N. Chandrasekaran’s decision to step down as chairman of Tata Sons has come at the worst possible time for India’s largest conglomerate. As per a statement, he will remain until the end of his term in February 2027, but the message is unmistakable: Tata Group is entering a leadership transition just as some of its biggest businesses are facing mounting financial and strategic challenges.The timing matters because Tata Sons is not merely searching for a successor. It is grappling with a deeper problem.Air India and Tata Digital, two of the group’s most ambitious bets, are consuming capital at a pace that is becoming difficult to ignore. At the same time, the conglomerate remains heavily dependent on Tata Consultancy Services (TCS) for cash generation. For years, that dependence was manageable. Today, it is beginning to look like a strategic vulnerability.The 158-year old Tata Group has always thrived on long-term thinking. It built steel plants before India industrialised, software businesses before the world outsourced technology and luxury hotels before India became a major travel destination. But long-term thinking works only when somebody is paying the bills.For decades, that somebody has been TCS.India’s largest software exporter has become far more than the Tata Group’s most valuable company. It has become the financial engine that powers the entire conglomerate. The dividends generated by TCS have helped Tata Sons reduce debt, support investments, fund expansion and sustain the charitable activities of the Tata Trusts.Few conglomerates in the world enjoy such a dependable source of cash.Also read: Amid Differences With Noel Tata, N. Chandrasekaran Steps Down as Tata Sons ChairmanThe problem is that the list of businesses consuming that cash continues to grow.Air India has emerged as the biggest challenge. The airline’s losses have ballooned even as Tata Sons continues to invest heavily in fleet expansion, systems integration and operational restructuring. The acquisition of Air India was celebrated as the return of a national icon to its original home. The romance of that narrative, however, cannot obscure the economics.Airlines are notoriously difficult businesses. They require enormous capital, operate on thin margins and are vulnerable to fuel prices, currency movements and geopolitical disruptions.Chandrasekaran himself acknowledged the scale of the challenge when he said Air India’s turnaround could take around a decade. That may well prove correct. The problem is that Tata Sons must finance those ten years.Then there is Tata Digital – a business set up during Chandra’s ten year tenure.The group entered digital commerce with the ambition of creating a consumer platform that could bring together retail, payments, travel, financial services and lifestyle offerings under a single ecosystem. The vision remains compelling.But the profit remains elusive.Years after launch, Tata Digital continues to report significant losses while facing fierce competition from global technology companies like Amazon and Flipkart, Reliance and a host of specialised digital platforms.Neither Air India nor Tata Digital can be dismissed as non-core assets. Both are central to Tata Sons’ vision of the future.Air India alone lost more than Rs 22,000 crore in FY 2026, while Tata Digital reported losses of nearly Rs 5,000 crore. Photo: PTI/File.But together they have become a formidable drain on capital. The problem extends beyond Air India and Tata Digital. Several Tata Group subsidiaries continue to report losses despite years of investment. Tata Electronics, Agratas, Tata Projects, Tata Play, Tata Realty & Infrastructure and Tata Chemicals were all in the red in FY2026. Individually, these losses may be manageable. Collectively, they point to a broader challenge confronting Tata Sons: too many businesses are consuming capital while too few are generating it.Air India alone lost more than Rs 22,000 crore in FY 2026, while Tata Digital reported losses of nearly Rs 5,000 crore. Together, the two accounted for the overwhelming bulk of the group’s losses, but they are not isolated cases. The cumulative losses across several subsidiaries raise an uncomfortable question.Is Tata Sons trying to build too many businesses at the same time? The conglomerate’s willingness to invest for the long term has historically been one of its greatest strengths. Yet even the most patient shareholder like Tata Trusts must eventually ask when these investments will begin generating returns rather than demanding ever larger capital infusions. The next chairman of Tata Sons and Noel Tata will have to answer that question.The uncomfortable reality is that the losses generated by Air India and Tata Digital are increasingly offsetting the financial benefits flowing from TCS. The software giant continues to generate extraordinary profits, but a growing portion of that value is effectively being used to support businesses that remain far from self-sustaining.That is not a sustainable model for a conglomerate of Tata’s scale.The leadership transition only amplifies the challenge.Tata Trusts chairman Noel Tata. Photo: X/@tatatrusts.Chandrasekaran’s departure follows months of reported tensions over succession, governance and the future direction of the group. Public reports suggest differences between Chandrasekaran and Noel Tata, the chairman of Tata Trusts, over leadership and strategic issues. In a statement, Chandra, as he is popularly known, has singled out one director of Tata Sons (read Noel Tata) “who did not support” the resolution for his renewal when it was tabled before the board on February 24th this year. This has made the board room fracas public.The uncertainty extends beyond personalities.As of now, there is no publicly identified successor. Investors do not know who will lead Tata Sons after Chandra. Markets have already reacted nervously to the announcement, with Tata Group stocks coming under pressure following the news of Chandrasekaran’s exit. At the same time, Tata Sons continues to face unresolved questions about its ownership structure and future direction.The Shapoorji Pallonji Group’s 18.4% stake remains trapped inside an unlisted company. The debate over whether Tata Sons should eventually list is unlikely to disappear. Leadership transitions have a way of bringing dormant issues back to the surface.Yet the most pressing issue remains capital allocation.The next chairman of Tata Sons will inherit a conglomerate blessed with several outstanding businesses apart from massive loss-making businesses. Titan, Trent, Indian Hotels, Tata Power and Tata Capital have all emerged as powerful franchises with the potential to become major generators of cash. The challenge is to convert more of them into dividend-paying engines capable of reducing the group’s dependence on TCS.In many ways, Tata Sons needs another TCS.Not another software company, but another business capable of generating large, recurring cash flows over decades.The group has achieved this before. It created TCS. It built Titan. It transformed Jaguar Land Rover into a global luxury brand. It has repeatedly demonstrated an ability to nurture businesses over long periods.The next chapter will require the same patience, but also greater discipline.Businesses that consistently generate cash should receive greater support and, where appropriate, broader access to capital markets. Businesses that continue to absorb capital should be subjected to clear performance milestones and tougher scrutiny.The era of easy funding from a single cash cow is coming to an end.As the Tata Group enters one of the most consequential periods in its history, its patriarch, Noel Tata, will have to play a far more important role than perhaps anyone anticipated. As chairman of the Tata Trusts and the ultimate steward of the group’s controlling shareholder, Noel Tata should take full charge and immediately clean up the stables. He will be expected to provide stability, direction and clarity during a period of uncertainty.More importantly, he and the next chairman of Tata Sons will have to confront the two problems that now sit at the centre of the conglomerate’s future: Air India and Tata Digital.The future of the Tata Group will not be determined by how much profit TCS generates.It will be determined by whether Noel Tata and the next generation of leadership can sort out the mounting challenges at Air India and Tata Digital before those losses overwhelm the financial strength that TCS has spent decades creating.Dev Chatterjee is a senior journalist and co-author of The Meltdown and India Inc’s Greatest Turnarounds.