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News analysis: India's Tata signals succession search

5 August, 2010

With the announcement that the board of Tata Sons, the holding company of India-based Tata Group, has formed a selection committee to choose a successor to chairman Ratan Tata (pictured), speculation is rife over who will replace him.

A statement from Tata Group said: "The committee is in the process of formulating criteria for identifying the most suitable candidate, taking into account the global nature and complexity of the Tata group's business at the present time."

The statement went on to say that the selection process will consider "suitable persons from within the Tata companies, other professionals in India as well as persons overseas with global experience."

Early speculation has centred on Ratan Tata's half brother Noel Tata, who last week stepped down as managing director of Trent, Tata Group's retail arm, to take up a position at marketing company Tata International.

Kavil Ramachandran, professor of family business and wealth management at the Indian School of Business in Hyderabad, believes Noel Tata could well be the preferred candidate.

He said: "I think the winds certainly are blowing towards someone with a Tata surname. The announcement of Noel Tata as the head of Tata International should be seen as the precursor."

Noel Tata would appear to be the obvious choice as it would be a big surprise if Jimmy Tata, Ratan Tata's secretive younger brother, is a serious contender. He sits on various charitable organisations including the Sir Ratan Tata Trust, but very little else is known about Jimmy Tata.

But not everyone is convinced Noel Tata is in prime position. Some analysts believe the reins of the business, founded by Jamsetji Tata in 1868, could pass to a non-family member.

If this happens, they will hope to last longer than Sir Nowroji Saklatwala. He spent six years as chairman in the 1930s, before being succeeded by JRD Tata who went on to run the Tata empire for 55 years.

Ratan Tata, 72, has led the business since 1991 and made globalisation of his company his legacy. Under his leadership, Tata made high-profile acquisitions of companies such as steelmaker Corus, automaker Jaguar Land Rover and tea giant Tetley Group. Around 65% of the group's revenues now come from business outside India.

Whoever takes on the role, they will be running one of Asia's biggest companies, with revenues of $70 billion in 2008/2009 and owners of 28 listed companies.

Analysts say that it is high time a successor is found.

"Ratan Tata has been dragging his feet for too long on this issue. He needs to clarify who his successor will be soon," said Ramachandran.