Tata Group – Now the real big challenges begin for the group

There has been a lot of action happening at the highest level in the Tata group. The current chairperson, N Chandrasekharan, has moved on and it is now down to brass tacks. Here are 4 issues that will take priority.

Finding an exit route for Shapoorji Pallonji group

One of the major factors that has driven the listing debate is the locking in of the SP group shares. The SP group currently holds 18.4% stake in Tata Sons and is the second largest shareholder after the Tata Trusts. However, after Tata Sons converted into a private company and put restrictions on the SP group transferring shares, the latter is struggling to come out of its high-cost debt. Under Noel Tata, the talks have begun about offering partial exit to the SP group. This is likely to be done by swapping their stake in Tata Sons for listed Tata group shares. That is a good starting point.

Getting back the stock market mojo of Tata group

This is the biggest missing piece that has to be put together by the Tata top brass. It is easy to talk about how market cap and profits of the group grew over last 9 years of Chandra’s tenure. But the real problem is with the second term, when market cap game went haywire. The crown jewel of the group, TCS, is down from second position to sixth position in market cap. How do group index returns compare? Over last 1 year; AV Birla group gave 20.21%, M&M Group 12%, and Tata group -2.45%. Over 3 years, respective returns were; 18.4%, 24.4%, and 2.9%. Over 5 years, CAGR returns were 13.4%, 23.7%, and 7.0%. Clearly, the Tata group stock market returns have lagged by a margin.

Mountain of debt in its unlisted companies

That is not much discussed about, but the real concern for Noel Tata would be the massive debt that unlisted companies of Tata group have. If you look at the total debt of 4 unlisted subsidiaries of Tata Sons (Air India, Tata Electronics, Agratas, and Tata Digital); it stands at ₹88,277 crore or nearly $10 billion. In FY26, these 4 unlisted subsidiaries of Tata Sons posted a net loss of over ₹(30,000) crore on revenues of ₹2,39,000 crore. Air India alone made losses of ₹(22,328) crore. Tata Sons may be debt-free, but its subsidiaries have a mountain of debt. The need of the hour is to take an urgent call. If the group is going to really sink in big funds here, then public fund raising may be required.

Most Important – Give a semblance of order

There has been a lot of dissent and chaos in the last few months. From the composition of the trusts to listing to the future of N Chandrasekharan; views have been diverse. For a long time, the Tata group was seen as an extremely private group which always gave the semblance of everything being in order. Of course, different business leaders can have different approaches to managing change. However, the Tata group is not any group. At $300 billion, it is the largest single group by market cap and is also seen as critical from a national perspective. The dissent within is not the real issue. For the outside world, there has to be a semblance of order and smooth functioning!