Tata Trusts Proposes Merging TESS and TCE With Tata Sons in Major Restructuring

Tata Trusts has proposed merging TESS and Tata Consulting Engineers with Tata Sons, aiming to strengthen its operating model and potentially move outside RBI’s NBFC and CIC framework.

Tata Trusts Proposes Merger of TESS and TCE With Tata Sons

Tata Trusts, which owns a 66% stake in Tata Sons Private Limited (TSPL), has proposed a strategic reorganisation involving the merger of Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) with Tata Sons.

The proposed restructuring is intended to change Tata Sons’ regulatory position under the Reserve Bank of India’s framework governing non-banking financial companies (NBFCs) and core investment companies (CICs).

According to Tata Trusts, the reorganisation would allow Tata Sons to return to an operating business model while continuing to serve as the holding company of the Tata Group.

Tata Sons Plans to Restore Operating Business Model

Tata Trusts said Tata Sons has historically operated businesses and generated operating revenue alongside its role as the Tata Group’s holding company.

For much of its history, the company used revenues from operating businesses to support investments in newer ventures.

The Trusts pointed to Tata Consultancy Services (TCS) as an example. Until 2004, TCS operated as a division of Tata Sons before being separated into a distinct subsidiary.

The proposed merger would therefore bring operating businesses back into Tata Sons and restore an organisational model that the group has used in the past.

Merger Could Change Tata Sons’ RBI Classification

The proposed transaction is aimed at ensuring that the resulting entity does not fall within the principal business criteria applicable to an NBFC or meet the requirements for classification as a CIC.

Tata Trusts said the combined entity would have substantial operating revenue compared with income generated from financial assets.

Financial Position of the Proposed Entity

Based on figures as of March 31, 2026, Tata Trusts stated that the merged entity would have:

• ₹1,05,043 crore in operating revenue.

• ₹40,072 crore in income from financial assets.

• Operating revenue accounting for 64.3% of total income.

• Net assets of approximately ₹2,00,158 crore.

• Investments in group companies of around ₹1,77,120 crore.

According to Tata Trusts, these figures would mean the resulting company does not meet the principal business criteria for an NBFC and would also not satisfy the conditions applicable to a CIC.

RBI Approval Required for Proposed Merger

The proposed restructuring would still require compliance with applicable RBI regulations.

Tata Trusts said the amalgamation of operating non-financial companies such as TESS and TCE with Tata Sons would need to follow the RBI (Non-Banking Financial Companies – Voluntary Amalgamation) Directions, 2025.

A prior no-objection certificate (NOC) from the RBI would be required for the proposed transaction.

If the reorganisation results in Tata Sons ceasing to qualify as a CIC, the company would also need to surrender its existing certificate of registration, according to Tata Trusts.

Tata Trusts Seeks Board Approval

Tata Trusts has written to the board of Tata Sons requesting that it consider and approve the proposed restructuring. The Trusts has also asked the board to take the necessary steps for obtaining the RBI's approval and completing the proposed merger.

Tata Trusts and Tata Sons are expected to engage with the RBI regarding the regulatory and operational aspects of the proposed reorganisation.

Aim to Retain Tata Sons as an Unlisted Private Company

A key objective behind the proposal is to preserve the status of Tata Sons as an unlisted private company.

Tata Trusts holds that the restructuring would provide a regulatory-compliant route while maintaining the existing organisational structure of the Tata Group.

The proposal follows unanimous resolutions passed by the boards of the Sir Dorabji Tata Trust and Sir Ratan Tata Trust in July 2025.

Those resolutions called for efforts to ensure that Tata Sons continues as an unlisted private company.

Proposed Merger and Tata Group’s Long-Term Structure

Tata Trusts said the restructuring would preserve the distinctive organisational structure that has characterised the Tata Group for more than a century.

The proposed arrangement would allow Tata Sons to combine its role as the group's holding company with direct operating activities and revenues.

The Trusts said the reorganisation is intended to serve the interests of the Tata Group and its stakeholders while meeting applicable regulatory requirements.

Conclusion

The proposed merger of TESS and Tata Consulting Engineers with Tata Sons marks a significant potential restructuring of the Tata Group's corporate model. The proposal seeks to strengthen Tata Sons’ operating base and potentially take it outside the RBI's NBFC and CIC framework, subject to regulatory approval and other applicable requirements.