“HELLO! Hello!” is what A.M. Naik says when he wants to ensure you are listening. He might lock a massive hand around your wrist, too, and grin. A bear of a man, aged 70, he lives and breathes the firm he has run since 1999 and worked at for over four decades, Larsen & Toubro (L&T). He reads out corporate mission statements with utter sincerity. His staff speak of him with awe and the tea boys get jumpy near him. And, just when you’ve concluded that Mr Naik is a despot, or has overdosed on propaganda, he will say something devastatingly self-critical.

It is this mix of obsession and honesty that has helped make L&T one of India’s bluest-chip firms, with a market value of $17.5 billion. It is seen as a beacon of competence and probity in an infrastructure industry that is vital but troubled. A conglomerate, it makes machines and has a finance arm. But its main game is engineering and construction, with a skew towards power and transport projects. To anyone travelling in India it can sometimes seem as if all the new airports, roads and power plants are being built by L&T.

Success was preceded by humiliation. In the late 1980s L&T fought off a takeover by Reliance, run by the Ambani family. L&T got lost in the 1990s, borrowing too much and investing heavily in a mediocre cement business. By 2002 it faced a bid by the Aditya Birla group. A government-sponsored compromise led to L&T’s cement unit and some of its debt being offloaded to Birla. “It was a threat converted into an opportunity,” says Mr Naik. Today staff own 12% of L&T, and a friendly state-owned insurance firm owns 18%.

L&T survived partly because of its skill at negotiation. As important may have been the financial rigour that Mr Naik enforced. Back in 1999 the firm had its strong engineering culture and a reputation for shunning graft, but “nobody thought the share price was important,” he says. His message to the troops was that,“if the company is too cheap, everyone will want to buy it. Make it expensive. Like a Rolls-Royce which no one can afford.” Capital had to be used efficiently. Between 2002 and 2008, L&T rode the infrastructure boom, and its return on equity rose.

Lately returns have slipped (see chart). That partly reflects the industry’s woes. Boom has turned to bust with projects stalled or rendered loss-making by bottlenecks and an iffy economy. Rivals that were stars, such as GMR, GVK and Lanco, are in financial trouble. Compared with its peers L&T’s balance-sheet is passable. Excluding its listed finance arm, its net debt is 1.9 times its gross operating profit. Ratios of over ten are common in the industry. Still, L&T’s debt has risen and it has been eating up cash. R. Shankar Raman, the chief financial officer, says this partly reflects planned investments in facilities and equipment, and working-capital outflows. The latter are common during a downturn, when desperate competitors offer more generous payment terms, which L&T has to match. But L&T’s balance-sheet has also ballooned due to its shift from building assets to the riskier business of owning them, too: it owns roads and ports, for example, and a metro in the city of Hyderabad. These projects now account for a quarter of the firm’s assets (excluding the finance arm), and last year made a return on assets of about zero. Weighted by size, the bulk of the portfolio is still being built. One view is that, because the debt attached to these projects is ring-fenced and not guaranteed by L&T, the company could walk away if things turn sour. Yet this might destroy its reputation. Another mooted solution, selling stakes in projects, would be hard since other firms want to sell too. In all probability, L&T’s shareholders must hope that it has done its sums, been less reckless than its peers, and that these projects, which have long payback periods, come good.

You say hello

So a bout of digestion beckons. Mr Naik has another priority, passing a finger over L&T’s fiddly organisational chart that spreads out over two pages and exclaiming: “We’re still too complex.” L&T is flirting with devolving power by giving each business unit its own board and possibly its own share listing (the finance arm was partially floated last year). Although popular with management consultants, this kind of restructuring is as likely to create complexity as simplification.

With the industry in trouble and its balance-sheet swollen, what L&T really needs is not financial engineering but to be a tight ship and make no big mistakes. That requires teamwork and good people. Mr Naik says the present, ageing, top brass are hard to replace: “Everyone does two people’s jobs.” It is tricky enough, he says, to attract young engineers to L&T (they are lured by banking and technology firms).

Foreign managers might be a source of fresh blood but are reluctant to come to India without massive pay cheques. “We’re a sensational brand in India, but in the outside world we have work to do.” The unspoken task is for Mr Naik to replace himself. He has stepped down as chief executive and is now merely chairman, but this formidable individual still seems very hands-on. Eventually, though, the man who says hello must say goodbye.