Mumbai: Tata Trusts, which hold a 66 per cent stake in Tata Sons, have proposed merging two operating companies with the group’s holding company in an attempt to change its regulatory classification and allow it to remain an unlisted private company.
The proposal involves amalgamating Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons Pvt Ltd (TSPL). The Trusts have asked the Tata Sons board to consider the plan and seek a prior no-objection certificate from the Reserve Bank of India (RBI). PTI reported the development based on a statement from the Tata Trusts.
The Trusts said the proposed structure would make Tata Sons an operating company as well as the holding company of the Tata Group. By bringing non-financial businesses and their revenues directly into Tata Sons, the reorganised entity would, according to the Trusts, no longer meet the regulatory criteria for either an NBFC or a core investment company (CIC).
The proposal comes after the RBI rejected Tata Sons’ application earlier this month to surrender its registration and directed the company to comply with the regulatory framework applicable to upper-layer NBFCs. Tata Sons has been classified in the RBI’s Upper Layer since 2022. Under the RBI’s scale-based framework, NBFCs in the Upper Layer are required to be listed within 3 years of identification.
How the proposed structure would work
The Trusts’ proposal is based on changing the balance between Tata Sons’ operating income and its investment income.
According to figures cited by the Trusts, the combined entity would have had operating revenue of Rs 1,05,043 crore for the year ended March 31, 2026. This would account for 64.3 per cent of its total income, while income from financial assets would have been Rs 40,072 crore.
The proposed entity would have net assets of Rs 2,00,158 crore, including Rs 1,77,120 crore invested in Tata Group companies. The Trusts said this would put investments in group companies at below 90 per cent of net assets, helping the reorganised company fall outside the definition of a CIC.
The Trusts have also argued that the proposed structure would revive an older Tata Sons model in which the holding company directly operated businesses.
Tata Consultancy Services, for instance, functioned as a division of Tata Sons before being separated into a subsidiary in 2004. The Trusts said Tata Sons had operating businesses and revenues for much of its history, rather than functioning solely as an investment holding company.
Why the RBI approval matters
The proposal cannot be implemented simply through a decision by the Tata Trusts.
The RBI’s Voluntary Amalgamation Directions, 2025 apply to amalgamations involving NBFCs and provide for prior regulatory approval or a no-objection certificate in specified circumstances. The Trusts have specifically asked Tata Sons to approach the RBI for the required NOC.
The Trusts said that after the proposed reorganisation, Tata Sons would cease to be a CIC and would therefore surrender its certificate of registration.
This is significant because the RBI rejected Tata Sons’ earlier attempt to surrender its registration on September 11. The regulator advised the company to take necessary steps to comply with the rules applicable to upper-layer NBFCs.
The Tata Sons board has subsequently moved towards compliance with the RBI framework. On September 17, it approved a fresh 5-year term for chairman N Chandrasekaran and decided to proceed with steps towards a listing. Tata Trusts chairman Noel Tata voted against Chandrasekaran’s reappointment.
The RBI has since sought an update from Tata Sons on its proposed compliance roadmap, according to the Financial Express. The board is expected to finalise its response, including the proposed timeline for listing-related compliance.
Tata Trusts and Tata Sons board at odds
The restructuring proposal therefore comes amid a wider disagreement between Tata Trusts and the Tata Sons board over the future structure of the holding company.
The Trusts have maintained that Tata Sons should remain privately held. Their position was formalised through resolutions passed by the boards of the Sir Dorabji Tata Trust and Sir Ratan Tata Trust in July 2025, calling for efforts to preserve Tata Sons as an unlisted private company.
