Tata Trusts has proposed merging two Tata Group companies with Tata Sons in a move aimed at addressing the Reserve Bank of India’s (RBI) requirement that the conglomerate’s holding company be listed.
The proposal involves merging Tata Electronics Systems and Tata Consulting Engineers with Tata Sons. According to the Trusts, the move would transform Tata Sons from primarily an investment-holding entity into a company with significant operating businesses and revenues.
The proposal comes amid a public disagreement between the Tata Trusts, which holds a 66% stake in Tata Sons, and the company’s board over its leadership and listing plans. The Trusts have opposed the reappointment of Tata Sons Chairman N Chandrasekaran and the board’s decision to pursue a stock-market listing.
In a statement, the Trusts said the proposed restructuring would also align Tata Sons with its earlier classification by the RBI, after 2004, as a “non-banking, non-financial company.”
Tata Sons was classified as a core investment company, or an “upper-layer” non-banking financial company (NBFC), by the RBI in 2022. This brought the holding company under enhanced regulatory requirements, including provisions that could require it to list its shares.
Earlier this month, the RBI rejected Tata Sons’ application seeking deregistration as a non-bank lender, increasing the pressure on the company to pursue a public listing.
The Tata Trusts said the proposed merger would result in the combined entity generating operating revenue of Rs 1.05 lakh crore ($10.94 billion). This would be substantially higher than its income from financial assets, which the Trusts put at Rs 40,072 crore, accounting for 64.3% of the amalgamated entity’s total income.
The proposal has been submitted to the Tata Sons board and will require its approval before it can be presented to the RBI.
