Corporate India has been gripped in recent weeks by the battle for control of one of its standard bearers, the Tata empire. The outcome has the potential to dramatically upend the country's largest conglomerate and reshape India Inc.
Under the late patrician chair Ratan Tata, the 158-year-old group expanded across the Indian economy after the early 1990s liberalisation, with operations spanning IT services, steel, hotels, chemicals, automobiles, power and even tea. Tata has long stood out for its corporate governance standards and longer-term approach, often making it a first port of call for foreign investors and business partners.
Now Ratan Tata's successors are fighting to gain control of both the group's holding company, Tata Sons, and the charitable trusts that are its majority shareholders. The tension centres on the business ambitions of executive chair N Chandrasekaran, who is backed by a majority on the Tata Sons board, and the concerns of the trusts, voiced by their chair, Noel Tata. Chandrasekaran has led the group since 2017, launching initiatives including iPhone assembly and taking over the troubled Air India. He has also set Tata Sons on a wave of capital-intensive projects in semiconductors, batteries and defence products. The total investment bill approaches $25bn.
The challenge is that Tata Sons' consolidated net profits have hit a five-year low, and the business model of TCS, the group's cash cow, is being disrupted by AI. If subsidiaries do not improve, payouts to the charitable trusts could suffer, an important concern given that charitable benefit has been central to the Tata ethos. Noel Tata dissented when the board reappointed Chandrasekaran for a third term, and the two sides also differ on whether Tata Sons should list, a question on which Noel Tata wants to keep the company private.
Source: Financial Times Companies · Summarized by HeadlinesBriefing