Tata Trusts propose merger of TESS, TCE with Tata Sons to avoid listing

Tata Trusts have proposed merging TESS and Tata Consulting Engineers with Tata Sons, saying the move could take the holding company outside the RBI's NBFC and CIC framework. The proposal seeks to retain Tata Sons as an unlisted private company

Mumbai: Tata Trusts, which own 66 per cent of Tata Sons, have proposed merging two operating companies with the Tata Group’s holding company in a restructuring that they say would allow it to shed its classification as a non-banking financial company and a core investment company, helping it retain its status as an unlisted private company.

The proposed restructuring involves the merger of Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons — the holding company of the salt-to-software, cars and airline conglomerate — according to a statement issued by the Tata Trusts on Monday.

---

The Trusts, which have opposed listing the holding company, have asked the Tata Sons board to consider the proposal and take necessary steps, including seeking a prior no-objection certificate from the Reserve Bank of India for the proposed merger.

The restructuring is aimed at ensuring the reorganised Tata Sons does not meet the regulatory criteria for either an NBFC or a core investment company, the Trusts said.

The proposed restructuring comes against a backdrop of growing differences between Tata Trusts and the board of Tata Sons over its future ownership structure. The Trusts, chaired by Noel Tata since October 2024, have opposed listing Tata Sons and in July 2025 unanimously resolved that efforts should be made to retain the company as an unlisted private entity.

The issue gained urgency after the RBI classified Tata Sons as an upper-layer NBFC in 2022, a status that carries a regulatory listing requirement. Tata Sons had sought to exit the NBFC framework, but the RBI rejected its request in September, leaving the listing issue unresolved.

The dispute has also spilled into the appointment of Tata Sons Chairman N Chandrasekaran. The Trusts had backed his reappointment for a third five-year term in July 2025, but opposed the board’s subsequent decision in 2026 to reappoint him after he indicated he would not seek another term.

Noel Tata and the Trusts argued that the Tata Sons articles required the support of the Trusts’ nominee directors for the appointment and described the board’s decision as invalid. The board has nevertheless backed Chandrasekaran and proceeded with steps linked to regulatory compliance.

The latest restructuring proposal offers the Trusts a route to address the listing requirement while preserving Tata Sons as an unlisted private company.

“The Tata Trusts today, as majority shareholders with a 66 per cent stake in Tata Sons Private Limited (TSPL), outlined a strategic reorganisation plan for the company which, when given effect to, would ensure that the reorganised entity would neither be an NBFC nor a core investment company,” it said in the statement.

As of March 31, 2026, the combined entity would have operating revenue of Rs 1,05,043 crore, accounting for 64.3 per cent of total income, compared with Rs 40,072 crore of income from financial assets, according to the proposal.

The reorganised entity would have net assets of Rs 2,00,158 crore, of which investments in group companies would account for Rs 1,77,120 crore, or less than 90 per cent of total net assets. This would mean it would not meet the principal business criteria for an NBFC or the applicable conditions for a CIC, the Trusts said.

The proposal would also restore an operating structure that Tata Sons followed for much of its history, when the holding company housed operating businesses alongside its investments in Tata Group companies.

Tata Consultancy Services, for example, was a division of Tata Sons until it was demerged into a separate subsidiary in 2004.

The proposed merger will have to comply with the RBI (Non-Banking Financial Companies – Voluntary Amalgamation) Directions, 2025, including the requirement for the central bank’s prior no-objection certificate.

Following completion of the restructuring, Tata Sons would surrender its certificate of registration as a CIC, the Trusts said.

The proposal comes after the boards of the Sir Dorabji Tata Trust and Sir Ratan Tata Trust unanimously resolved in July 2025 that efforts should be made to retain Tata Sons as an unlisted private company.

The Tata Trusts said the proposed structure would preserve the Tata Group’s longstanding organisational model while meeting applicable regulatory requirements. The proposal remains subject to consideration by the Tata Sons board, RBI approval and completion of the merger process.