.
L&T Infotech Ltd is the sixth largest Indian IT services player at present with revenue of USD 887 million and an employee base of over 20,000 people.

The parent L&T, a conglomerate with presence in engineering, construction, infrastructure among other businesses, is already listed with a market cap of nearly Rs 1.5 trillion, while L&T Finance Holdings got listed over five years ago and commands a market cap of about Rs 14,000 crore.
At Rs 705-710 per share price band for L&T Infotech IPO, it will fetch a market cap of over Rs 12,000 crore.
Asserting that his entire focus at present is to ensure that the IPO is a huge success, Naik described it as the group's "second baby" entering the stock market after L&T Finance's listing nearly five-and-a-half years ago.

Asked about the revenue growth potential of the market- bound company, Naik told PTI in an interview, "At the moment, we are targetting doubling in three years time... So we want to become USD 2 billion."

He, however, said many things depend on the events that will happen over the years and therefore first he is looking to make it "the number-one brand".
Asserting that he does not want the company to be constantly compared with the companies like Infosys, Wipro, Cognizant and TCS, Naik said, "We don't want to be compared that way. Whatever L&T does, it is number one and I like to be number one."

USD 21-billion L&T Group has separated its technology businesses under two verticals -- L&T Technology Services and L&T Infotech.
Together, Naik said, the two firms would have revenue of USD 1.5 billion this year and his aim is to make them account for at least 10 per cent of the group's total revenue eventually.
Explaining the rationale for keeping them separate, Naik said, "If I mix it, it will still remain number-six and people will say the number one company is five times bigger. So, what do I achieve?
"Rather we will push Infotech with its core management totally focussed on IT, and for the other company the core management will be totally focussed on engineering. That way, will achieve both the objectives."

Naik, who has been with the group for nearly 52 years including 18 years as its head, said the two companies can work together whenever the need arises.
Recalling the days before he took over as CEO of the
group in April 1999, Naik said L&T was a very "high-tech" company even from the very beginning when it comes to use of technology but it did not thought of doing IT business which was more about "labour supply" at that time.
"The management may have thought possibly that we do not want to sell the IT services and give people to somebody else. Net result is we lost hundreds and hundreds of people from our IT group. Also, whether it is Infosys or Wipro, or anyone, they did not have functional experts. L&T has 82 businesses or 82 domains with such a rich experience functionally, which made it one of the most sought-after companies to hire talent.

"And in the process, we must have lost 10,500 people in the last 15 years at the rate of 700-800 every year only to IT industry," Naik said.
Soon after taking charge as CEO, Naik said, his focus was to create an entrepreneurial professionalism and he decided to implement a five-year strategic plan.
"I involved 750 people in making of the plan so that there was maximum acceptance. But by the time it was done, we had lost another 800 people between 9-10 months.
"So I said, this won't do, because this was draining our talent and we had just completed our strategic plan based on the fact that only the companies will do well that have the outstanding talent. The competition was not of the business, but is that of the talent.

"I was kind of very deeply committed to that. You can even call it like paranoid, that I would do anything to retain people and retain good people. So when this happened, I got very worried that by the time the ink is dry of the strategic plan, we are not able to solve the people problem. And then the maximum beneficiary was the IT industry. So we started our own IT business," he said.
Naik said the group had an IT company since 1996, which was set up primarily to retain its IT personnels who were leaving at three-times and four-times the salary.

"This was the market at that time because the Y2K was at the peak and the dotcom was at the peak. So, the demand was just outstripping the availability of resources. So, I said why can't we start our own IT business.
"During 90s, we did some Y2K. At that time, everybody wanted to go abroad and work in the US, the UK and Australia among other places. We started with some Y2K work and did USD 35 million worth of business and then we tried to do some dotcom work. But then the dotcom burst."
Naik said he was asked by everyone why he was getting into this business after Y2K was done in 1999 and the dotcom burst in 2000, but he decided to do it and started talking to people to get clients.

"After the Y2K had gone and the dotcom had burst, there was nothing in the company except one account with about USD 15 million business," he said, while adding soon he found some very important accounts -- one of utilities, one of oil and gas, one of engineering.
"Collectively, all of them put together we became USD 80 million. That was in first two-and-a-half years. Now, since we had reference, we went on growing.
"We grew at the rate of 30 per cent up to 2007 and then we came USD 350 million, then we grew at the rate of around 18 per cent and then in the last three years we grew at the rate of 9 per cent because USD 85 billion worth of business was transferred to technology services business," he added.