The Tata Group of companies has announced the replacement for outgoing chairman Ratan Tata.
Cyrus Mistry, a current director of Tata, will spend a year as deputy chairman under Ratan Tata until he takes over the reins in December 2012.
He is the younger son of construction tycoon Pallonji Mistry, who owns 18% of Tata Group.
Mr Mistry’s family is India’s seventh richest with a net worth of $7.6bn (£4.9bn).
Tata, which owns Jaguar Land Rover, is India’s biggest company with a value of about $98bn, and has interests including telecoms, engineering and science.
The 143-year-old group has more than 100 companies in more than 80 countries, employing 425,000 people.
Ratan Tata, 73, was appointed chairman of the group in 1991, and led the takeover of Anglo-Dutch steelmaker Corus in 2007.
Although Tata has been a strongly family-run business, Ratan Tata has no children and there was much speculation about his successor after he announced he would retire by the end of 2012.
Welcoming the appointment, Mr Tata said: “I have been impressed with the quality and calibre of his participation, his astute observations and his humility.”
Mr Mistry, 43, said in a statement he was “deeply honoured” by the appointment.
He said: “I am aware that an enormous responsibility, with a great legacy, has been entrusted to me. I look forward to Mr Tata’s guidance in the year ahead in meeting the expectations of the group.”
Mr Mistry said he would “undertake to legally dissociate myself from the management of my family businesses to avoid any issue of conflict of interest”.
Although he will be the first chairman from outside the family, Mr Mistry does have a connection – his sister is married to Mr Tata’s half-brother.