Inside Tata Sons power struggle: Why N Chandrasekaran’s third term as chairman collapsed

Dubai: N Chandrasekaran’s proposed third term as Tata Sons chairman became caught in disagreements over capital spending, losses at newer businesses and whether the holding company could remain private.

He will serve until his current term ends on February 20, 2027. The Sir Dorabji Tata Trust and Sir Ratan Tata Trust had unanimously recommended extending his tenure by five years, while Tata Sons’ Nomination and Remuneration Committee had also recommended the proposal.

Yet it failed to secure unanimous support when tabled at the Tata Sons board meeting on February 24. Chandrasekaran deferred the decision and, after six months without a resolution, chose not to seek reappointment.

Four of Tata Sons’ six directors supported the extension, while Tata Trusts chairman Noel Tata opposed it and sought several conditions, Reuters reported in February, citing a source with direct knowledge of the meeting.

Noel Tata sought a commitment that Tata Sons would never list its shares, according to Reuters. Chandrasekaran would not provide that assurance and proposed deferring the decision to preserve consensus with the trusts, the news agency said.

The Economic Times reported that Noel Tata also sought curbs on heavy capital spending in high-risk ventures amid concerns over debt, Air India’s losses and investments in semiconductor and battery businesses.

Chandrasekaran’s statement does not name the dissenting director. The identification of Noel Tata and details of the reported conditions come from Reuters and The Economic Times.

The Economic Times reported late last year that Tata had committed more than Rs1.84 trillion to Air India, digital operations, semiconductors and electric mobility, with another Rs300 billion planned for emerging businesses.

Air India and Air India Express lost Rs222.38 billion in the year ended March 2026, more than double the previous year. Combined with losses at Tata Digital and Tata Electronics, the three businesses lost roughly Rs288 billion.

Chandrasekaran has defended the investments as long-term strategic decisions and said Air India’s turnaround could take five to ten years.

Tata Sons remained profitable, with profit after tax rising 21.8 per cent to Rs319.61 billion and revenue growing 9.1 per cent to Rs423.67 billion. The concern centred on the continuing funding and risks attached to newer ventures.

In May, the three businesses presented their spending and funding requirements to the Tata Sons board, Fortune India reported. The Economic Times said Noel Tata still considered several issues unresolved after the review.

Chandrasekaran also could not guarantee that Tata Sons would never list because its regulatory status remains unsettled. The Reserve Bank of India classifies Tata Sons as an “upper-layer” non-banking financial company, a category normally required to list within three years.

Tata Sons repaid debt and applied to surrender its non-banking financial company registration in an effort to avoid an initial public offering, but the RBI has not publicly decided the application. Reuters reported in August that the RBI retained Tata Sons in the upper-layer category.

The issue also divides its shareholders. Tata Trusts, which owns about 66 per cent of Tata Sons, opposes a listing. Shapoorji Pallonji Group, its biggest minority shareholder with about 18 per cent, supports one as a possible way to unlock the value of its stake and reduce debt.

Tata Sons’ August 18 annual meeting was expected to consider Chandrasekaran’s continuation as a director, which he needed to remain chairman. The unresolved differences created the risk of a contested shareholder vote.

His withdrawal gives Tata Sons just over six months to select a successor and manage the transition before his term ends. The immediate reason for his decision was clear: a five-year extension recommended by the two main trusts remained unapproved by the Tata Sons board six months later.