India's Tata Group is going through a major boardroom crisis. Noel Tata, the Chairman of the Tata holding company, has been removed from the Tata Group's board by N. Chandrasekaran, chairman of Tata Sons. Noel Tata has declared the decision illegal, a stance the board disputes. The crisis has been precipitated by a 2022 decision by India’s central bank to order the company to seek a stock market listing for Tata Sons, to comply with new rules governing systemically important investment firms. Tata Sons is considered an investment firm because it holds stakes in Tata subsidiaries and can inject capital into them. Noel Tata, who heads the bloc of charities that owns two-thirds of Tata Sons, vehemently opposes a listing.
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| Ratan and Noel Tata |
India's Tata Group is known for its deep philanthropic engagement in the country. Tata patriarch Jamsetji Tata, who laid the foundations of large-scale steel manufacturing in colonial-era India about a century ago, created trusts that would hold controlling stakes in the Tata Group, thus capping Tata family members' personal wealth. As a result of that decision, none of the Tatas' names show up among India's billionaires, even though the group's 26 listed firms had a market capitalization of nearly $280 billion in March this year. In recent weeks, the boardroom battle has dragged down the share prices of some group firms. The trusts receive hundreds of millions of dollars in dividends from Tata Sons. In the year ended March 2025, they spent more than $100 million on education, health and other social programs, according to the Wall Street Journal. Listing of Tata Sons as a public company could significantly reduce Tata Son's philanthropic spending.
Tatas are Parsees, a Zoroastrian minority that migrated to South Asia centuries ago. The Parsee community became very wealthy under the British Raj. They were licensed by the British colonial government to export opium to China and sell cotton to Britain when the American Civil War dried up supplies. These two activities helped them accumulate enormous wealth. But they have also used some of this wealth to fund charities. The Tata group was “conceived as national service carried on through business…and the structure of its ownership is what has allowed it to remain so,” Noel Tata has been quoted as saying at the board meeting.
Parsee community is also known for its philanthropy in Pakistan. NED Engineering University, my alma mater in Karachi, is named after a Parsee gentleman Nadirshaw Edulji Dinshaw (N.E.D.), who initially funded the institution at its founding in 1921. NED, now a university, still has reserved seats for Parsee students recommended by the Dinshaw family. I had several Parsee classmates when I attended it. In addition to reserved seats, Parsees also compete for admissions on general seats.
In 1925, Framroze Edulji Dinshaw of the Dinshaw family bailed out Tatas by loaning Rs 20 million to the Tata Group to rescue its troubled Tata Hydro and Tata Steel.
Some Parsee leaders, like Dadabhai Naoroji (1825-1917), participated in India's independence movement. Naoroji was among the founding members of the Indian National Congress and served as its President on three occasions, from 1886-87, 1893-94 and 1906-07. He was an early political mentor and major influence on Pakistan's founding father Quaid-e-Azam Muhammad Ali Jinnah during his formative years in public life. A major street that passes near Quaid-e-Azam Mohammad Ali Jinnah’s mausoleum is named Dadabhai Naotoji Road in Karachi.
Today, Tata is Apple’s only homegrown assembler of iPhones in India. The company faces heavy expenses from its efforts to turn around loss-making flagship carrier Air India, according to the Wall Street Journal. For now, Tata is heavily reliant on the profits of its cash cow, outsourcing firm Tata Consultancy Services (TCS).
Companies listed on public stock exchanges focus primarily on delivering short-term profits for shareholders and higher stock price, not for the benefit society at large. This is the main reason why Noel Tata is resisting pressure for listing his holding company. As he put it at the board meeting, the Tata Sons’ “dividends fund hospitals, universities and research for which no shareholder will ever be repaid. Its capital has repeatedly been placed at risk for reasons no analyst would have endorsed and from which the country has nonetheless benefited.”
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17 comments:
Among Tata Group's myriad businesses, a very prominent one wasn't mentioned here - Tata Motors. It is India's largest commercial vehicle manufacturer and second largest passenger vehicle manufacturer, and it also owns Jaguar-Land Rover, Daweoo Trucks and IVECO (the latter currently under process of acquisition).
There are several such Parsi business houses in India besides the Tatas including Godrej, Wadia, Mistry, Poonawalla etc. For a very small community, Parsis have also played an prominent role in India's politics, arts, military and technology fields including Feroz Gandhi (husband of Indira Gandhi), Homi Jehangir Bhabha who played a key role in India's nuclear programme, Gen Sam Manekshaw who was the Army Chief during 1971 war etc.
