Noel Proposes Revamp Plan for Tata Sons to RBI to Prevent Listing
MUMBAI: Tata Trusts chairman Noel Tata has proposed merging Tata Electronics Systems (TES) and Tata Consulting Engineers (TCE) with Tata Sons. This move aims to take the holding company outside the Reserve Bank of India’s (RBI) regulatory framework for non-banking financial companies (NBFC) and core investment companies (CIC). The proposal comes shortly after Tata Sons’ board expressed a preference for a public listing to comply with RBI’s upper-layer regulations.
Noel Tata opposed the listing during a recent board meeting, suggesting that alternative options should be explored. This proposal marks a shift from previous restructuring efforts, such as the demerger of Tata Consultancy Services (TCS) in 2004. If approved, it would also hinder minority shareholder Shapoorji Pallonji Group’s plans to monetize its stake through an IPO. The proposal has been submitted to both Tata Sons and the RBI, but their responses are not yet clear.
F N Subedar, an adviser to Tata Trusts, described the plan as a return to Tata Sons’ historical structure, which previously housed operating businesses alongside its role as a holding company. Tata Sons became an NBFC-CIC only after TCS was demerged. Binoy Parikh, a partner at Katalyst Advisors, cautioned that the proposal may not permanently resolve Tata Sons’ regulatory status. If Tata Sons later lists TES or TCE or brings in external investors, it could be forced to demerge them, potentially pushing it back into the NBFC-CIC category.
This proposal is Tata Sons’ second attempt to avoid a public listing. In 2024, the company sought to exit RBI’s upper-layer NBFC-CIC rules after reducing its debt significantly. However, the RBI rejected this request earlier this month and directed compliance with its norms. The RBI’s criteria for an NBFC require that financial assets and income account for over 50% of a company’s total assets and income. The proposed merger would shift Tata Sons’ income mix towards operating revenue, likely causing it to fail one of these tests.
According to Tata Trusts, the merged entity would have an operating revenue of Rs 1.05 lakh crore as of March 31, 2026, significantly exceeding its income from financial assets. Operating revenue would represent 64% of the total income of the merged entity. Subedar noted that this proposal differs from earlier attempts to exit the RBI’s regulatory framework, as it aims to establish Tata Sons as neither an NBFC nor a CIC.
Noel Tata did not require fresh approval from the Tata Trusts boards to pursue this proposal, acting on a unanimous resolution from July 2025. However, some insiders dispute this interpretation, stating that the resolution cannot be automatically carried forward due to diverging positions among the trustees. The scheme would need the RBI’s no-objection certificate before being submitted to the National Company Law Tribunal (NCLT) for approval, along with shareholder backing of at least 75% of votes cast.
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