Tata Trusts’ bid to reorganise Tata Sons Pvt Ltd (TSPL) by merging Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with the TSPL, so that the holding company of the Tata Group can shed the classification of a non-banking finance company (NBFC) and a core investment company (CIC) and not be forced to list, could face regulatory complications, say experts.
RBI continues to include TSPL in its list of upper layer (UL) NBFCs under its scale-based regulations, which required heightened regulatory compliance as well as listing. It rejected TSPL’s application for de-registration as a NBFC-Investment Credit Company.
In the run-up to its de-registration application, the holding company of the Tata Group cleared all its debt. Tata Trusts holds 66 per cent stake in Tata Sons.
Akshat Khetan, Founder, AU Corporate Advisory & Legal Services, noted that the reported proposal to fold TESS and TCE into Tata Sons would begin shifting the holding company’s character from a pure investment vehicle toward an operating enterprise.
However, the RBI’s classification turns on substance, not form: whether more than half of Tata Sons’ assets and income remain financial, whether at least 90 per cent of its net assets still sit in group companies and whether it has direct or indirect access to public funds.
“Given the scale of Tata Sons’ investment book, dominated by its TCS holding absorbing two comparatively small operating subsidiaries is unlikely to disturb those tests. Nor would ceasing to meet the CIC definition alone provide an exit; it could instead push Tata Sons into the general NBFC category, with heavier obligations,” Khetan said.
He opined that the RBI’s September 11 rejection of TSPL’s application for voluntary surrender of its Core Investment Company registration, its five-year lock-in for upper-layer entities and its prior-approval role in any NBFC amalgamation mean that any such scheme must be defensible before the regulator on its merits.
“A restructuring large enough to move Tata Sons out of the framework would look less like a merger of two subsidiaries and more like a fundamental reorganisation of the group’s holding structure which is what is now being debated at board level,” Khetan said.
Nazneen Ichhaporia, Partner, ANB Legal, observed that Tata Sons’ latest move highlights the tension between an existing board resolution to comply with the RBI’s listing mandate and fresh proposals being advanced by its majority shareholders.
“While trusts and affiliated entities collectively hold significant voting power, any restructuring, merger, or change in course would still require formal shareholder approval and, depending on the proposal, may need special majority thresholds. Until shareholders formally consider the matter or the courts rule otherwise, the board’s earlier decision to pursue the listing route remains valid and operative.”
Rohit Jain, Managing Partner, Singhania & Co, noted that following the RBI’s rejection of TSPL’s application to surrender its Core Investment Company registration, it will have to comply with the NBFC-Upper Layer framework that expressly provides that an NBFC-UL “shall be mandatorily listed within three years” of identification.
“Therefore, to avoid listing Tata Sons will have to restructure itself to cease its registered-CIC/NBFC-UL status. While Tata Trusts is seeking to take these steps, in light of the ongoing dispute between Tata Trusts and Tata Sons implementation of this plan seems to be practically difficult,” he said.
Alay Razvi, Managing Partner, Accord Juris, opined that the proposed merger of operating entities into Tata Sons is a legally sound route to address the CIC/NBFC classification question.
“With operating revenues at 64.3 per cent of total income and group investments below the 90 per cent net-asset threshold, the structure appears designed to fall outside both regimes. The real test is the RBI’s prior no-objection certificate under the 2025 Voluntary Amalgamation Directions, which will decide the timeline. If approved, it would let Tata Sons remain an unlisted private company,” he said.
Published on September 28, 2026
