Having covered the unfolding Tata Sons boardroom saga over the last two weeks on this column, today let’s unpack the listing question itself: why the regulator wants it, and how the Tata Trusts are trying to engineer their way out of it.
Start with why Tata Sons is caught up in a banking regulator’s rules in the first place, even though it looks nothing like a bank. In October 2021, the Reserve Bank of India (RBI) introduced scale-based regulation for non-bank financial companies (NBFCs), sorting them into four layers by size, complexity and systemic importance.
Tata Sons is registered as a Core Investment Company (CIC), a type of NBFC whose entire business is holding equity stakes in group companies, which is precisely what Tata Sons does with its shareholdings in Tata Motors, Tata Steel, Tata Consulting Services and the rest.
Because of its sheer size, the RBI placed it in the upper layer on September 30, 2022, and upper-layer NBFCs must list on a stock exchange within three years of that classification.
The RBI’s logic is straightforward. An entity this large, even one that never touches a retail bank depositor, is systemically important: group companies borrow on the strength of its name, and its own borrowings ripple through markets if something goes wrong.
Listing forces the public disclosure, quarterly reporting and independent scrutiny that RBI believes an entity of this size and interconnectedness should carry, rather than letting it operate as an opaque private holding company answerable mainly to itself.
Tata Sons missed the September 2025 deadline after applying to surrender its CIC registration altogether, hoping to argue it no longer needed the classification since it had repaid over 21,000 crore, about $2.2 billion, in debt. RBI rejected that application on September 11, 2026, and told Tata Sons to comply with upper-layer rules.
The Tata family were not trying to sign up to the exposure that lifting up its governance skirts would require through a forced listing. Now here’s why expensive lawyers get paid. RBI regulates that a CIC must hold at least 90 percent of its net assets as investments in group companies, with at least 60 percent of that in equity. Tata Sons met that definition because almost everything it owns is shares in other Tata companies.
On September 28, 2026, Tata Trusts proposed merging two operating businesses, Tata Electronics Systems Solutions and Tata Consulting Engineers, directly into Tata Sons. The operating word here is ‘merger’. The two companies would cease to exist as separate legal entities, and everything they own and earn would move directly onto Tata Sons’ own books, with Tata Sons as the sole survivor.
Right now, when Tata Motors sells a car, that revenue belongs to Tata Motors, and Tata Sons only ever records a dividend, which counts as a financial asset. After the merger, when Tata Consulting Engineers bills a client for an engineering project, that fee would sit directly on Tata Sons’ own income statement as operating revenue, because Tata Sons would literally be the company doing the work.
There is no subsidiary left in between, and therefore no investment and no dividend to count toward the 90 percent test. Owning shares in another company, however many companies, keeps you on the financial-assets side of that line. Absorbing the company itself moves you onto the operating side.
The amalgamated entity would reportedly post operating revenue of about 1.05 lakh crore, roughly $10.9 billion, which works out to 64.3 percent of its total income, against roughly 40,072 crore, about $4.2 billion or 35.7 percent, from financial assets such as dividends.
A company that is now majority an operating business by income, rather than overwhelmingly an investment vehicle, no longer resembles the kind of entity the RBI’s financial company tests, on both assets and income, were written to catch.
Two things stand in the way. The Tata Sons board has to approve the merger, and RBI has to grant a no-objection certificate, the same regulator whose listing requirement this plan is designed to escape. There is also a governance question tucked inside the restructuring itself.
Corporate lawyers have pointed out that a move of this magnitude would ordinarily need the backing, if not unanimous agreement, of the Tata Trusts’ own trustees, and reports suggest it is not clear everyone was consulted before the proposal was announced.
In a saga already defined by trustees fighting about who gets to decide things, deciding to restructure the company without first agreeing among themselves would be a strange way to make the case for good governance.
For East African family businesses watching this unfold, the lesson is a legitimate counter argument to setting up trusts and company boards with independent-thinking trustees and directors. They may one day vote against the very family that appointed them in the first instance! Governance, my friends, is a double-edged sword.