Tata Trusts on Monday announced a reorganisation plan for Tata Sons Private Limited (TSPL) aimed at preventing the company's mandatory public listing. The Trusts highlighted that the strategic restructuring would ensure that the "reorganised entity" would neither be a non-banking financial company (NBFC) nor a core investment company (CIC).

By shedding NBFC and CIC status, Tata Sons would no longer have to comply with Reserve Bank of India (RBI) rules that push for stock-market listings. This announcement comes after the RBI rejected an application by Tata Sons to deregister as a non-bank lender earlier this month.

ALSO READ: Inside Tata Sons Boardroom: Why Noel Tata Push For Restructuring Over Listing

What Tata Trusts' Reorganisation Proposal Involves?

The proposal involves merging Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) directly with TSPL. Integrating these entities will grant the group's holding firm direct control over operational activities and revenue streams.

In a press release issued on Monday, the Trusts emphasised its proposal to reorganise the business and operations of TSPL was not a new pathway.

"TSPL has, for almost 80 years out of its 100-year existence, always had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures," the statement read.

The proposal aims to return TSPL to its historical dual structure as both an operating entity and a holding company, aligning with the RBI's post-2004 classification of TSPL as a non-banking, non-financial entity.

Tata Sons Vs Tata Trusts

The proposal comes amid growing differences between Tata Sons and Tata Trusts, which owns 65.9 per cent of Tata Sons. Tata Trusts Chairman Noel Tata, who is opposing listing the company based on revenue parameters, informed the board that he would block any such decision.

ALSO READ: 'Illegal And Strong Objection': Why Noel Tata Is Opposing N Chandrasekaran's Reappointment As Chairman | Explained

Disagreements surfaced during a board meeting on September 17, where Noel Tata said that the Tata Sons board, led by late Ratan Tata, had "unanimously” agreed to remain an unlisted private company. He had previously suggested splitting TSPL into multiple entities to to prevent the listing of the Tata's holding firm.

Friction further escalated over the board's vote to re-appoint N Chandrasekaran as executive chairman of the group, with Noel Tata emerging as the sole board member to vote against the extension, publicly calling the move a "legal nullity".

(With Inputs From PTI)