Noel Tata, chairman of Tata Trusts, the majority shareholder of Tata Sons, has put forth an internal proposal to split Tata Sons' approximately $21.5 billion asset portfolio into two or more separate companies. This restructuring aims to keep the conglomerate below the Reserve Bank of India's (RBI) $12 billion (₹1 trillion) asset threshold, thereby avoiding the compulsory public listing requirement for "upper layer" non-banking financial companies (NBFCs). The RBI has classified Tata Sons as an Upper Layer NBFC since September 2022, and the company's three-year deadline for listing expired in September 2025.
Two primary restructuring options are being considered. The simpler approach involves a two-way split: one new company would hold Tata Sons' listed investments like TCS, Tata Motors, and Titan, while a second would absorb stakes in unlisted ventures such as Tata Digital and Tata Electronics. Each new entity would then fall below the RBI's asset threshold. The more ambitious option is a sector-wise demerger, creating separate holding companies for areas like financial services, IT, electric vehicles, and manufacturing, allowing each vertical to raise external capital.
The proposal, however, faces scrutiny from the RBI and creates internal divisions. The RBI has indicated that such a restructuring would be seen as an "effort of avoidance" and insists that Tata Sons comply with the listing directive. An RBI official stated that the central bank wants Tata Sons to comply and undertake a listing exercise promptly. The issue has also become a point of contention between Tata Sons and Tata Trusts, with the Trusts advocating for the holding company to remain private, while the Shapoorji Pallonji Group, which holds around 18.37% of Tata Sons, favors listing to monetize its stake.
Analysts caution that a sector-wise split could lead to multiple boards, duplicated compliance, and the risk of value getting trapped in crossholdings. Furthermore, the RBI counts assets by book value, and Tata Sons' stakes in listed companies often exceed their book value, making the reported $21.5 billion figure conservative. Any restructuring would require RBI approval, and the central bank has already rejected Tata Sons' previous attempt to surrender its registration as a Core Investment Company. A revamp could also disrupt Tata Sons' current practice of using dividends from TCS to fund other group companies.
