NEW DELHI: Tata Trusts on Monday evening announced a strategic reorganisation plan for Tata Sons, proposing to revert to its old operational model through an amalgamation process to remain a privately held company. The philanthropic organisation, led by Chairman Noel Tata, shared the plan with Tata Sons before briefing the media on it.
Reiterating its position, Tata Trusts, the largest shareholder with a 66 per cent stake in Tata Sons, said the restructuring would give Tata Sons its own operations and revenues. This would ensure that the holding company of the salt-to-software conglomerate would “neither be a non-banking financial company (NBFC) nor a core investment company (CIC)”. Without the upper-layer NBFC and CIC tags, Tata Sons would not have to list, Tata Trusts maintained, while pointing out that the reorganisation would preserve the century-old organisational structure of the group.
The reorganisation of the holdco can be done through the merger of Tata Electronics Systems Solutions Private Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons Pvt Ltd (TSPL), according to Tata Trusts. TESS is a fully owned subsidiary of Tata Electronics and TCE is a leading private sector engineering and project consultancy. Farokh N Subedar, advisor to Tata Trusts, spoke to reporters in Mumbai about the restructuring plan. Subedar, 71, is a Tata group veteran, having retired in 2017 as chief operating officer and company secretary of Tata Sons. He worked as vice-chairman of the Noel Tata-led Tata Investment Corporation till last year.
Arguing that the proposed plan would be in the best interests of the Tata group as well as its stakeholders, in addition to being compliant with regulations, Tata Trusts said it had written to the Tata Sons board to consider and approve the proposal and to take necessary steps, including applying to the RBI for the necessary ‘no-objection certificate’. Tata Trusts, along with Tata Sons, would engage with the RBI on all aspects of the proposed rejig, a Tata Trusts statement said.
Tata Sons did not comment. The Tata Trusts statement said the proposed strategic reorganisation of the business and operations of Tata Sons is not a new pathway. For almost 80 years of its 100-year existence, Tata Sons had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures, the statement said. “To recall, as recently as 2004, Tata Consultancy Services was a business division of Tata Sons before it was demerged into a separate subsidiary.” The statement added that this was also the case with other operating businesses of Tata Sons.
“Accordingly, the proposed reorganisation will result in Tata Sons reverting to its previous operating model, with its own operations and revenues, in addition to being a holding company for the Tata Group,” Tata Trusts said.
This will also be in line with the previous classification (after 2004) by the Reserve Bank of India of Tata Sons as a non-banking, non-financial company, it stated.
The RBI placed Tata Sons on the upper-layer NBFC list in September 2022, giving the company three years to get listed. In 2024, Tata Sons cleared all its debt and filed an application to voluntarily surrender its CIC status so that it could remain a private company. Earlier this month, the RBI rejected the Tata Sons application, asking the company to comply with the norms immediately.
While the Tata Sons board on September 17 backed the proposal to list Tata Sons, as suggested by the RBI, Noel Tata, a nominee director at Tata Sons, opposed any listing move. Tata Trusts, which has opposed listing Tata Sons, said at the board meeting and thereafter that listing is not the only option. It suggested restructuring Tata Sons as a solution. Noel Tata had told Tata Sons that “considerable room remains” to negotiate and that the board should “occupy that room” rather than concede to listing.
The Shapoorji Pallonji group, the second-largest shareholder of Tata Sons with over an 18 per cent stake, is supporting listing. Listing of Tata Sons would enable it to partly dilute its stake and reduce its mounting debts.
Shriram Subramanian, founder and managing director of InGovern, a proxy advisory firm, told Business Standard that it may be difficult for the RBI to agree to a restructuring plan at this point since it has already rejected the Tata Sons application for deregistering its CIC status.
Working out the math, Tata Trusts on Monday said the amalgamated entity, arising out of the merger of TESS and TCE with Tata Sons, will have an operating revenue of ₹1.05 trillion, far in excess of its income from financial assets of ₹40,072 crore, constituting 64.3 per cent of the total income of the amalgamated entity. Also, it will not meet the “principal business criteria” of an NBFC as well as the conditions applicable to a CIC (net assets aggregating over ₹2 trillion, out of which investment in group companies will be more than ₹1.77 trillion, representing less than 90 per cent of the aggregate net assets of the resultant entity), the statement pointed out.
According to the RBI, any upper-layer NBFC with an asset size of over ₹1 trillion must go for listing. Tata Sons’ standalone assets were pegged at more than ₹2 trillion.
An amalgamation of genuine operating, non-financial companies (such as TESS and TCE) with an NBFC (such as Tata Sons) will need to be undertaken in accordance with the RBI provisions (Non-Banking Financial Companies – Voluntary Amalgamation) Directions, 2025, including the requirement to obtain a prior no-objection certificate from the regulator. “Given that Tata Sons will also cease to be a CIC upon the conclusion of the proposed reorganisation, it will require to surrender its certificate of registration,” Tata Trusts said.
It mentioned that the restructuring would be in sync with 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 Tata Sons as an unlisted private company should continue.”
Source: Business Standard
