Tata Trusts on Monday proposed merging two Tata Group companies with Tata Sons, as the family charity looks to sidestep a Reserve Bank of India requirement for the conglomerate to list its shares.
The proposal follows a public rift between the Trusts and Tata Sons, in which it holds a 66% stake. The charity has opposed the board's reappointment of Chairman N Chandrasekaran and its decision to pursue a stock-market listing for the owner of marquee brands like Jaguar Land Rover and Tetley tea.
Monday's proposal entails merging Tata Electronics Systems and Tata Consulting Engineers with Tata Sons. This would turn it into a company with substantial operating business and revenue from its current status of an entity whose primary activity is holding investments.
"This will also be in line with the previous classification (after 2004) by RBI of TSPL as a 'non-banking, non-financial company'," the Trusts said in a statement.
As a holding company of multiple Tata Group businesses, Tata Sons was classified a core investment company or "upper-layer" non-banking financial company (NBFC) in 2022 — placing it under RBI regulations that need increased supervision.
Earlier this month, the central bank rejected the salt-to-software conglomerate's application to deregister as a non-bank lender, pushing it towards a public listing.
The merged entity would have operating revenues of 1.05 trillion rupees ($10.94 billion) — "far in excess of its income from financial assets (400.72 billion rupees) constituting 64.3% of the total income of the amalgamated entity," the charity said.
The Trusts submitted the proposal to the Tata Sons board and would require its consent before putting it before the central bank.
Tata Sons did not immediately respond to a Reuters request for comment.