Exit of India's Tata chairman fuels concerns over power of Tata Trusts
Tata chairman’s exit sparks investor concerns over stability and Tata Trusts’ influence, raising questions about succession, governance and the group’s strategy amid losses at Air India and other challenges
NEW DELHI: The exit of the chairman of Tata Sons from India's storied tea-to-tech conglomerate may pause bitter disputes with its controlling charity, but has ignited worries about the power of the philanthropic arm, which has now forced out two chiefs.
The departure of N. Chandrasekaran has raised concern over the continuity and stability of the 158-year-old group battling with losses in aviation and e-commerce ventures, while working to make products for global clients like Apple.
"If I am an investor, I would be worried," said Vijay Singh, one of the trustees at Tata Trusts, the charity that controls 66% of Tata Sons, the holding company of the conglomerate.
"Stability of the group is important for investors and that depends on the relationship between the company and its largest shareholder," he told Reuters.
The sole reason for Chandrasekaran's resignation is his disagreements with Tata Trusts, Reuters has reported.
The charity and its head, Noel Tata, had been upset about mounting financial losses at airline Air India and concerns about several other business strategies adopted by the group.
The conglomerate comprises more than two dozen companies such as Tata Motors-owned Jaguar Land Rover, Tata Steel, Tata Consultancy Services and Tata Electronics, which have their own boards and leadership.
"If I am an investor, I would be worried. Stability of the group is important for investors and that depends on the relationship between the company and its largest shareholder”
"If I am an investor, I would be worried. Stability of the group is important for investors and that depends on the relationship between the company and its largest shareholder”
Singh said the charity followed a "hands-off approach" regarding business at the group, but some investors were getting worried.
"It's more a reputational issue," said Minari Shah, an independent strategic communications adviser, who previously worked at Tata Motors.
"The need is to lay out the succession plan thoughtfully because the internal and external stakeholders will watch the group carefully to see how it deals with the leadership."
In 2016, Tata Sons' board sacked its then-chairman, after he fell out over governance issues with group patriarch Ratan Tata, one of India's best-known corporate titans, who headed the charity arm before his death in 2024.
Now Chandrasekaran's exit, prompted by disagreements with the current Trust chairman Noel Tata, the half-brother of Ratan Tata, is raising concerns that such disruptions could become a recurring feature at the group.
Established in 1892, the charity says it is "India's oldest, and amongst Asia's largest, philanthropic institutions", working to improve healthcare, nutrition, education, water and sanitation.
"We extend our full support to Tata Sons in ensuring a smooth, timely and orderly transition of leadership, consistent with the values and long-term interests of Tata Sons and the Tata group," the Tata Trusts said in a statement.
Biggest concern for investors
Stocks of Tata group lost $4.6 billion in combined market value on the news of Chandrasekaran's exit, before staging a recovery late on Thursday.
Over the years, Tata has built a sprawling business through the acquisition of brands such as British tea firm Tetley, a recent deal with Europe-based Iveco's trucks business and its India partnership with Starbucks.
The biggest concern for investors now is whether Tata Sons can independently set priorities for group companies, or if it will continue to be influenced by Trust priorities, two domestic institutional investors told Reuters on condition of anonymity.
"Succession has once again become a topic of conversation at a time when Tata is facing a number of other challenges - TCS' market cap is falling, Air India troubles (are mounting)," said one of them.
"A stable top was needed while Tatas navigate these challenges."
Foreign and domestic institutional investors together have an estimated $54 to $56 billion of exposure across five of Tata's most-watched listed companies, exchange disclosures showed.
During Chandra's tenure, investor wealth has grown with the combined market capitalisation of Tata companies rising to $277 billion by March 31 from $76 billion when he became chairman in 2017.