Merger of Two Companies to Save Tata Sons from Listing: Group to Revert to 80-Year-Old Model; Exemption from RBI Norms Expected
Tata Trusts has devised a new plan to prevent Tata Sons from having to list on the stock market. Under RBI regulations, large financial investment companies like Tata Sons fall into the ‘Upper-Layer NBFC’ category, which mandates a stock market listing.
Under this plan, two separate Tata entities—Tata Electronics and Tata Consulting Engineers—will be merged with Tata Sons. Post-merger, Tata Sons will transform from a purely financial investment company into an entity that also produces and sells goods or services.
This move will take Tata Sons out of the ambit of the RBI’s stringent regulations. Once outside this regulatory scope, the legal obligation to list on the stock market will cease, allowing the Tata Group to retain full control over its holding company.
For 80 of its 100-year history, Tata Sons operated its business in precisely this manner. For instance, until 2004, TCS was not a separate company but a division of Tata Sons itself. This merger will see Tata Sons revert to that traditional business model.
Tata Trusts Holds Approximately 66% Stake in Tata Sons
Tata Trusts holds a stake of approximately 66%—effectively the ownership—in Tata Sons. Consequently, Tata Trusts has written to the Tata Sons board seeking approval for this merger plan. Additionally, they have requested that an application be submitted to the RBI to obtain the necessary No Objection Certificate (NOC) and approvals for the merger. Tata Trusts and Tata Sons will jointly engage in discussions with the RBI regarding this matter. 64% of earnings to come from operating business
According to Tata Trusts, following the merger, approximately 64.3% (around ₹1.05 lakh crore) of the new Tata Sons’ total revenue by March 2026 will be derived directly from the sale of goods or services. In contrast, only 35.7% (around ₹40,072 crore) of earnings will come from investments and financial sources.
Under RBI regulations, a company is classified as an NBFC or an investment company only if a significant portion of its total revenue is generated from investments or financial transactions.
Tata Trusts argues that post-merger, the primary source of Tata Sons’ revenue will be direct business operations; this would automatically take it outside the scope of the RBI’s NBFC classification, thereby exempting it from the stringent regulations applicable to stock market listings.
RBI NOC and surrender of registration required
Implementation of this plan requires approval from the Reserve Bank. Since two active operating companies are being merged into an NBFC, Tata Sons will need to obtain a No Objection Certificate (NOC) from the RBI.
Once the merger process is complete and the status as an investment company ceases, Tata Sons will be required to surrender its NBFC registration certificate.
The Trusts believe that this change, executed within the legal framework, will safeguard the group’s structure and ensure the uninterrupted continuation of its social welfare activities.
