Tata Trusts Proposes Merger Of TESS & TCE With Tata Sons To Change Regulatory Status

· Free Press Journal

Mumbai, Sep 28: Tata Trusts, which holds a 66 per cent stake in Tata Sons Pvt Ltd (TSPL), has proposed merging Tata Electronics Systems Solutions Private Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons as part of a strategic reorganisation aimed at taking the company outside the RBI's regulatory framework for non-banking financial companies (NBFCs) and core investment companies (CICs), under which it is mandatory to list the company.

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Tata Sons proposes restructuring

The proposed strategic reorganisation of the business and operations of TSPL is not a new pathway, as TSPL has, for almost 80 years out of its 100-year existence, always had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures, according to a Tata Trusts statement issued on Monday.

It highlights that as recently as 2004, Tata Consultancy Services was a business division of TSPL before it was demerged into a separate subsidiary. This was also the case with other operating businesses of TSPL. Accordingly, the proposed reorganisation will result in TSPL reverting to its previous operating model, with its own operations and revenues, in addition to being a holding company for the Tata Group. This will also be in line with the previous classification by the RBI of TSPL as a "non-banking, non-financial company", the statement said.

Regulatory framework and merger plan

It further contended that the amalgamated entity, arising out of the merger of TESS and TCE with TSPL, shall have, as of March 31, 2026: "Operating revenues of INR 105,043 crore, far in excess of its income from financial assets (INR 40,072 crore) constituting 64.3 per cent of the total income of the amalgamated entity; Will not meet the 'principal business criteria' of an NBFC; and will also not meet the conditions applicable to a CIC (Net Assets aggregating INR 200,158 crore, out of which investment in Group Companies shall be INR 177,120 crore representing less than 90 per cent of the aggregate net assets of the resultant entity)."

An amalgamation of genuine operating, non-financial companies (such as TESS and TCE) with an NBFC (such as TSPL) will need to be undertaken in accordance with the provisions of the Reserve Bank of India (Non-Banking Financial Companies – Voluntary Amalgamation) Directions, 2025, including the requirement to obtain a prior ‘no objection certificate’ of the RBI. Given that TSPL will also cease to be a CIC upon the conclusion of the proposed reorganisation, TSPL will be required to surrender its certificate of registration, the Tata Trusts statement said.

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Tata Trusts outlines next steps

The Tata Trusts believe that the proposed reorganisation and action plan for compliance would be in the best interests of the Tata Group as well as its stakeholders, in addition to being a regulatory permissible and compliant form of reorganisation of a CIC.

The Tata Trusts have, accordingly, written to the TSPL Board to consider and approve the proposal, and to take necessary steps, including applying to the RBI for the necessary ‘no-objection certificate’ as required for the proposed merger and reorganisation of TSPL. The Tata Trusts, along with TSPL, will engage with the RBI on all aspects of the proposed reorganisation.

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Preserving Tata Group structure

The proposed amalgamation and consequential steps are in line with regulatory compliance requirements and the unanimous resolutions passed by the Boards of Sir Dorabji Tata Trust and Sir Ratan Tata Trust in July 2025, wherein it was agreed that all endeavours should be made to ensure that the status of TSPL as an unlisted private company should continue.

It also has the advantage of preserving the more than 100-year-old distinctive and unique organisational structure of the Group, which has always focused on long-term strategic initiatives geared towards nation-building and the welfare of the disadvantaged and the excluded, the statement added.

(Except for the headline, this article has not been edited by FPJ's editorial team and is auto-generated from an agency feed.)

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