Tata Trusts proposes merger of electronics subsidiaries TESS, TCE into Tata Sons to shed CIC tag, avoid…

New business data points to the fact that Tata Trusts has proposed merging Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) with Tata Sons Private Limited, in a restructuring aimed at taking the group holding firm outside the regulatory definitions of both a non-banking financial firm (NBFC) and a core investment firm (CIC).

The proposal, announced by Tata Trusts on September 28, would allow Tata Sons to retain its status as an unlisted private firm if approved by the Tata Sons board and the Reserve Bank of India (RBI).

Tata Trusts, which owns around 66 percent of Tata Sons, has written to the firm’s board asking it to consider and approve the restructuring and apply to the RBI for the necessary no-objection certificate.

“The Tata Trusts, along with TSPL, will engage with the RBI on all aspects of the proposed reorganisation,” the Trusts stated in a statement.

The plan represents a fresh structural route for Tata Sons to avoid a public stock-exchange debut after the RBI rejected its application to surrender its registration as a CIC earlier this month. As an upper-layer NBFC, Tata Sons is subject to enhanced regulatory requirements, including mandatory stock-exchange debut.

Unlike a break-up or demerger of Tata Sons, the proposed restructuring would enlarge the firm by absorbing two operating, non-financial businesses. This would give Tata Sons substantial operating revenues in addition to the income it earns from its investments in Tata group firms.

According to Tata Trusts, the amalgamated entity would have had operating revenues of Rs 1,05,043 crore as of March 31, 2026, compared with income of Rs 40,072 crore from financial assets. Operating revenues would constitute 64.3 percent of the resultant entity’s total income.

On this basis, the restructured Tata Sons would not meet the RBI’s “principal business criteria” for classification as an NBFC, the Trusts stated.

The restructuring is additionally designed to take Tata Sons outside the definition of a CIC. The resultant entity would have aggregate net assets of Rs 2,00,158 crore, of which Rs 1,77,120 crore—or around 88.5 percent—would comprise investments in group firms.

This would bring the proportion below the 90-percent threshold applicable to CICs, according to the statement.

If the transaction is completed, Tata Sons would operate businesses directly while continuing to act as the principal holding firm of the Tata group.

Tata Trusts stated this would amount to Tata Sons returning to its earlier operating model. For nearly 80 years of its century-long existence, Tata Sons had operating businesses and revenues that helped fund newer ventures of the group.

Tata Consultancy Services, for instance, operated as a division of Tata Sons before it was separated into a subsidiary in 2004. Tata Trusts stated the proposed model would additionally be consistent with the RBI’s earlier classification of Tata Sons, after 2004, as a “non-banking, non-financial firm”.

That stated, the proposed merger cannot be implemented without regulatory clearance. As it involves the amalgamation of operating, non-financial firms with an NBFC, the transaction would have to comply with the RBI’s Non-Banking Financial Firms–Voluntary Amalgamation Directions, 2025.

These directions require Tata Sons to obtain the RBI’s prior no-objection certificate. Once the restructuring is completed and Tata Sons ceases to qualify as a CIC, it would be required to surrender its certificate of registration.

Tata Trusts stated the proposed restructuring was in the interests of the Tata group and its stakeholders and represented a legally permissible route for reorganising a CIC.

The Trusts additionally linked the proposal to unanimous resolutions passed by the boards of the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust in July 2025. The two boards had agreed that all efforts should be made to preserve Tata Sons’ status as an unlisted private firm.

The restructuring would, the Trusts stated, preserve the Tata group’s century-old organisational structure and its focus on long-term investments, nation-building and philanthropic objectives.