‘India’s biggest corporate decision’: Tata Group chair’s exit raises hard succession questions

The sudden announcement that N Chandrasekaran will not seek another term as chairman of Tata Sons has raised a pressing question for India: who can steer one of the country’s most powerful and influential conglomerates through its next phase? The answer matters well beyond the group’s boardroom. Tata’s businesses span salt, software, cars, steel, airlines and hi-tech manufacturing, with annual revenue equivalent to about 5 per cent of India’s gross domestic product and more than a million employees, giving the trust-controlled empire an outsize role in the country’s economic ambitions. Chandrasekaran, 63, said on Wednesday that he had informed the board he would not seek reappointment once his tenure ended in February next year, after directors failed to reach a decision on his future role. His announcement sparked a rout in the shares of Tata Group companies on Wednesday, eroding billions of dollars in a single day amid investor concerns about a leadership crisis at the iconic group. Tata Sons is the principal holding company of the Tata Group, whose foundations date back to before India’s independence from British rule and whose controlling shareholder, Tata Trusts, gives the charitable trusts unusual influence over one of Asia’s most prominent business empires. The Tata Group comprises 31 key mainstream companies operating across 10 distinct business verticals, though the broader ecosystem includes over 100 operating and subsidiary companies globally. Chandrasekaran’s move reportedly followed disagreement among board members over issues including losses at some group companies. The dispute leaves Noel Tata, head of the influential Tata Trusts and half-brother of late chairman Ratan Tata, to manage the transition after he pushed back against a Chandrasekaran-led spending spree amounting to US$120 billion over the next five years. Suresh Prabhu, a former Indian minister and a chartered accountant, articulated investor concerns in a social media post, pointing out that the group had become “India’s flag bearer with substantial global presence”. “I sincerely hope (that) the resignation of N Chandrasekaran, a seasoned professional, will lead to a smooth leadership transition,” he said. Chandrasekaran, who was chief executive of the group’s flagship information technology company Tata Consultancy Services (TCS) before being appointed as chairman of Tata Sons in 2017, currently oversees the management of dozens of major companies, including Tata Motors and Air India. Under Chandrasekaran, the Tata Group saw its revenue nearly triple, while its net profit and listed market capitalisation grew roughly fivefold and threefold, respectively, over his tenure from 2017 to 2026. The group also pushed into hi-tech manufacturing such as semiconductors, digital enterprises including online grocery app BigBasket, and aerospace and defence equipment manufacturing, embellishing his reputation that he once described in an interview as a “man in a hurry”. Chandrasekaran’s exit could mean that many of the conglomerate’s current and planned projects could slow down, according to a Bloomberg report. Lloyd Mathias, a leading New Delhi-based angel investor and business strategist, said Chandrasekaran’s resignation was not “all that surprising” given reports about concerns over lack of profitability in some of the group’s ventures. Tata Group “virtually has its leg in every aspect of the Indian economy” and the “immediate priority will be to find a successor,” Mathias said, but noted that finding a new chairman before February could prove difficult. “It is easily India’s biggest corporate decision to be made in the next six months. There are challenges ahead.” The development comes as TCS, the group’s largest profit generator, is under pressure from a slowdown in global technology spending. The company is also grappling with threats from generative AI software and its shares have fallen more than 20 per cent in the past year. The Tata Group’s efforts to revive the loss-making Air India have suffered setbacks following the crash of a London-bound flight last June and reports last week that a pilot of a flight to Phuket, which experienced severe turbulence, had smoked marijuana. Vijay Govindarajan, distinguished professor of management at the Tuck School of Business at Dartmouth, said on social media that Chandrasekaran’s successor “will inherit a paradox”. TCS, the cash machine that funds the empire, including Air India’s planned turnaround, is “staring down the most disruptive force it has ever faced” because its legacy IT services model catering to Fortune 500 companies is being threatened by generative AI, according to Govindarajan. Vaibhav Kakkar, senior partner at law firm Saraf and Partners, said the end of Chandrasekaran’s tenure “should primarily be understood as a leadership transition at Tata Sons, rather than a sign of potential operational instability across the Tata Group’s diversified businesses”. “He has been instrumental in shaping the group’s growth trajectory over the past decade, but one must bear in mind that institutions such as Tata are built over decades on governance, professional management and continuity – and those foundations do not change overnight,” Kakkar said. The institutional depth of the group companies was often underappreciated during times of transition, he added. Looming uncertainty Amritraj Kaushal, a lawyer at the Supreme Court of India, said the priority “should be a swift and transparent succession process”. An extended period of uncertainty could slow down distribution of finance, group initiatives and coordination, which are particularly important for businesses like Air India that are still in transformation, according to Kaushal. He pointed out that Chandrasekaran was closely involved in Air India’s integration and turnaround after Tata reacquired it in 2022 from the government, 69 years since it was brought under state control from its founder, the Tata Group. “So continuity of vision matters here more than most group companies,” Kaushal said. The implications for Air India’s business go beyond India because Singapore Airlines has faced direct shareholder questions regarding its 25.1 per cent equity stake in the carrier. Mayur Patel, regional commercial and industry affairs leader for Asia-Pacific, Middle East and Africa at OAG, a travel data and aviation analytics firm, said Singapore Airlines had consistently viewed its investment as a long-term strategic play to participate in India’s significant domestic market and international growth. “While Air India is undergoing a significant transformation and faces near-term challenges, Singapore Airlines has continued to emphasise the strategic rationale behind the investment,” he said. Chandrasekaran’s departure was unlikely to make much of a difference to Air India, Patel noted. Earlier this month, Air India appointed aviation veteran Tewolde Gebremariam, former group head of Ethiopian Airlines, as its new CEO and managing director. He succeeds Campbell Wilson, who previously led Scoot, Singapore Airlines’ low-cost subsidiary.

‘India’s biggest corporate decision’: Tata Group chair’s exit raises hard succession questions

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}N Chandrasekaran will step down in February and analysts say the group should prioritise a ‘swift and transparent’ succession process

N Chandrasekaran will step down in February and analysts say the group should prioritise a ‘swift and transparent’ succession process