India’s $106bn Tata empire considers revamping leadership structure

The country’s largest conglomerate may appoint a CEO to improve corporate governance

FILE PHOTO: A private security guard stands at the exit gate of the headquarters of Tata Consultancy Services (TCS) in Mumbai, India October 13, 2016. REUTERS/Shailesh Andrade/File Photo

Tata Sons, the holding company for India’s largest conglomerate, is considering an historic revamp of its leadership structure by creating a chief executive role to help improve corporate governance.

Under the plan being proposed, the chief executive will guide the sprawling businesses of the 153-year-old Tata empire, people engaged in the deliberations said.

The chairman will oversee the chief executive on behalf of shareholders, according to sources. The approval of Ratan Tata – the octogenarian chairman of controlling owner Tata Trusts – is seen as key to implementing the change, they said.

The current chairman of Tata Sons, Natarajan Chandrasekaran, is being considered for extension after his term ends in February. Heads of various Tata group companies, including Tata Steel, are being evaluated for the chief executive position, the sources said.

No final decision has been reached, and the plan and details could change, they said.

A spokeswoman for Tata Sons declined to comment. Emails to Tata Trusts and Ratan Tata were not answered.

The proposal comes months after former Tata Sons chairman Ratan Tata, 83, won a years-long legal battle with his successor, Cyrus P Mistry. Mr Mistry had alleged mismanagement at the group and sued the patriarch for removing him in 2016.

The proposed makeover may help chart a future for the conglomerate, which is at a crossroads after more than two decades of expansion under Ratan Tata’s leadership. It is not known who will succeed him as chairman of Tata Trusts, which owns 66 per cent of the holding company that runs the empire.

Shares of most of the listed companies of the Tata group advanced following the report. Tata Consultancy Services climbed as much as 1.3 per cent. Tata Motors added as much as 2 per cent on Tuesday, when the benchmark index of stocks was largely flat.

A new group chief executive will have to tackle many challenges. Tata Steel is racing to cut a net debt load of $10 billion, while Tata Motors – owner of British marque Jaguar Land Rover – had three consecutive years of losses up to March 2021.

The group’s plan to capitalise on India’s growing base of online shoppers has also yet to bear fruit. Despite having Tata Consultancy Services, Asia’s largest software services provider, at its disposal, a plan to launch an all-in-one e-commerce app to market its array of consumer products and services has been delayed.

With about 100 businesses and more than two dozen listed firms, the Tata group had a combined annual revenue of $106bn in 2020. Its 750,000 employees make cars and lorries, blend tea, forge steel, sell insurance, write software, operate phone networks and package salt, among much else.

The proposed leadership overhaul is in line with a recommendation by India’s market regulator that the nation’s top 500 listed companies have a separate chairman and chief executive by April 2022 for better governance, according to sources. Though Tata Sons is not listed, the change would help it comply with the rule, they said.

The addition of a professional manager at the top of the holding company also shines a spotlight on how Ratan Tata – who continues to shape the group – might envision his own transition from his current role of semi-retired chairman-emeritus.

Though Ratan Tata says he is no longer actively involved in business decisions, he still wields considerable influence over the group’s management through his leadership of Tata Trusts. After an Indian newspaper reported in July that Mr Chandrasekaran’s extension as chairman had been “informally ratified”, Ratan Tata issued a statement saying the board had not yet made a decision and no one approached him on the topic, reinforcing his clout.

Despite the familial link, Ratan Tata’s sway over the group also stems from his record as Tata Sons’ chairman between 1991 and 2012. A legendary figure of Indian business, he put the Tata group on the global map with a string of eye-catching deals over the past two decades, from the $2.3bn purchase of automaker JLR to the $13bn acquisition of British steel company Corus Group.

Updated: September 15th 2021, 4:30 AM
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