Tata Trusts Chairman Noel Tata has proposed the merger of two Tata group companies with Tata Sons Private Ltd (TSPL) in an effort to keep the holding company private and outside the ambit of the Reserve Bank of India’s regulations governing upper-layer non-banking financial companies (NBFCs).
The proposed restructuring involves the merger of Tata Electronics Systems Solutions Private Ltd (TESS) and Tata Consulting Engineers (TCE), both wholly owned subsidiaries of Tata Sons, into TSPL.
Noel Tata submitted the proposal to Tata Sons chairman N Chandrasekaran on Monday evening. A copy has also been forwarded to the Reserve Bank of India (RBI) for its records.
The move comes weeks after the RBI, on September 11, rejected Tata Sons’ request to be declassified as an unregistered Core Investment Company (CIC). The decision effectively keeps alive the requirement for Tata Sons to list its shares, an issue that has exposed differences between the company’s board and its principal shareholder, Tata Trusts.
Under the proposal, the merger would reduce the proportion of TSPL’s income derived from financial assets and investments in group companies below the thresholds prescribed by the RBI for classification as an upper-layer NBFC and a CIC. Tata Trusts argued that the restructuring would restore Tata Sons to its earlier model of functioning as both an operating and holding company.
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Farokh Subedar, adviser to Tata Trusts, said the Trusts had identified TESS and TCE as the most suitable candidates for the merger because it was the “cleanest option”, although Tata Sons could consider other entities as well.
While securing the approval of Tata Sons and its board could prove challenging, Subedar said he believes it would be difficult for the RBI to reject the proposal.
To qualify for exclusion from the RBI’s regulatory framework, the businesses being merged must contribute a minimum level of revenue and assets. “We are looking at wholly owned subsidiaries so that there is no impact on the shareholding structure of Tata Sons,” Subedar said.
As on March 2026, TESS, which manufactures Apple iPhones in India, reported revenue of ₹67,542.47 crore and profit of ₹1,026.96 crore, while engineering consultancy firm TCE (standalone) reported revenue of ₹1,932.38 crore and profit of ₹225.79 crore. Their inclusion would substantially increase the operating income and business assets of Tata Sons.
“The proposed strategic reorganisation of TSPL’s business and operations is not a new pathway. For nearly 80 of its 100 years of existence, Tata Sons had operating businesses and operating revenues that enabled it to fund new ventures,” Tata Trusts said in a statement.
As recently as 2004, Tata Consultancy Services (TCS) operated as a business division of Tata Sons before being demerged into a separate subsidiary. Several other operating businesses were also housed within Tata Sons in the past.
According to Tata Trusts, the proposed reorganisation would restore Tata Sons to its earlier operating model, under which it generated its own revenues while also functioning as the holding company of the Tata group.
The merged entity would have operating revenue of approximately ₹1.05 lakh crore as of March 31, 2026, significantly exceeding its income from financial assets of ₹40,072 crore, which would account for 64.3 per cent of total income. As a result, Tata Trusts argues, the amalgamated entity would fail the “principal business” test required for NBFC classification.
Similarly, the entity would not qualify as a Core Investment Company. Its aggregate net assets would stand at ₹2,00,158 crore, of which investments in group companies would amount to ₹1,77,120 crore, representing less than 90 per cent of total net assets, thereby falling outside the regulatory threshold applicable to CICs.
Tata Trusts maintains that the restructuring is a legitimate and historically consistent solution that would allow Tata Sons to remain unlisted while aligning its business profile with RBI regulations.
Published on September 28, 2026
