- Tata Trusts propose merging TESS and TCE with Tata Sons to restructure the holding company
- The new entity aims to avoid classification as NBFC or core investment company under RBI rules
- RBI rejected Tata Sons' request to surrender its core investment company registration recently
Tata Trusts have proposed a strategic reorganisation of Tata Sons that could alter the structure of the Tata Group's holding company while allowing it to remain an unlisted private company. The proposal comes after the Reserve Bank of India rejected Tata Sons' request to surrender its registration as a core investment company, putting the group under pressure to find a way to comply with the central bank's regulatory framework.
Under the proposed restructuring, Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) would be merged with Tata Sons Private Limited (TSPL). The resulting entity is proposed to be structured in a manner that would mean it is neither a non-banking financial company, or NBFC, nor a core investment company, according to the proposal to Tata Sons Chairman, marked to RBI.
The reorganisation would require a prior no-objection certificate from the RBI, and Tata Trusts are expected to engage with the central bank on the proposed structure.
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The proposed amalgamation is designed around the operating profile of the enlarged entity. As of March 31, 2026, the amalgamated entity would have operating revenues of Rs 1,05,043 crore. Revenue in excess of income from financial assets would stand at Rs 40,072 crore.
Based on these numbers, the proposed entity would not meet the “principal business criteria” applicable to an NBFC. It would also not meet the conditions applicable to a core investment company, according to the proposal.
This distinction is important because Tata Sons has historically operated primarily as the holding company of the Tata Group, with significant investments across the conglomerate's businesses.
Tata Sons has been registered with the RBI as a systemically important non-deposit taking core investment company. The company had sought voluntary surrender of its CIC registration, but the RBI rejected that request earlier this month.
Tata Trusts Want Tata Model Preserved
Tata Trusts hold about 66% of Tata Sons, making them the controlling shareholder of the group's holding company. The Trusts have consistently opposed a public listing of Tata Sons and have pushed for alternatives that preserve the existing Tata Group structure.
At a Tata Sons board meeting on Sept. 17, Tata Trusts Chairman Noel Tata reiterated the Trusts' position that the more-than-century-old structure of Tata Sons and the Tata Group should be preserved. The Trusts said the board should explore all available options rather than considering listing as the only route to compliance.
The latest proposal is therefore aimed at addressing the RBI's regulatory requirements while retaining Tata Sons as an unlisted private company. The proposed structure would also preserve what the Trusts describe as the Tata Group's long-standing operating model.
TESS Brings Electronics And Semiconductor Business Into The Structure
One of the key entities proposed to be merged with TSPL is Tata Electronics Systems Solutions, or TESS. TESS is part of Tata Group's broader electronics and semiconductor push. Its operations include electronics manufacturing and the development of capabilities across semiconductors, precision components and electronics manufacturing services.
Tata's FY26 annual report lists Tata Electronics Systems Solutions as a step-down subsidiary and shows its presence alongside the group's semiconductor manufacturing businesses.
Tata Consulting Engineers, meanwhile, brings engineering and consulting capabilities into the proposed enlarged entity. The combination would therefore bring substantial operating businesses into Tata Sons, changing the nature of the entity from a predominantly investment-oriented holding company towards one with a larger operating base.
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