Tata Trusts Offer a Merger to Keep Tata Sons Unlisted

Tata Trusts on September 28 asked Tata Sons to absorb two operating companies so the holding firm can drop its finance-company tags and remain unlisted. The plan would merge Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) into Tata Sons Private Limited, then take the combined firm outside the Reserve Bank of India’s definitions of a non-banking financial company and a core investment company.

The same regulator that refused a clean CIC exit on September 11 must still grant a no-objection certificate for a merger built to fail the tests that keep Tata Sons in the listing net.

Tata Trusts Put the Merger in Front of the Board

Noel Tata, chairman of Tata Trusts, wrote to the Tata Sons board on September 28 asking it to consider the reorganisation and apply to the RBI. Farokh N. Subedar, advisor to Tata Trusts, told a briefing at the Trusts’ World Trade Centre office that the letter went that evening to N. Chandrasekaran, chairman of Tata Sons, and that a copy went to the central bank as well.

Tata Trusts hold a 66 percent stake and framed the move as majority-shareholder policy, not a completed deal. The official account posted the outline the same afternoon.

The Tata Trusts today, as majority shareholders with a 66% stake in Tata Sons Private Limited (TSPL), outlined a strategic reorganisation plan for the Company which, when given effect to, would ensure that the reorganised entity would neither be a ‘Non-Banking Financial Company’… pic.twitter.com/H9yWp5pBMj

— Tata Trusts (@tatatrusts) September 28, 2026

If the board agrees and the RBI issues a no-objection certificate, Tata Sons would keep operating as an unlisted private company while still holding the group’s main investments. The Trusts said they and Tata Sons would then engage the RBI on every part of the reorganisation. Nothing in the letter itself lists Tata Sons, changes a share register, or ends the upper-layer listing clock.

Tata Sons Would Miss the CIC 90 Percent Test

The Trusts’ case is arithmetic. Fold two operating businesses into Tata Sons, lift the share of income that comes from making and selling things, and bring group-company investments in as a slightly smaller slice of net assets. On paper, both of the RBI’s gates would then fail.

HOW THE TWO RBI TESTS WOULD SHIFT

The Trusts put operating revenues at Rs 1,05,043 crore as of March 31, 2026, and income from financial assets at Rs 40,072 crore. They said operating revenues would make up 64.3 percent of the amalgamated entity’s total income, which is a separate total and not simply those two lines added together. On that basis, they argued, Tata Sons would miss the RBI’s 50 percent asset and income tests that decide whether a company’s principal business is finance.

The CIC gate is tighter. A core investment company must hold not less than 90 percent of its net assets in group-company shares, debt, or loans. The Trusts said the combined firm would have aggregate net assets of Rs 2,00,158 crore, of which around 88.5 percent would still be investments in group companies, just under that 90 percent line. Tata Sons’ own FY26 accounts put standalone assets at Rs 2.01 lakh crore, more than double the Rs 1 lakh crore upper-layer threshold the RBI locked in during June 2026. Those two asset figures describe different bases: the company’s books now, versus the Trusts’ net-asset mix after the merger.

The Phone Assembly Unit Does the Heavy Lifting

TESS is not a paper subsidiary invented for this letter. Tata Electronics, the group’s 2020 electronics and semiconductor push, acquired Wistron’s India operations in 2024 for its electronics manufacturing services business, and that unit was rebranded as Tata Electronics Systems Solutions. It is the former Wistron phone-assembly business, a high-volume plant network, not the Dholera wafer fab or the Assam assembly-and-test project that sit in other Tata Electronics companies.

TCE is a different animal, and a much smaller one on the income line. The engineering consultancy, founded in 1962, is already a wholly owned subsidiary of Tata Sons. Its FY26 annual report shows Rs 2,885 crore of FY26 income, Rs 3,958 crore of new orders, and a workforce of 8,455 on March 31, 2026. Set against the Trusts’ Rs 1,05,043 crore operating-revenue figure for the combined entity, TCE is a thin slice. The income mix moves because of the electronics manufacturing unit, not because an engineering firm of TCE’s size can reclassify a holding company on its own.

That is the trade the letter does not dwell on. Phone assembly is a contract-manufacturing business with customer concentration, export logistics, and working-capital swings. Parking it inside Tata Sons would give the holding company the operating revenue it needs to argue it is no longer a finance firm, and it would also put those plants, their labour, and their customer contracts on the same balance sheet as the group’s stakes in TCS, Tata Motors, Tata Steel, and the rest. The Trusts presented that as a return to an older operating model. It is also a way of using a high-turnover factory business as a regulatory weight.

The Proposal Follows a September 11 Rejection

Seventeen days separate the RBI’s refusal from the Trusts’ merger letter. Tata Sons had spent more than two years trying to hand back its CIC registration after paying down debt, and the bank closed that door before this new route was put on the table.

FROM UPPER LAYER TO THE MERGER LETTER

1. September 2022: The RBI classifies Tata Sons as an upper-layer NBFC, starting a three-year listing clock.
2. March 28, 2024: Tata Sons applies to surrender its CIC registration after repaying Rs 21,813 crore of debt in FY24 and turning net cash positive.
3. September 2025: The original three-year listing deadline lapses with the company still unlisted and the surrender application still open.
4. August 2026: The RBI again names Tata Sons among 17 upper-layer NBFCs, saying the listing is without prejudice to the pending application.
5. September 11, 2026: The RBI rejects the surrender bid, writing that it cannot be acceded to, and directs Tata Sons toward upper-layer compliance.
6. September 17, 2026: The Tata Sons board discusses the letter. Tata Trusts tell the board to study every option other than listing.
7. September 28, 2026: Tata Trusts send the TESS and TCE merger proposal to the Tata Sons board and to the RBI.

