How merging Tata Electronics, TCE could help Tata Sons avoid an RBI-mandated listing - The Indian Express

The proposed merger of Tata Electronics Systems and Tata Consulting Engineers (TCE) with Tata Sons could fundamentally alter the character of Tata Sons, reducing the proportion of its assets and income represented by financial and investment activities. Tata Trusts argue that this proposal will enable Tata Sons come out of the Reserve Bank of India’s regulatory definition of an NBFC or a Core Investment Company (CIC) and avoid listing on stock exchanges

The proposed merger therefore brings a large and rapidly expanding manufacturing business into Tata Sons, substantially strengthening the operating-company component of its balance sheet. However, the big question is whether the Tata Sons board and the RBI will approve the merger proposal.

Given the power struggle in the group, the million-dollar question is: will the board of Tata Sons agree to the proposal of Tata Trusts?

The board, in a 4:1 majority decision, agreed to take steps to go for listing as mandated by the RBI at its meeting on September 17. Four directors – Harish Manwani, Anita M George, Venu Srinivasan and Saurabh Agrawal – okayed the listing process. Only Noel Tata opposed the plan. “Tata Sons board may meet and take a decision on the latest proposal. Going by the tone of the September 17 meeting, they are likely to oppose it. Even if the board agrees, the RBI will have to be convinced,” said an observer tracking the Tata group.

The second question is whether the RBI will agree to the reorganisation plan of the trusts. The central bank has substantial powers in the regulation of the NBFC sector. The regulatory issue confronting Tata Sons stems from its classification by the RBI as an upper-layer NBFC. The company had sought deregistration from the NBFC framework, but the RBI rejected the request.

Tata Sons now functions primarily as the principal holding company of the Tata Group, with significant investments in several group companies. Tata Sons is also facing several ifs and buts: the AGM nod for Chairman N Chandrasekaran, the status of the AGM itself, and the removal of a restraining order on Sir Ratan Tata Trust.

However, the restructuring by itself does not automatically guarantee that Tata Sons will cease to be an NBFC or CIC and whether the RBI will approve it or not. The final outcome would depend on the precise structure of the transactions, the post-merger business composition, and how the RBI applies the relevant regulatory criteria to the restructured entity, and whether the Tata Sons board gives green signal.

By bringing Tata Electronics and TCE into Tata Sons through a merger, the group would convert a portion of the holding company’s investment exposure into direct operating businesses. That distinction is important under the regulatory framework governing NBFCs and CICs. A CIC is essentially an entity whose principal business is the acquisition of shares and securities of group companies, subject to the RBI’s regulatory criteria. The proposed restructuring appears designed to change the nature and composition of Tata Sons so that it is no longer principally an investment-holding vehicle.

In simple terms, the strategy is to make Tata Sons more of an operating company and less of an investment company. The merger would potentially achieve this in two ways. First, Tata Electronics would bring a large manufacturing and semiconductor business directly into Tata Sons. Second, TCE would add an established engineering and consultancy operation with substantial revenues of its own.

If, after the restructuring, Tata Sons no longer satisfies the regulatory conditions for classification as a CIC or NBFC, the basis for the mandatory listing requirement could also change. The proposed structure is therefore aimed not merely at reorganising group assets, but at changing the regulatory character of Tata Sons itself. Thus, instead of Tata Sons remaining primarily a holding company with large investments in Tata group companies, it would directly own and operate major businesses such as Tata Electronics and TCE.

Tata Electronics has emerged as one of the fastest-growing operating businesses within the Tata Group. In just four years, it has become the group’s fourth-largest company by revenue, with revenue of Rs 131,082 crore. Nearly two-thirds of its 86,466-strong workforce are women.

The company is positioning itself as an integrated player across the electronics and semiconductor value chain, spanning electronics manufacturing, semiconductor fabrication, advanced packaging and indigenous chip development. Its operating profit has already reached breakeven, marking a significant shift from a capital-intensive start-up phase towards commercial operations.

Tata Electronics manufactured about 12 per cent of the total volume of phones produced by the global leader in 2025. It is also building India’s first high-volume semiconductor fabrication facility in Gujarat and has packaged what Tata describes as India’s first indigenous microprocessor. “We will develop advanced packaging, indigenous electronics and semiconductor solutions, capabilities in semiconductor materials, and work with the most advanced lithography tools in Dholera,” the Tata Sons annual report said.

The proposed restructuring also brings Tata Consulting Engineers into Tata Sons, adding a substantial engineering and project-consultancy business to the holding company. TCE, India’s largest private-sector engineering and project consultancy, has executed projects in 60 countries since its establishment in 1962. The company reported consolidated income of Rs 2,885 crore in FY26 and provides engineering and project-management capabilities across a wide range of sectors.

Its role as an Owner’s Engineer and Project Consultant enables it to provide services stretching from concept development to commissioning, while integrating digital technologies and sustainability practices, according to its annual report. The inclusion of TCE is significant because it adds another operating, fee-generating business rather than another investment-holding entity to Tata Sons, analysts said.

George Mathew is an Associate Editor with The Indian Express, based in Mumbai. A veteran of financial journalism with nearly three decades of experience, he is one of the country’s most authoritative voices on banking, regulation, and the corporate sector. Expertise & Focus Areas Mathew’s reporting covers the nerve center of India’s economy. His specialized beats include: The Reserve Bank of India (RBI): He has tracked the central bank's policy evolution through the tenures of multiple Governors, offering deep insights into monetary policy, repo rates, and banking regulation. Banking & Insurance: Extensive coverage of public and private sector banks, non-performing assets (NPAs), and key legislative reforms like the Insurance Amendment Bills. Corporate Affairs: Mathew frequently breaks major stories related to India's largest conglomerates, with a specific focus on the Tata Group, documenting boardroom shifts and strategic decisions. Financial Markets: Reporting on the complexities of Foreign Portfolio Investors (FPIs), IPOs, and currency fluctuations. Authoritativeness & Insight With a career dating back to the late 1990s, Mathew possesses a rare institutional memory of India’s financial liberalization and market crises. His work is not limited to daily news; he frequently contributes to the "Explained" section, where he decodes complex financial legislations and market trends for a broader audience. His rigorous reporting has also been featured in scholarly platforms like the Economic and Political Weekly (EPW). Find all stories by George Mathew here ... Read More