Noel Tata proposes splitting Tata Sons as alternative to RBI-mandated listing

Mumbai: Tata Trusts chairman Noel Tata has suggested that Tata Sons explore a restructuring exercise, including potentially splitting it into several entities, as an alternative to listing the conglomerate's holding company to meet Reserve Bank of India (RBI) requirements, people familiar with the matter said.

He had made the proposal at the Tata Sons board meeting on September 17, but it wasn't clear whether the board would consider it, the people said.

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The Trusts, majority shareholder of Tata Sons, has maintained that the holding company should remain unlisted and has been exploring options to meet RBI requirements without going public.

That September 17 board meeting had exposed the sharp divide between Noel Tata and the rest of the Tata Sons board members, with the latter grouping voting to reappoint N Chandrasekaran as chairman and embark on the process of listing. Noel Tata opposed both moves.

The regulator has classified Tata Sons as an upper-layer non-banking finance company, subjecting it to stricter regulatory requirements. Tata Sons has been examining the implications of the classification and options available to it, said the people cited.

Noel Tata and Tata Sons did not comment. There was no voting on the resolution related to the RBI directive, although the matter was debated at length, executives said.

Tata later suggested that both sides should set up a team to examine the matter in detail.

The holding company is understood to have begun preparing for a public listing soon after RBI directed it to do so last week, with February 2027 emerging as an approximate internal target for a likely market debut, ET reported on September 19.

Experts said restructuring could take several forms, including a demerger, moving assets into a subsidiary, a merger, or a broader scheme of arrangement. Given Tata Sons' size, any such exercise could involve significant regulatory, commercial and tax complexities, said Ketan Dalal, founder of Katalyst Advisors.

Tata Sons is the holding company for a broad portfolio of group businesses, including Tata Consultancy Services, Tata Motors, Tata Steel, Tata Capital, Tata Communications, Tata Consumer Products, Tata Investment Corporation, Air India, Tata Digital, Tata Electronics and Agratas, among others.

On a consolidated basis, Tata Sons' FY26 revenue rose 17% to Rs 6.61 lakh crore, while net profit fell 35.7% to Rs17,923 crore, weighed down by losses at unlisted businesses, including Air India, Tata Digital and Tata Electronics.

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"Implied in the restructuring thought is the assumption that RBI will permit it in the first place, in spite of so much water under the bridge," Dalal said. "A restructuring could also raise questions over the resulting governance architecture, including where listed and unlisted companies would sit and what role each new entity would have... It would be very difficult to comment, except to say that it's easier said than done."

Shapoorji Pallonji (SP) Group, which owns about 18.37% of Tata Sons, is backing a Tata Sons listing. SP Group's stake is held through Sterling Investments Corp and Cyrus Investments, and has been pledged against borrowings. The group completed a Rs 21,500-crore refinancing in July after telling investors it planned to monetise part of its Tata Sons holding through a listing or share sale within 18 months. It faces a repayment obligation of about Rs 3,500 crore by the end of September.

"Even if splitting Tata Sons into multiple entities is legally possible and could avoid a listing, it would not necessarily resolve SP Group's exit issue, as the group would still have no clear route to monetise its stake," said Harshal Anjaria, founder of boutique capital market advisory firm Shreeyam Advisors. He said RBI's rejection of Tata Sons' deregistration application could also make such a route difficult, particularly if the restructuring is seen as an attempt to circumvent that decision. "Any such reorganisation or change in control would require prior RBI approval," he said.

Such a revamp could also affect the way Tata Sons deploys cash across the group. Tata Sons currently uses dividends from TCS to fund businesses that require capital and a separation could disrupt that mechanism.

"Lenders and rating agencies could also reassess the extent of support available to different group companies, potentially raising financing costs for entities separated from TCS," Anjaria said.

Tata Sons had argued that after repaying its debt, it should no longer require registration as a core investment company, but RBI rejected that application. A company predominantly holding group investments can avoid core investment company registration only if it does not access public funds and does not provide guarantees for group companies.