Mid-September FAQs from the RBI restated the CIC 90 percent rule, the twin 50 percent principal-business tests, and the definition of public funds. Tata Sons had argued it was a debt-free holding vehicle owned by charities and should not be treated as a listed NBFC. The bank’s published tests still catch a company whose books are mostly group investments and whose income is mostly financial, which is the profile Tata Sons has had since it stopped running factories and software as in-house divisions.

Shapoorji Pallonji Has Been Pushing for a Listing

The Trusts are not the only owners with a view. The Shapoorji Pallonji Group holds about 18.4 percent of Tata Sons, the largest minority block, and has wanted a public market in those shares for years. After the September 11 letter, Shapoor Mistry, the group’s chairman, backed compliance with the listing route and called it more than a balance-sheet event.

The public listing of Tata Sons is not merely a financial or regulatory matter. It is a social and moral imperative.

Shapoor Mistry, chairman, Shapoorji Pallonji Group

He said the RBI had given “full clarity” and that “the path forward is clear.” A listing would give SP a visible price and an exit ramp after years of trying to raise cash against an unlisted stake. Roughly 13 percent of Tata Sons sits with other Tata group companies, with the rest largely in Tata family hands, so a public float would also change how those inner holdings are valued.

Talks on a partial buyback of SP’s shares, including a proposal Noel Tata tabled in mid-September involving about Rs 25,000 crore, sat beside that fight and did not settle it. The September 28 merger, if it works, would cut the other way. It is designed so Tata Sons never has to list, which is the outcome SP has been arguing against. The Trusts’ July 2025 resolutions at the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, both unanimous, had already instructed that every effort be made to keep Tata Sons an unlisted private company. The merger is that instruction put into a structure the RBI has not yet accepted.

What the RBI Must Still Approve

The letter is a request, not a closing. Because Tata Sons is an NBFC, folding two non-financial companies into it falls under the RBI’s voluntary amalgamation directions from 2025, issued on November 28, 2025. Those directions say a scheme still needs National Company Law Tribunal approval under sections 230 to 234 of the Companies Act, and that the NBFC must obtain a no-objection certificate before it approaches the tribunal.

WHAT STILL HAS TO HAPPEN

• Tata Sons board: The directors have to consider and approve the Trusts’ proposal; the letter does not bind them.
• RBI no-objection: A prior NOC is required where a non-NBFC is amalgamated with an NBFC, which is the TESS and TCE case.
• Tribunal scheme: The merger still needs a Companies Act scheme before the National Company Law Tribunal, after the RBI has spoken.
• Licence surrender: If the combined firm ceases to be a CIC, Tata Sons would then have to surrender its certificate of registration.

The directions add a proviso that is awkward for this plan. Where a non-NBFC merges into an NBFC, the surviving NBFC is to keep meeting the principal business criteria if it wants to remain eligible to hold its registration. The Trusts want the opposite result: they want Tata Sons to fail those criteria, drop both the NBFC and CIC labels, and hand the certificate back. That is a lawful theory only if the RBI treats the NOC as a gateway to an exit, not as a tool for keeping the surviving company inside the NBFC net. Seventeen days after refusing a standalone surrender, the bank is being asked to certify a merger whose purpose is to produce the same exit by another route.

Upper-layer status is the reason the labels matter. Once the RBI parks a firm in that layer, listing is part of the enhanced rulebook, and Tata Sons was still on the August 2026 list of 17. Take Tata Sons outside NBFC and CIC definitions, and that listing mandate no longer attaches in the way it does now. Leave it inside, and the September 11 letter still points at a public issue. The RBI has not said how it will read a purpose-built miss of its own 50 percent and 90 percent tests.

Tata Sons Once Ran TCS as a Division

The Trusts’ historical claim is specific. For almost 80 years of a century-long life, they said, Tata Sons had operating businesses and used that cash to fund newer ventures. Tata Consultancy Services ran as a division of Tata Sons until it was separated into a subsidiary in 2004, and other operating lines followed the same path. After that split, the RBI treated Tata Sons as a non-banking, non-financial company, the Trusts said, and the new merger would put it back on that footing: factories and fees on one side of the house, group shareholdings on the other.

That is why they argue a listing would not be a technical listing of another large NBFC. On September 17, after the RBI letter had been read in the Tata Sons boardroom, Noel Tata told directors that the group’s ownership by a charity is the operating model, and that a public float would hit that model at its core. He had already put that line in writing for the board.

That is not sentiment. It is the operating model of this House, and it has stood the test of time for more than a century. A listing will destroy its character and strike at the heart of this principle.

Noel N. Tata, chairman, Tata Trusts, statement to the Tata Sons board, September 17, 2026

The irony is sitting in the same paragraph as the history. Tata Sons spent two decades becoming a pure holding company, including by peeling TCS out in 2004, and that form is what pulled it into the CIC and upper-layer NBFC net. To get out, the Trusts now want the holding company to swallow a phone-assembly business and an engineering firm, print 64.3 percent operating income and 88.5 percent group assets, and then persuade the RBI that the resulting hybrid is no longer a finance company. The board still has to vote. The tribunal still has to sanction a scheme. The RBI still has to decide whether a merger that misses its tests by a thin margin is compliance, or a second attempt at the surrender it already refused.