Tata Sons' next leader may reset strategic priorities, capital allocation: Senior Advocate Gopal Jain

Senior Advocate Gopal Jain believes N Chandrasekaran’s decision not to seek a third term as Tata Sons chairman gives the Tata Group an opportunity to begin a new phase with a clean slate.

Jain described the move as a “dignified way” of handling leadership differences and said the next leader would have to steer the group through a significantly changed business environment, including the rise of artificial intelligence (AI).

Jain said the new leadership could also bring changes in strategic priorities, capital allocation and restructuring, depending on the vision of the incoming chairman.

With the Tata Sons annual general meeting (AGM), its non-banking financial company (NBFC) listing status and the deregistration application still unresolved, Jain said the incoming chairman would have to address these issues while also redefining the group's priorities for the next 10-20 years.

This is an edited transcript of the interview.

Q: Nine years after that bitter boardroom battle between Ratan Tata and Cyrus Mistry, Tata Sons Chairman N Chandrasekaran has now said that he will not seek reappointment for a third term. Not entirely unexpected, given what we've seen play out over the last six months, but the timing and the very public nature of this letter — what do you make of it?

A: I think we have to see it in context and think that the group requires leadership. Instead of having some kind of discourse in the public domain on the differences which had happened, I think this is a dignified way of doing it.

Very much the Tata style

.

The Tatas have always done well under the leadership of somebody from the Tata Group. So, looking at the future of the group, its expansion and growth in these challenging times and in the new world of AI, perhaps, like they say, it's a handing over of the baton to another Tata.

Q: There are several important developments that continue to remain unanswered at this point in time. To start with, the Tata Sons AGM scheduled for August 18, there is a crucial meeting of the Charities Commissioner. That meeting takes place tomorrow. That could hold the key to whether that AGM will happen or not. And of course, there is the open question of the listing, where it is an upper-layer NBFC classification, but no clarity yet on its deregistration application. All of this, along with this big leadership change, will be important aspects that will determine the future course of this group.

A: Absolutely. Because as you said, the NBFC listing will be a completely different ball game altogether, given the long history that the group has had without that. So, the new leader will have to look at these aspects and provide leadership.

But yes, it is going to be a completely changed circumstance in which the next set of meetings would happen. So, as I say, watch this space.

Q: I'm almost getting a sense of déjà vu, as I've been saying, almost a decade, and we're seeing pretty much, of course, not acrimonious in the way that it was during the Cyrus Mistry time, but again, a boardroom battle leading to succession change at the House of Tatas. What does that tell you?

A: It shows two things. One, as you said, there could have been differences of opinion, but it had spilled very much into the public domain, and there was just a lot of speculation around the leadership.

So, this puts that whole thing to rest in a quiet way, and it gives the next person the chance now to start on a clean slate versus having to look at a more squabbling board.

So, it's done in a graceful and dignified way, and you start afresh on a clean slate, which is very important for the reasons you mentioned, the kind of decisions which the new leader would have to take and steer the Tata Group into what I call the $200 billion or $300 billion club.

Q: In the last board meeting, which was the contentious board meeting, five businesses were identified where questions were raised about capital allocation, return on investment and so on and so forth. Do you envisage any change as far as strategic priorities and capital allocation are concerned, on the back of what we've seen transpire in the last few months and what is likely to come?

A: The way the debate was going on, in terms of capital allocation and restructuring, that very much depends on the vision of the new leader and the priority sectors.

We saw that when Cyrus was there at the helm of affairs as well. So, this is like a fresh cabinet and a fresh leader. You redefine your priorities in the light of the next 10 or 20 years.

Watch the full conversation here



So, I do expect some kind of major change on the anvil, but like you said, it'll all depend on the new leader, and then we can have a second round once we know who the new leader is.

Catch all the latest updates from the stock market here