The next chair of the Tata group’s holding company, after incumbent N. Chandrasekaran steps down on 20 February 2027, will inherit a hard nut to crack: managing nearly $10 billion in bank debt built up by four new-age, loss-making businesses.
Air India, Tata Electronics, Agratas and Tata Digital saw their borrowings rise at a faster clip than the debt added by the four most indebted listed Tata companies in 2025-26, highlighting the scale of the challenge facing the next Tata group boss.
Rising debt at these new-age companies has become a concern for Tata Sons, according to a group executive, because much of the borrowing, as reflected in agreements with multiple domestic and international banks, is backed by the Tata Sons. Chandrasekaran is on the boards of all four.
Whoever becomes the next chairperson, the defining question will be resource allocation, which ultimately sits at the intersection of ownership, management and governance, said Srinath Sridharan, a Mumbai-based strategic corporate advisor and author of Family and Dhanda.
"This O-M-G alignment becomes particularly important when a large, institutionally owned conglomerate is simultaneously managing mature businesses and making significant bets on newer businesses,” he said, adding that the real test will be whether capital allocation remains governed by strategic merit and institutional discipline, rather than by legacy, loyalty, managerial momentum or the size of the opportunity.
The debt pile
Tata Digital Pvt. Ltd, the Tata Electronics Pvt. Ltd cluster, including the iPhone assembling business and semiconductor business, the Air India group, and Agratas Energy Storage Solutions Pvt. Ltd and its UK subsidiary Agratas Ltd, saw their borrowings surge by 53% to ₹88,277 crore ($10 billion) at the end of March 2026, from ₹57,828 crore ($6.6 billion) a year ago, showed a Mint review of the individual company filings with the ministry of corporate affairs (MCA) and the UK's companies registrar.
These borrowings or debts do not include lease liabilities or inter-corporate loans and are only payable to banks. The lease liabilities of Air India and Air India Express alone exceed ₹40,000 crore.
In comparison, the four most indebted Tata group listed companies—Tata Steel Ltd, Tata Motors Passenger Vehicles Ltd, Tata Motors Ltd (Tata Motors Commercial Vehicles), and Tata Power Ltd—saw their net debt jump by 27% from ₹1.35 trillion in FY25 to ₹1.72 trillion ($18 billion) in Fy26.
In absolute terms, the four privately held firms added ₹30,449.2 crore in external debt, compared with ₹36,133 crore added by the four listed group firms.
Meanwhile, the group's crown jewel, Tata Consultancy Services Ltd, has no debt, while its dividends accounted for two-thirds of Tata Sons Pvt. Ltd’s ₹42,366.5 crore revenue.
Tata Digital was founded in 2019 with the lofty ambition of building a one-stop app offering everything from shopping to cab-hailing. It was the first of the new business bets made by Chandrasekaran after he was appointed Tata Sons chair in February 2017.
The group then started Tata Electronics in 2020 to assemble iPhones for Apple Inc. and expanded into silicon wafer and integrated circuit manufacturing through Tata Electronics' wholly owned subsidiaries, Tata Semiconductor Assembly and Test Pvt. Ltd and Tata Semiconductor Manufacturing Pvt. Ltd.
By January 2022, Tata had acquired Air India and, in 2023, made its fourth bet by entering lithium-ion battery cell manufacturing for electric vehicles under Tata Agratas.
For now, the semiconductor business, Tata Electronics, and the battery businesses are in the midst of completing their manufacturing operations and do not report any revenue.
Tata Sons has invested ₹55,000 crore in the four businesses, with Tata Digital accounting for 48%, or ₹26,300 crore. The four companies reported a combined loss of ₹29,924 crore on revenue of ₹238,942 crore in FY26, according to the Mint’s review. Meanwhile, ₹88,277 crore is payable to banks, meaning creditors, including public- and private-sector banks, have 1.6 times Tata Sons’ exposure.
The albatross around the neck
A roadmap for profitability and the future of these new bets was one of the points Tata Trusts chair Noel Tata raised, first in the 24 February board meeting of Tata Sons, making him the sole dissenting voice among the six-member board.
The group’s holding company deferred its decision to grant Chandrasekaran a third, five-year term, followed by presentations from some of the chief executives of these businesses before the Tata Sons board in the last week of May.
Still, Noel Tata, who took over as chair of Tata Trusts on 11 October 2024 after the demise of his half-brother Ratan Tata, remained unconvinced.
Finally, on 12 August, Chandrasekaran decided to write a letter to the Tata Sons board, conveying that the member’s inability over the last six months to resolve his reappointment had led him to end his decade-long tenure at the end of his current stint, on 20 February 2027.
While debt has piled up, execution risks have also increased, with the battery plant facing potential delays in the UK and Air India’s recovery potentially taking up to a decade, as chair Chandrasekaran has said.
In June, the UK-based The Guardian reported that Agratas is facing a potential delay in the construction of its gigafactory, which could push the timeline for the plant's commercialization to 2028 from the earlier-slated 2027.
Air India and low-cost subsidiary Air India Express posted a combined net loss of ₹22,238 crore in FY26, more than double the year ago's ₹10,859 crore, while combined revenue fell nearly 9% to ₹71,870 crore.