Tata Sons backs Chandrasekaran, listing as Tata stocks shed $3.2bn

Tata Sons reappointed N Chandrasekaran as chairman on Thursday and decided to consider a public listing, deepening a dispute with Tata Trusts, the family charity that controls the salt-to-software conglomerate.

The decision has exposed a growing divide within the 158-year-old Tata Group over leadership, governance and the future structure of Tata Sons.

Chandrasekaran and the Noel Tata-led Tata Trusts, which owns 66% of Tata Sons, have clashed over issues including a potential listing of Tata Sons, Air India’s mounting losses and a planned exit by a minority shareholder.

The 63-year-old chairman’s reappointment came as the group faces deepening losses at Air India and a sharp downturn at Jaguar Land Rover. Tata Group shares surged on Thursday after news of his reappointment.

But the gains were partly reversed on Friday as investors reacted to the growing uncertainty.

Shares of Tata Group companies lost about $3.2 billion in market value on Friday. By 10:45 a.m., about 302.22 billion rupees ($3.16 billion) had been erased from the combined market value of the listed Tata Group companies, compared with Thursday’s closing figure of about $268.5 billion, Reuters calculations based on LSEG data showed.

Shares of Tata Consultancy Services slipped 2.69%, Tata Chemicals fell 8.37% and Tata Investment Corporation declined 3.67%. Tata Motors Passenger Vehicles dropped 2.77% and Tata Power lost 0.56%.

Tata Motors fell 0.79% and Tata Elxsi slipped 0.82%, while Tata Capital rose 0.91% and Tata Steel gained 0.15%.

The Friday declines reversed some of Thursday’s gains in Tata Group stocks.

The dispute became public after Tata Trusts opposed both Chandrasekaran’s reappointment and the potential listing of Tata Sons following Thursday’s board meeting.

Tata Trusts called Chandrasekaran’s reappointment “illegal” under Tata Sons’ articles of association. It said both trust nominees on the board were required to vote in favour, while Noel Tata voted against the proposal. Tata Trusts reiterated that position in a statement on Thursday.

Tata Sons did not respond to a request for comment on the allegations.

Chandrasekaran had said last month that he would not seek another term as chairman after February 2027. Tata Group said the board this month asked him to reconsider in the group’s “larger interests”, a request he accepted on Thursday.

Tata Sons said Chandrasekaran “acceded to the board’s request to reconsider his decision” and that the board subsequently resolved by a majority vote to reappoint him as executive chairman for another five years after his current tenure expires.

Noel Tata, 68, opposed Chandrasekaran’s reappointment and a potential Tata Sons listing at Thursday’s board meeting.

The dispute comes days after the Reserve Bank of India rejected Tata Sons’ request for an exemption from rules that would require it to list.

The RBI classified Tata Sons as an “upper-layer” non-banking financial company in 2022, a category subject to enhanced regulation and a listing requirement.

The Tata Sons board on Thursday decided to move towards compliance with those rules and consider a listing, a source with direct knowledge of the situation told Reuters.

Tata Sons stopped short of making the listing decision explicit, saying it would “initiate steps to comply with the applicable RBI Guidelines and will seek guidance from RBI, Tata Trusts and other stakeholders on applicable compliance requirements.”

The listing has emerged as the biggest point of contention between Tata Sons and Tata Trusts.

Tata Trusts said it had asked Tata Sons to explore alternatives, arguing that the “Tata Model has to be saved”.

“What makes the Tata operating structure unique is that it is premised on trust and its majority shareholder is a charity … A listing will destroy its character and strike at the heart of this principle,” it said.

The Tata Trusts owns 66% of Tata Sons, while the Shapoorji Pallonji Group is the second-largest shareholder with an 18.4% stake.

Tata Trusts also said the Shapoorji Pallonji Group had proposed monetising part of its stake through a two-tranche buyout that would yield at least $2.61 billion over 18 months.

Tata Trusts Chairman Noel Tata said the buyout could be funded through Tata Sons’ internal cash flows, sales of listed shares, bringing investors into newer businesses or listing some of its companies. The Shapoorji Pallonji Group expressed support on Friday for a potential Tata Sons listing.

The disagreement over Tata Sons is not the first major boardroom dispute involving the group.

In 2016, the board ousted its then-chairman after he fell out over governance issues with group patriarch Ratan Tata, Noel’s half-brother who headed the charity arm until his death in 2024.

Chandrasekaran joined the group’s IT services arm TCS in 1987 after a master’s degree in computer applications and rose through the ranks. The group has described him as a “Tata lifer”. He first became chairman of Tata Sons in 2017 and his reappointment gives him a third term.

“Retaining Chandrasekaran removes a potential leadership uncertainty and reassures investors,” said Aishvarya Dadheech, founder and chief investment officer at India’s Fident Asset Management.

Tata Sons, the holding company of the Tata Group, controls more than 30 Tata companies, including TCS and Tata Motors.

Tata Group companies generated combined revenue of $185 billion in the last financial year. Its 26 listed companies had a combined market capitalisation of $277 billion as of March 31.

The latest developments leave Tata Sons facing two major issues at the same time: the continuation of Chandrasekaran as chairman and the question of whether the holding company should pursue a stock market listing. The dispute between Tata Sons and Tata Trusts has also brought questions over governance, ownership and succession to the forefront of the 158-year-old group.

(With inputs from agencies)