Noel Tata, chairman of Tata Trusts, has proposed a restructuring of Tata Sons that would involve merging two group companies, Tata Electronics Systems (TES) and Tata Consulting Engineers (TCE), with the holding company.
The proposal has been submitted to Tata Sons and the Reserve Bank of India (RBI) and is aimed at taking Tata Sons outside the regulatory framework applicable to upper-layer non-banking financial companies (NBFCs) and core investment companies (CICs). If successful, the restructuring could also allow the company to remain unlisted.
The proposal comes shortly after the Tata Sons board indicated a preference for pursuing a public listing to meet RBI requirements governing upper-layer NBFC-CIC entities. Noel Tata, who represents the majority shareholders, had opposed the listing and argued that other structural alternatives should be considered.
Proposed merger would change Tata Sons’ structure
Under the proposed arrangement, the two operating companies would become part of Tata Sons. This would represent a significant change from the group’s previous restructuring strategy, including the 2004 demerger of Tata Consultancy Services (TCS) from Tata Sons.
F N Subedar, an adviser to Tata Trusts and former company secretary of Tata Sons, described the proposal as a return to an earlier structure in which Tata Sons housed both operating businesses and the group’s holding-company functions.
Tata Sons later assumed the status of an NBFC-CIC after TCS was separated from the company.
The restructuring could also affect minority shareholder Shapoorji Pallonji Group, which has previously sought an opportunity to monetise its stake in Tata Sons through a potential public offering.
Questions remain over long-term regulatory status
Some restructuring experts have raised questions about whether the proposed arrangement would permanently remove Tata Sons from the RBI’s regulatory framework.
Binoy Parikh, a partner at Katalyst Advisors, said that if Tata Electronics Systems or Tata Consulting Engineers were subsequently listed or brought in outside investors, the companies could potentially have to be separated from Tata Sons again.
Such a move could reduce the operating revenue of Tata Sons and potentially result in the company once again meeting the criteria for classification as an NBFC-CIC.
According to Parikh, the proposed structure could therefore allow Tata Sons’ regulatory position to change depending on future business and regulatory circumstances.
Why the restructuring could affect NBFC classification
The RBI’s principal-business criteria for an NBFC generally require more than half of a company’s total assets to be financial assets and more than half of its income to come from financial activities.
The proposed merger would bring substantial operating businesses and revenue onto Tata Sons’ balance sheet. According to a restructuring expert, this could shift the company’s income profile sufficiently for it to fall outside the relevant NBFC criteria.
The arrangement could also affect Tata Sons’ classification as a Core Investment Company. Under the applicable framework, at least 90% of a CIC’s net assets must consist of investments in group companies.
Tata Sons’ net assets are estimated at around Rs 2 lakh crore. Adding the operating assets of TES and TCE could reduce the proportion represented by investments below the 90% threshold.
Figures provided by Tata Trusts indicate that the combined entity would have generated approximately Rs 1.05 lakh crore in operating revenue as of March 31, 2026, compared with Rs 40,072 crore of income from financial assets. Operating revenue would therefore account for around 64% of total income.
Second attempt to avoid a listing
The latest proposal follows an earlier effort by Tata Sons to exit the RBI’s upper-layer NBFC-CIC framework.
In 2024, the company sought deregistration after significantly reducing its debt. The RBI subsequently rejected the request and directed Tata Sons to comply with the regulatory requirements applicable to its classification.
Subedar said the latest proposal differs fundamentally from the earlier approach. Previously, the objective was to remain classified as a CIC while seeking relief from certain regulatory requirements. Under the new proposal, Tata Sons would seek to operate outside both the NBFC and CIC categories.
Disagreement over shareholder mandate
According to Subedar, Noel Tata did not need fresh approval from the Tata Trusts boards to pursue the restructuring. He said the proposal was consistent with a unanimous resolution passed in July 2025 that called for efforts to preserve Tata Sons as an unlisted private company.
People familiar with the matter have disputed that interpretation. They argue that circumstances have changed since the resolution was passed, particularly because two vice-chairmen of the Trusts are now understood to support a public listing of Tata Sons.
They also point out that the July 2025 resolution was adopted before the RBI had made its decision on Tata Sons’ March 2024 application seeking to leave the NBFC-CIC framework.
Regulatory and shareholder approvals required
The proposed restructuring would require a no-objection certificate from the RBI before it could be submitted to the National Company Law Tribunal (NCLT) for consideration.
The transaction would also require shareholder approval, including support from at least 75% of the votes cast.
The proposal therefore remains subject to regulatory, tribunal and shareholder approvals before it can be implemented.
