Tata Sons seeks legal opinion on Tata Trusts’ restructuring plan to avoid listing: Report

The Tata Sons board has reportedly sought a legal opinion on the validity of a restructuring proposal from Tata Trusts that aims to help the holding company avoid a mandatory listing. The board is unlikely to formally meet to consider the proposal until its legal status is clarified.

According to a report in The Economic Times that cited sources, the proposal cannot be treated as a formal shareholder mandate as it was not presented as a resolution formally approved and signed by the two principal shareholder trusts, Sir Ratan Tata Trust (SRTT) and Sir Dorabji Tata Trust (SDTT).

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Tata Trusts, which collectively own 66% of Tata Sons, have proposed merging Tata Electronics Systems Solutions and Tata Consulting Engineers with the holding company, the report stated. The move aims to change Tata Sons’ regulatory status and allow it to remain an unlisted private entity.

The proposal follows the Reserve Bank of India’s direction to Tata Sons to comply with regulations applicable to an upper-layer non-banking finance company (NBFC). Tata Sons has begun preparations for a potential listing to meet the RBI directive, as per the report.

The Trusts have argued that the proposed restructuring would provide Tata Sons with sufficient operating income to fall outside the principal-business criteria for an NBFC and reduce the proportion of investments in group companies, potentially taking it outside the definition of a core investment company.

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SRTT and SDTT together hold a 51.54% stake in Tata Sons.

An executive close to Tata Trusts chairman Noel Tata said the proposal was an option for Tata Sons to evaluate and modify if necessary, as per the report. The proposal has also been sent to the RBI.