Chandra’s exit is a double-edged sword for Tata
BREAKINGVIEWS-Chandra’s exit is a double-edged sword for Tata The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates throughout to reflect Chandra's statement confirming his resignation.
By Shritama Bose
MUMBAI, Aug 12 (Reuters Breakingviews) - India's $290 billion Tata conglomerate has extended its abysmal record on managing succession. Its leader of nine years, N. Chandrasekaran, resigned on Wednesday ahead of an annual meeting next week where shareholders of the unlisted holding company, Tata Sons, may have ousted him. The exit of the first real outsider to run the 158-year-old group removes a distraction but also raises difficult questions about its future.
A row between Chandra and the charitable trusts that control the salt-to-power conglomerate became public in February over a mandate by the Reserve Bank of India to list Tata Sons. Chandra didn't see eye to eye with Tata Trusts Chair Noel Tata who opposed a listing. That led to a stalemate over his reappointment which made his position untenable.
The recent discord overshadowed Chandra's success in turning around large parts of the group. He deleveraged bloated balance sheets after inheriting serious problems at Tata Steel TISC.NS and Tata Motors TATM.NS. Annualised total shareholder returns from most listed group firms have beaten India's benchmark Nifty 50 stock index .NSEI since he took charge in 2017, prior to news of his departure.
But AI pressures have led to lagging returns at Tata Consultancy Services TCS.NS, the group's industry-leading IT outsourcer where he was previously CEO and which contributes 87% of Tata Sons' $3.4 billion annual dividend income. That will squeeze funds available to plough into unlisted businesses like the group's smartphone making venture with Apple AAPL.O and money-losing Air India, a carrier foisted on Chandra by the late Ratan Tata, former Tata Sons chair and chair emeritus.
Infighting also has delayed decision-making on other leadership issues: it took four months to name a CEO for Air India after Campbell Wilson stepped down in April, while rival IndiGo-owner InterGlobe Aviation INGL.NS replaced its chief within weeks in March. And the spat also has jeopardised the Tatas' philanthropic spending, which relies on dividends paid up through the holding company.
Worst of all, Chandra's departure is uncomfortably reminiscent of the 2016 ouster of his predecessor Cyrus Mistry. Back then, Ratan Tata swooped in as interim chair for four months before handing over to Chandra. His passing in 2024 has left the family's influence over the group in flux and the trusts under greater scrutiny, a test they are not passing with flying colours.
The 5% drop in Tata Consultancy shares on news of Chandra's departure underscores the ripple effect it will have across the group where he also chairs many individual companies. And it signals how the consequences of this second leadership disaster could force a bigger rethink on how the Tata group, with its unusual ownership structure, is managed.
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CONTEXT NEWS
N. Chandrasekaran on August 12 resigned as chair of Tata Sons, the Indian conglomerate's holding company, citing the absence of unanimous support from the board for his re-appointment.
In a personal statement, Chandrasekaran, known as Chandra, said one board member did not support his re-appointment at a February board meeting, noting six months have since passed without a resolution on the matter. Chandra added it is necessary to have a leader in place to run the group beyond February 2027, when his current term as chair ends.
Earlier in the day, The Economic Times, citing unnamed sources, reported Chandra had discussed the possibility of stepping down ahead of an annual general meeting scheduled for August 18 amid uncertainty over his reappointment as a director and tensions with Tata Trusts Chair Noel Tata.
Charitable trusts collectively own nearly two-thirds of Tata Sons. Two of them — Sir Ratan Tata Trust and Sir Dorabji Tata Trust — hold a 52% stake between them.
(Editing by Una Galani; Production by Ujjaini Dutta and Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))