Also, Parsis and Iranis are considered distinct Zoroastrian communities in India with the former having arrived during and after the Muslim conquest of Persia while the latter community arrived much later during 19th century.
Tata has proved to be a national champion again and again.
The reason it can take those long gestation big bets like building a fully Indian car brand in the 1990s to buying Air India to investing in semiconductor and aircraft manufacturing today is because the Tata Sons holding company can fund those decade plus strategic commitments without worrying about explaining everything to fickle investors every quarter.
It must be protected at all costs.
Yes TCS cash cow won’t last forever but it’s good for at least the next 5-10 years at which point Tata Group annual revenue will be 300 billion USD(Its 180 billion USD today)
Iranis are 19tg century migrants from Qajar ruled Iran??
True
Tata Sons via Tata Charities donates 60% annually to charities.
Wonder why a Lt. General is not running Tata.
Shams: “Wonder why a Lt. General is not running Tata”
Major Pakistani conglomerates like Dawood Group, Mansha Group and Habib Group are not run by Pakistani generals
http://www.riazhaq.com/2018/05/history-of-pakistans-business-and.html
Dawood Group is disinvesting from Pakistan in power sector, already left many sectors except for Fertilizer, which will be the last one.
Mansha Group is front face of Sharifs, like Omni Group is Zardari's. These two are obviously not going anywhere, but what they extract from Pakistan is sent outside.
Habib Group has a much reduced exposure in Pakistan, practically in banking sector only.
You cannot deny the extortionist role of Faujis in pakistani enterprises fast going bust.
Suhail: “Dawood Group is disinvesting from Pakistan in power sector, already left many sectors except for Fertilizer, which will be the last one”
Most Pakistani conglomerates started out in banking and textiles. They are now diversifying their portfolios. Dawood is now heavily into telecommunications. Similarly, Mansha is getting into autos, as are Habibs. These changes come naturally as a country develops and its consumers demand new products and services.
Sabeer Bhatia
@sabeer
Benchmark
Oct. 1, 2024
Oct. 1, 2026
2-year return
🇵🇰 Pakistan KSE-100
81,804.59
168,636.84
+106.1%
🇮🇳 India Nifty 50
25,796.90
22,421.95
−13.1%
https://x.com/sabeer/status/2105848874963534276?s=20
I wouldn't exactly consider stock market performance as a reliable indicator of the health of an economy. Remember, it is the same Pakistan that has signed up for an IMF bailout and not India.
"Five reasons India's stock market is sinking even when its economy is growing"
https://www.bbc.com/news/articles/cwp9g5p1gy7yo
India's economy is growing at an enviable rate of over 7% despite global energy shocks, rising interest rates, tariff uncertainties and weather-related disruptions.
But the world's fastest growing major economy also has one of the worst performing major equity markets in 2026. The correction in Indian stocks has, in fact, only intensified in recent weeks.
The benchmark Sensex and Nifty indices, which represent the country's largest companies, have inched up slightly since Monday after posting losses for eight straight weeks - the longest losing streak in 25 years, according to Reuters.
Indian mom-and-pop investors who put their money into the Nifty have seen their wealth erode by about 15% this year. In comparison, they would have made 62% returns on Korea's Kospi index since January or 170% in the last two years.
On aggregate, the money foreign investors have put into Indian markets in the past decade - after subtracting what they sold or withdrew - is nearing zero. In the past two years alone, foreign institutional investors have withdrawn a staggering $40bn, according to data from Bernstein Research.
It is the large pool of domestic institutional and retail money, flowing into instruments like mutual funds, that have helped the markets avoid a sharper fall.
Domestic assets under management of mutual funds have grown from about $125bn in 2016 to some $900bn this year, with the number of Indians parking money in stocks and mutual funds more than tripling to 150 million individuals.
This makes the recent fall in the markets more worrying - since households, already struggling from a weak job market, high inflation and faltering consumption, are now seeing their equity savings take a beating too.
So, what's gone wrong?
Here are five reasons India's booming economy isn't lifting its stock market.
- Persistent energy shocks due to Middle East conflict
Crude oil prices have hovered between $90 and $100 a barrel as the disruption to shipping through the Strait of Hormuz enters its eighth month, far longer than analysts had expected. Moreover, there's little visibility on when normalcy will return.
