Shares of several Tata Group companies declined on September 29 after Tata Trusts proposed restructuring Tata Sons, the conglomerate’s holding company, in an attempt to address regulatory requirements linked to its classification by the Reserve Bank of India (RBI).
Among listed Tata companies, Tata Steel and Tata Motors Passenger Vehicles each hold a 3.06% stake in Tata Sons, while Tata Chemicals owns 2.53%. Tata Power holds 1.65%, whereas Indian Hotels, Tata Consumer and Tata Investment Corporation own 1.11%, 0.4% and 0.25%, respectively.
During the early trade on Tuesday, Tata Chemicals shares were down 3% at ₹622.55 apiece. Shares of Tata Motors Passenger Vehicles and Tata Investment Corporation also declined 3% and 2.2%, respectively.
Tata Trusts propose merger to alter Tata Sons structure
The restructuring proposal involves merging Tata Electronics Systems and Tata Consulting Engineers with Tata Sons. According to Tata Trusts, the move would transform Tata Sons from primarily an investment-holding entity into a company with substantial operating activities and revenue streams.
The Trusts said the restructuring would align with Tata Sons’ earlier classification by the RBI after 2004 as a non-banking, non-financial company.
Tata Sons was classified as a core investment company and an “upper-layer” non-banking financial company (NBFC) in 2022, bringing it under stricter RBI oversight. Earlier this month, the central bank rejected Tata Sons’ request to deregister as a non-bank lender, increasing expectations that the company may eventually need to list its shares.
Proposal awaits Tata Sons board and RBI approval
Tata Trusts said the merged entity would generate operating revenue of ₹1.05 lakh crore, which would be significantly higher than income from financial assets. The Trusts said revenue from financial assets would account for 64.3% of the combined entity’s total income, amounting to ₹40,072 crore.
The restructuring proposal has been submitted to the Tata Sons board and will require approval before it can be placed before the RBI.
The development comes amid differences between Tata Trusts, which owns a 66% stake in Tata Sons, and the holding company. The proposed restructuring is expected to be evaluated by the board and regulatory authorities before any final decision is taken.
