Tata Sons reorganisation is a fresh twist in a long tale

Tata Sons boardroom tussle: The proposed strategic reorganisation of Tata Sons by its single largest shareholder, Tata Trusts has thrown up multiple possibilities. At the core is the intention to retain Tata Sons, the Tata Group’s holding company, as an unlisted entity. The board of Tata Sons and its largest shareholder, Tata Trusts (it accounts for 66%) have been at loggerheads on the issue – the former has favoured a listing and the board of Tata Trusts has opposed it.

A press statement has proposed the merger of Tata Electronics Systems Solutions and Tata Consulting Engineers with Tata Sons. “The strategic reorganisation would ensure that the reorganised entity would neither be a non-banking financial company (NBFC) nor a Core Investment Company (CIC),” it outlined.

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On September 12, RBI rejected Tata Sons’ application to surrender its Certificate of Registration (CoR) before directing it to comply with regulations applicable to NBFCs classified in the upper layer. In 2024, Tata Sons applied to the RBI to surrender its registration once it repaid its outstanding debt. In line with RBI’s framework, an NBFC with assets of Rs 1 lakh crore comes under the upper classification layer.

Those tracking the development think the move by Tata Trusts is a way to tell the Tata Sons board that listing ought to have been avoided. “It raises the question of why this was not considered,” says one person.

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Importantly, the new structure makes Tata Sons, the holding company, now an operating company. How Tata Sons reacts to this proposal from its largest shareholder (Tata Trusts) at a time when there is a bitter succession battle will be interesting. Eventually, it will need to be cleared at the annual general meeting of Tata Sons, an issue that is already contentious, since the reappointment of N Chandrasekaran as Tata Sons’ Chairman will also come up.