Tata Trusts Suggest Merger of Two Firms with Tata Sons to Comply with RBI Listing Requirements
NEW DELHI: Tata Trusts, which hold a 66% stake in Tata Sons, have proposed a merger of two operating companies with Tata Sons. This move aims to remove Tata Sons from the Reserve Bank of India’s regulatory framework for non-banking financial companies (NBFCs) and core investment companies (CICs), potentially allowing it to remain unlisted. The Trusts have requested the Tata Sons board to consider merging Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons and to seek a no-objection certificate from the RBI for the restructuring.
The proposal comes amid ongoing tensions between Tata Trusts and the Tata Sons board regarding the holding company’s future, particularly its listing status. The Trusts have expressed a preference for Tata Sons to remain a private entity, while the board has been exploring options for a public listing. The Trusts stated that the reorganization plan would ensure that the new entity would not be classified as an NBFC or a CIC.
Proposed Restructuring Details
Under the proposed restructuring, TESS and TCE would be amalgamated with Tata Sons, integrating their revenues directly into the holding company. This change would alter the composition of Tata Sons’ income and assets. According to the Trusts, the reorganized entity is projected to have operating revenue of Rs 1,05,043 crore by March 31, 2026, which would account for 64.3% of its total income. Income from financial assets is expected to be Rs 40,072 crore, with net assets totaling Rs 2,00,158 crore.
The restructuring aims to ensure that Tata Sons no longer meets the regulatory criteria for an NBFC or a CIC. The Trusts noted that the merger must comply with the RBI’s Non-Banking Financial Companies – Voluntary Amalgamation Directions, 2025, which includes obtaining a no-objection certificate from the central bank. Following the reorganization, Tata Sons would also need to surrender its certificate of registration as a CIC.
Context of the Proposal
The restructuring is a response to Tata Sons’ classification as an upper-layer NBFC by the RBI in 2022, which subjects it to additional regulatory requirements, including a potential listing. Tata Sons had sought an exemption from this classification, but the RBI rejected the request in September, intensifying the urgency for a solution. The Trusts have consistently opposed a public listing, advocating for Tata Sons to remain an unlisted private company.
The proposed merger offers an alternative to comply with the regulatory framework by changing Tata Sons’ business and asset profile. The Trusts argue that this restructuring would restore an organizational model that existed for much of Tata Sons’ history, where operating businesses were housed directly within the parent company.
Ongoing Disputes
This proposal emerges amid broader disagreements between Tata Trusts and the Tata Sons board over governance and structure. The Trusts, led by Noel Tata since October 2024, have resisted moves toward a public listing. Tensions escalated when the Tata Sons board voted to extend N Chandrasekaran’s term as chairman for another five years, a decision opposed by Noel Tata. The Trusts have questioned the validity of this resolution, citing a lack of support from their nominee directors.
The proposal will require consideration by the Tata Sons board and regulatory approval, including an RBI no-objection certificate. The Trusts have indicated their intent to engage with the RBI regarding the proposed reorganization.
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