Tata Trusts has proposed a strategic restructuring plan for Tata Sons aimed at allowing the group holding company to continue as an unlisted private entity.
The proposal was shared with the Tata Sons board on Monday evening before being made public. Tata Trusts, which holds a 66% stake in Tata Sons, said the restructuring would restore the company’s earlier operating model by bringing business operations and revenue streams directly under the holding company.
The move comes amid a regulatory requirement for Tata Sons to list its shares after being classified as an upper-layer non-banking financial company (NBFC) by the Reserve Bank of India in 2022.
Merge Tata Electronics subsidiary Tata Electronics Systems Solutions Private Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons.
Bring operating businesses and revenues into Tata Sons along with its existing role as the group’s holding company.
Apply to the RBI for a prior no-objection certificate for the restructuring.
Surrender Tata Sons’ core investment company (CIC) registration after the restructuring.
Retain Tata Sons as a privately held company.
Tata Trusts said the proposed structure would ensure Tata Sons is no longer classified as either an upper-layer NBFC or a CIC. Under RBI rules, upper-layer NBFCs with assets above ₹1 trillion are required to list their shares.
The Trusts argued that after the merger, Tata Sons would generate significantly higher operating revenue compared with income from financial investments, helping it move outside the regulatory framework applicable to NBFCs and CICs.
According to Tata Trusts, the combined entity would have operating revenue of around ₹1.05 lakh crore, while income from financial assets would be about ₹40,072 crore.
Tata Trusts said the proposed restructuring is not a new approach for the group. For most of its history, Tata Sons operated businesses directly while also functioning as the holding company of the Tata Group.
The Trusts pointed out that Tata Consultancy Services (TCS) was once a division of Tata Sons before being separated into an independent subsidiary in 2004.
The restructuring proposal comes after a disagreement over whether Tata Sons should proceed with a public listing.
In September 2022, the RBI classified Tata Sons as an upper-layer NBFC and provided a three-year timeline for compliance, including listing requirements.
Tata Sons later cleared its debt and applied to surrender its CIC status to remain private. However, the RBI rejected the application and asked the company to comply with applicable regulations.
The Tata Sons board had earlier supported a listing proposal, while Noel Tata, chairman of Tata Trusts and a Tata Sons nominee director, opposed the move.
The proposed restructuring has also significant implications for Tata Sons’ shareholders. The Shapoorji Pallonji Group, which owns more than 18% stake in Tata Sons, has supported listing. A public issue could allow the group to partially sell its stake and raise funds.
Tata Trusts, however, has maintained that restructuring offers an alternative route while preserving the company’s private ownership structure.