Tata Trusts Proposes Tata Sons Restructuring To Avoid RBI Listing Requirement, Plans TESS And TCE Merger

Tata Trusts has proposed restructuring Tata Sons by merging Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) with the group holding company. The proposal is aimed at taking Tata Sons outside the Reserve Bank of India's (RBI) regulatory framework for non-banking financial companies (NBFCs) and core investment companies (CICs), potentially allowing it to remain unlisted. The proposal was announced on Monday, September 28.

Tata Trusts, which owns 66% of Tata Sons, has asked the Tata Sons board to consider the restructuring and seek a prior no-objection certificate (NOC) from the RBI. The move comes after the central bank rejected Tata Sons' request to surrender its CIC registration earlier in September, keeping the company under the regulatory framework applicable to upper-layer NBFCs and bringing the listing requirement into focus.

According to Tata Trusts, the merged entity would have had operating revenue of ₹1,05,043 crore as of March 31, 2026, compared with ₹40,072 crore of income from financial assets. Operating revenue would account for 64.3% of total income. The Trusts said the proposed structure would therefore take Tata Sons outside the RBI's principal-business criteria for an NBFC.

Tata Sons Restructuring Plan

Under the proposal, TESS and TCE would be merged into Tata Sons. TESS operates across electronics manufacturing, semiconductors, precision components and related businesses, while TCE is an engineering and consulting company.

The merger would give Tata Sons operating businesses and revenue directly within the holding company while allowing it to continue as the principal holding company of the Tata Group.

Tata Trusts said the proposed entity would have aggregate net assets of ₹2,00,158 crore. Investments in Tata Group companies would account for ₹1,77,120 crore, or about 88.5% of net assets.

The 88.5% figure is significant because the RBI's CIC framework uses a 90% threshold for investments in group companies. Tata Trusts said the proposed structure would therefore mean Tata Sons would no longer meet the definition of a CIC.

The Trusts also said the higher operating revenue would mean the restructured Tata Sons would not meet the principal-business test for an NBFC.

Tata Sons Listing Issue

The restructuring proposal comes after the RBI rejected Tata Sons' application to surrender its CIC registration on September 11. Tata Sons is classified as an upper-layer NBFC and is subject to enhanced regulatory requirements, including the applicable listing requirement.

Tata Trusts has opposed the listing route. At the Tata Sons board meeting on September 17, Tata Trusts Chairman Noel Tata reiterated that the Trusts had not agreed to the listing and that alternatives should be examined. The Trusts said the Tata Sons board had unanimously decided in March 2024 that the company should remain unlisted.

The latest proposal is therefore focused on changing Tata Sons' corporate and financial structure rather than taking the holding company public.

Tata Trusts said the proposed structure would also take Tata Sons back towards its earlier operating model, when the holding company had businesses and revenues of its own. Tata Consultancy Services, for example, was previously a division of Tata Sons before becoming a separate subsidiary in 2004.

Tata Sons Merger What Happens Next

The proposed merger is not effective yet. Tata Sons' board will first have to consider the plan, after which the company would need to approach the RBI for its NOC.

The transaction will also have to comply with the RBI's Non-Banking Financial Companies–Voluntary Amalgamation Directions, 2025, since it involves merging operating non-financial companies with an NBFC.

Tata Trusts said it and Tata Sons would engage with the RBI on the proposed reorganisation. If the restructuring is approved and completed and Tata Sons no longer qualifies as a CIC, the company would then be required to surrender its CIC registration.

For now, the Tata Sons listing question remains unresolved. The next key step is the Tata Sons board's response to the restructuring proposal and the subsequent RBI approval process.

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