"This single variable tends to influence the markets quite negatively," Hari Shyamsunder, a fund manager with Franklin Templeton Asset Management India, told the BBC. "Markets can absorb crude between $70 and $90, but when prices move above $100 a barrel, it starts putting stress on macro-economic variables such as inflation and also company earnings and margins."
India imports over 90% of its requirements - nearly half of its crude oil imports, along with a large share of its liquified petroleum gas (LPG) and liquified natural gas (LNG) shipments, come through the Strait of Hormuz.
While Delhi has diversified its energy sources, tapping Russian oil markets, US President Donald Trump recently threatened up to 100% tariffs on countries doing trade with Moscow, further complicating matters.
- Rising global interest rates
With oil prices rising, inflation is going up and, as a result, interest rates are on the rise globally. The effective yield on US government bonds is above 5%, or at near 25-year highs.
These are often considered risk-free investments. As a result, foreign money tends to leave riskier emerging market assets such as Indian equities and chase safer investments like US bonds when interest rates rise.
(Contd..)
(Contd..)
https://www.bbc.com/news/articles/cwp9g5p1gy7yo
- Falling rupee
For foreign investors, the problem of muted returns has been compounded by a weaker rupee. In currency-adjusted dollar terms, they have suffered because of the fall in the Indian currency.
The Nifty has delivered just 6% annualised dollar returns over the past decade - hardly attractive, especially in comparison with several other competing markets.
- Indian stocks are cheaper, but still relatively expensive
Stock valuations have been another major concern.
The market correction over the last two years has reduced the premium that Indian stocks held over their emerging market competitors.
"Stocks are cheaper than they have been on average for the last ten years," says Shyamsunder, adding that the premium that Indian shares commanded over other emerging economies has shrunk substantially in the past few years.
However, they are still expensive relative to their earnings, especially since companies in countries such as South Korea and Taiwan have benefited from a huge boom in artificial intelligence (AI) which has pushed up their profits.
- The missing AI piece
In India, AI, or the new economy broadly, is a major missing piece of its growth story.
"Many of India's large caps [big companies] represent a bygone economic era," Bernstein Research said in a note recently. "Most are not investing in the future, but consolidating their past, often expecting policy to continue shielding them from global competition."
And its smaller companies are yet to reach a scale that will attract foreign institutional funds.
While Indian companies are investing in data centres and chip fabrication, the country has not produced a global giant like OpenAI, Anthropic or even China's DeepSeek - this is where the largest share of the profits in the AI value chain lie.
Foreign investor interest will only return to India meaningfully if it can build globally competitive industries in these emerging areas, according to Bernstein.
"We are seeing early signs of this in areas such as space, defence, semiconductors, and deep-tech innovation, but most remain too small to materially influence capital allocation decisions over much of this decade."
So what's next?
There are many immediate factors that will influence how Indian markets behave going forward.
"Easing geopolitical tensions and relatively attractive valuations could support a revival in FPI [foreign portfolio investor] inflows," according to CareEdge, a brokerage, though trade tensions and higher energy prices remain a “challenge for corporate performance going ahead”.
For now, while foreign investors may have given up, Indian savers, even though increasingly more anxious, haven't slowed their monthly investment flows into mutual funds.
The real test will be whether this resilience survives a deeper correction in the future.
Such comparisons are fraught. It is just as fraught when comparisons were being made between Wall Street and the SENSEX when it was booming.
These comparisons are not between apples and oranges but between grapes and watermelons. Furthermore, liquidity in dollars, speculation and the reasons behind that, retail footprints, borrowing costs, regulatory oversight and hordes of other factors.
Lastly, sitting in a Western country, it is not advisable or fathomable to chase performance in a developing markets. Thanks
It'd be interesting how AI disruption will affect not just TCS, but Indian IT services in general.
Zen: “ It'd be interesting how AI disruption will affect not just TCS, but Indian IT services in general”
I’d go further and ask how AI would affect the Indian economy which depends on IT services exports to manage balance of payments.
Zen prediction:
- India could get tailwinds in the short-med term because of legacy maintenance projects. I am bullish on all the major players for the time being.
- India will end up taking lots of lowest value chain AI work such as imitation training labeling for robots, vision models, data curation etc.
For these two jobs, you don't need US/China scale tech. investment or tech talent pools.
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