Tata Trusts pitch Tata Sons restructuring as alternative to listing

Mumbai: Tata Trusts have sent the board of Tata Sons a plan to fold two operating companies into the group’s holding company, seeking to change its regulatory status and preserve it as an unlisted private entity.

The proposal, which was sent to the Tata Sons board on Monday, would merge Tata Electronics Systems Solutions and Tata Consulting Engineers with Tata Sons, according to a Tata Trusts statement. The Trusts also held a media conference to outline the plan, putting their alternative to a potential listing of Tata Sons into the public domain.

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The Trusts, which hold a 66% stake in Tata Sons, said the reorganisation would result in a company with enough operating income to fall outside the principal business criteria for an NBFC and with a lower proportion of investments in group companies, taking it outside the definition of a core investment company.

“The Tata Trusts believe that the proposed reorganization and action plan for compliance would be in the best interests of the Tata Group as well as its stakeholders, in addition to being a regulatory permissible and compliant form of reorganization of a CIC,” the statement said.

The regulator has classified Tata Sons as an upper-layer non-banking finance company (NBFC-UL), subjecting it to stricter regulatory requirements. Tata Sons has been examining the implications of the classification and options available to it inclduing an IPO.

The Trusts said they have formally written to the Tata Sons board asking it to consider and approve the proposal and take steps to secure regulatory approval.

“The Tata Trusts have, accordingly, written to the TSPL Board to consider and approve the proposal and, to take necessary steps, including applying to the RBI for the necessary ‘no-objection certificate’ as required for the proposed merger and reorganisation of TSPL,” it said, adding that they would work with Tata Sons in discussions with the regulator.

The proposal is built around the argument that Tata Sons was historically an operating company rather than simply a holding entity. The Trusts pointed to its nearly century-long history of running businesses, including Tata Consultancy Services before it was moved into a separate subsidiary.

“TSPL has, for almost 80 years out of its 100-year existence, always had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures,” the statement said.

The proposed merger would give the resulting entity Rs 105,043 crore of operating revenue as of March 31, 2026, compared with Rs 40,072 crore of income from financial assets. Operating revenue would therefore account for 64.3% of total income, the Trusts said.

“Accordingly, the proposed reorganisation will result in TSPL reverting to its previous operating model, with its own operations and revenues, in addition to being a holding company for the Tata Group,” the statement said.

The resulting entity would have net assets of Rs 200,158 crore, including Rs 177,120 crore invested in group companies. That would leave investments in group companies below 90% of aggregate net assets, the Trusts said, meaning the company would not meet the conditions applicable to a CIC.

The Trusts said the proposal was also designed to preserve Tata Sons' unlisted status.

“The proposed amalgamation and consequential steps are in line with regulatory compliance requirements and the unanimous resolutions passed by the Boards of Sir Dorabji Tata Trust and Sir Ratan Tata Trust in July 2025 wherein it was agreed that all endeavours should be made to ensure that the status of TSPL as an unlisted private company should continue,” the statement said.

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The restructuring would require a prior no-objection certificate from the Reserve Bank of India under its voluntary amalgamation framework for NBFCs. If the reorganisation is completed and Tata Sons ceases to qualify as a CIC, it would surrender its registration, the Trusts said.

The Trusts said the plan would also preserve what they described as Tata's distinctive organisational structure.

“It also has the advantage of preserving the more than 100-year-old distinctive and unique organisational structure of the Group, which has always focused on long term strategic initiatives geared towards nation building and the welfare of the disadvantaged and the excluded,” the statement said.

"It would not necessarily resolve the 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.

Anjaria 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.