Tata Trusts Seek To Move Tata Sons Out Of RBI's NBFC And CIC Categories

Tata Trusts have proposed a restructuring of Tata Sons Private Limited that would leave the company classified as neither a Non-Banking Financial Company (NBFC) nor a Core Investment Company (CIC), the Trusts said in a statement.

The Trusts, which hold 66% of Tata Sons, want Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) merged into it.

According to the Trusts, the merged entity would have posted operating revenues of ₹105,043 crore as of March 31, 2026, well above its ₹40,072 crore in income from financial assets. They put operating revenues at 64.3% of total income, and said this would keep the company short of the principal business criteria for an NBFC.

The conditions for a CIC would not be met either, the statement said. Net assets would stand at ₹200,158 crore, of which investments in group companies would account for ₹177,120 crore, below the 90% threshold.

A Return To An Older Structure

The Trusts said the plan takes Tata Sons back to a model it followed for almost 80 of its 100 years, running operating businesses whose revenues funded newer ventures. Tata Consultancy Services was a division of the company until it was demerged into a separate subsidiary in 2004, they noted, as were other operating businesses.

Under the proposal, Tata Sons would again earn its own revenue while continuing as the Tata Group's holding company. The Trusts said this would match the Reserve Bank of India's classification of the company after 2004 as a "non-banking, non-financial company". It would remain an unlisted private company.

Since TESS and TCE are operating, non-financial companies, their merger into an entity currently treated as an NBFC must follow the RBI's Voluntary Amalgamation Directions for NBFCs, 2025. These require a no-objection certificate from the central bank before the deal proceeds. Tata Sons would surrender its CIC registration certificate once the reorganisation is complete.

Alay Razvi, Managing Partner, Accord Juris, said the proposal is “a legally sound route” to address the classification question. “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.”

Tushar Kumar, Advocate, Supreme Court of India, said the proposal “does not seek an exemption” but seeks to alter Tata Sons’ “factual and economic character” so the regulations cease to apply. He added that the RBI will examine whether the amalgamation is a genuine transformation or “principally a transaction structured to avoid a regulatory consequence which has already crystallised.”

Anushkaa Arora, Founder of ABA Law Office, said, "The Tata Sons–Tata Trusts episode is a useful reminder that the distinction between ownership and management must be clearly defined, particularly in promoter-led businesses. Ownership gives shareholders the right to determine the broad direction and protect their economic and strategic interests; it does not necessarily mean involvement in day-to-day managerial decisions."

“The broader lesson is that good governance is not about eliminating promoter influence; it is about institutionalising it,” she added.

"The lesson for every promoter-led business that installs an outside professional at the top is that autonomy for management and protection for the promoter are not competing goals to be traded off against each other. They need to be assigned, in advance and in writing, to different decisions, with enough precision that neither side is arguing about what the document means at the moment it matters most,” said Kunal Sharma, Managing Partner, TARAksh Lawyers and Consultants.

“Very few Indian promoter groups that have handed the top job to an outside professional have Articles, nomination terms or disclosure obligations spelt out with anything like the precision this episode shows was needed," he added.

The Trusts have written to the Tata Sons board asking it to consider and approve the proposal and take the necessary steps, including applying to the RBI. They said they and Tata Sons would engage with the regulator on all aspects of the plan.

The statement also referred to unanimous resolutions passed in July 2025 by the boards of Sir Dorabji Tata Trust and Sir Ratan Tata Trust, which held that all efforts should be made to keep Tata Sons an unlisted private company. According to the Trusts, the plan is in line with those resolutions and with regulatory requirements.

The Trusts added that the plan would preserve the group's organisational structure, which is more than 100 years old and has focused on long-term initiatives for nation building and the welfare of the disadvantaged and excluded. They said it serves the interests of the group and its stakeholders.