Did Tata Trusts' ₹1,000cr funding decision trigger internal rift?
What's the story
A proposed ₹1,000 crore funding plan for loss-making Tata International Ltd (TIL) has become a major point of contention among trustees of the Tata Trusts. The capital infusion proposal, which was approved by the board on September 11, has been marred by allegations of insufficient consultation and possible violation of Article 121A of Tata Sons' Articles of Association. This article mandates prior approval from the Trusts for significant financial commitments.
Leadership challenges
TIL's financial struggles
Noel Tata has been at the helm of TIL since 2010. He has always considered it as a key link between Tata Group's domestic and international operations. Despite its long-standing legacy, the company has been struggling with high leverage, forex losses, and a weak growth model. Despite a jump in turnover to roughly ₹32,000 crore in FY2025, the company posted a net loss of around ₹477 crore.
Governance concerns
Trustees raise procedural concerns
Trustees Pramit Jhaveri, Mehli Mistry, Jehangir H.C. Jehangir and Darius Khambatta have raised concerns over the way this ₹1,000 crore for TIL funding was approved in a board meeting. They argue that such a major capital commitment should have been thoroughly debated and circulated well in advance. The dissenting trustees also highlighted Tata Motors' acquisition of Iveco Group's non-defense commercial vehicle business for ₹38,000 crore in July as another instance where they were informed only at a late stage.
Business recovery
TIL's turnaround plan
Despite a doubling of turnover since FY2020, TIL continues to struggle with operational inefficiencies and a strained balance sheet. The company is pursuing joint ventures with Mitsubishi Corporation Mobility Group for its African distribution arm and Mercuria Group for its global trading business as part of a turnaround plan. During the board meeting on August 8, TIL MD Rajeev Singhal proposed this capital infusion to stabilize finances and support restructuring efforts.
Strategic scrutiny
Board members question strategic rationale
Several board members questioned the strategic rationale for continued support to TIL. They stressed that the company needed a clearer business model and long-term purpose, warning it could remain "transactional and opportunistic" without one. Tata Sons Chairman N Chandrasekaran acknowledged this concern but noted that while the proposed infusion would ease near-term stress, TIL faced deeper structural problems. He suggested a progress review by September 2026 with an interim assessment in a year.
Governance emphasis
Dissenting trustees emphasize governance issues
The dissenting trustees have stressed that their objections are more about governance than commercial concerns. They believe Article 121A was created to ensure collective oversight on large capital deployments, and if decisions are presented as faits accomplis, it undermines the transparency the Trusts are meant to uphold. TIL's total debt, including perpetual bonds, is estimated at over ₹5,000 crore with losses from trading and manufacturing operations eroding overall performance despite profitability in its African distribution business.