N Chandrasekaran is new Tata Sons chairman

In a move that many had anticipated, N Chandrasekaran was appointed as the new chairman of the $103 billion-Tata group on Thursday.

Chandrasekaran, popularly known as Chandra, is currently the MD and CEO of Tata Consultancy Services (TCS), the most valuable company of the salt-to-software conglomerate. “This is as per the unanimous recommendation of the Selection Committee. Mr. Chandrasekaran will take charge from February 21, 2017,” said a statement issued by Tata Sons on Thursday evening.

The 54-year-old TCS chief became the seventh chairman of Tata Sons, the flagship holding firm of the 149-year-old group on Thursday, after the company’s board met to ratify his name as the next leader of the group. Even before the decision was formally announced, Chandra, who attended the board meeting at Bombay House – headquarters of the group –returned to TCS’ headquarters in the same area of Fort later in the evening to standing ovation from his colleagues.

“I am humbled and honoured to be chosen to lead a truly great institution that occupies a unique position in the hearts of people in India and the world,” Chandra said in a statement issued late Thursday evening. “I am proud to have been part of the Tata family for over 30 years and assuming this position is a great privilege. I want to thank the Tata Sons Board and Mr. Ratan N. Tata for their confidence in me to lead this trusted institution that has a rich heritage. At the Tata group, we are at an inflection point. I am aware that this role comes with huge responsibilities. It will be my endeavour to help progress the group with the ethos, ethics and values that the Tata group has been built on.”

The new chairman of Tata Sons will take over the reins at a crucial time for the conglomerate, when it is facing several challenges. Foremost among them is a bruising corporate battle that it is engaged in with Cyrus Mistry, the former chairman of Tata Sons who was unceremoniously sacked on October 24 last year. A complete breakdown in the relationship between Mistry and other directors of Tata Sons and trustees of Tata Trusts (which owns 66 percent of Tata Sons), including Ratan Tata, owing to an irreconcilable trust deficit, has seen a public and legal spat rage on, which continues till date.

Chandra, who has been reported to be one of the Tata group veterans playing a key role in the conglomerate’s defence against Mistry’s challenge, will need to immediately roll up his sleeves and rally people around him to re-build the group’s brand image, which has been affected due to the battle with Mistry and the various allegations of impropriety that have been floating around. Added to that are the challenges that his predecessor was facing before his was ousted. These include group businesses like Tata Steel Europe and Tata Motors’ passenger cars division, which have been struggling for some time now.

“Chandra was the perfect choice (for Tata Sons chairman). The legal cases are some of the immediate areas that he will have to deal with. This is an extraordinary time for the group from a legal point of view,” said Ishaat Hussain, director of Tata Sons. “He will have the best advice from legal minds within and outside Tata Sons and he will take care of it,” Hussain told reporters outside Bombay House after Thursday’s board meeting.

One of the challenges that Chandra may potentially face as Tata Sons chairman, according to observers, is his lack of experience in a manufacturing setup. While most of the Tata group’s revenues and profitability comes from its IT services arm, the conglomerate has a significant manufacturing presence across verticals such as automobiles, metals, and consumer products.

But Chandra’s peers in the industry feel that the IT sector veteran is adept at dealing with the new circumstances that that he will find himself in once he assumes office. “Leadership is about taking strong judgment calls when they are needed. And he (Chandra) is capable of that,” Kiran Mazumda-Shaw, chairperson and MD of Biocon, India’s largest biotechnology company told CNBC-TV18.

The founder of Infosys, TCS’ closest rival, NR Narayana Murthy, described Chandra as “a simple human being, austere, confident and competent.”

“Chandra will be in a position to instill and inspire employees at Tata with his own personal example,” Murthy told the TV channel.

Chandra, a frequent marathon runner, has been the MD and CEO of TCS since 2009 and the company has seen stellar growth during his tenure, even when the Indian IT industry was facing headwinds and TCS’ peers weren’t doing very well. The postgraduate in computer applications from the Regional Engineering College, Trichy (now known as National Institute of Technology, Tiruchirapalli) joined TCS in 1987 as a software programmer.

Under his leadership, TCS’ topline has tripled in six years to stand at $16.5 billion in 2015-16. The company that snatched the IT bellwether status from rival Infosys employs 3.71 lakh employees globally, had a market capitalization of $70 billion as on March 31, 2016. Chandra was also appointed as a director on the board of India’s central bank, Reserve Bank of India, in 2016.

The Tata Sons statement quoted its board of director as saying that Chandra has demonstrated exemplary leadership as the CEO and MD of TCS. “We believe he will now inspire the entire Tata group to realise its potential acting as leaders in their respective businesses, always keeping with our value system and ethics and adhering with the practices of the Tata group which have stood it in good stead,” the statement added.

Chandra’s official profile describes him as a “technopreneur” known for his ability to make big bets on new technology to drive TCS’ strong positioning in the emerging digital economy. Apart from being a passionate long-distance runner, Chandra is also an avid photographer, according to his profile on TCS’ website. 

By virtue of being a global conglomerate with operations across countries and continents, Tata Sons also needs a leader who is well-recognised globally. Chandra fits the bill since as TCS chief, he has struck up relationships with the heads of several large global multinational companies who are TCS’ clients. 

However, Chandra’s elevation as Tata Sons chairman leads to another question mark for the conglomerate: that of his succession at TCS. Late on Thursday evening it was announced that Rajesh Gopinathan, the IT major’s chief financial officer will take over from Chandra. Gopinathan will have to navigate the company through some choppy waters as global uncertainty owing to events like Brexit and Donald Trump’s ascendance to the US presidency are impacting the IT sector. To support Gopinathan, TCS also named N Ganapathy Subramaniam as the company’s president and chief operating officer. Subramaniam is currently president, TCS Financial Solutions.

“TCS’ core strength is its strong leadership talent that is collaborative and aspirational. I have been privileged to lead this company of great professionals over the last seven years…I am absolutely delighted that the board has chosen both Rajesh and NGS (Subramaniam) to lead this company into the future. I am proud of the capability they have to take TCS to greater heights. I look forward to a continued relationship with TCS and the management team,” Chandra said in a statement as chairman of Tata Sons.