Industry Odisha Bureau, Sep 30: Tata Trusts wants TCE and TESS merged into Tata Sons. Their operating revenue could change the holding company’s income mix. That may matter for its NBFC status and listing debate.
Tata Sons earns much of its revenue from investments in group companies. A new proposal could change that balance.
Tata Trusts has proposed a merger of two operating businesses into Tata Sons. They are Tata Consulting Engineers (TCE) and Tata Electronics Systems Solutions Pvt Ltd (TESS). The plan remains a proposal, not a done deal.
Its real significance lies in what Tata Sons could become. The holding company could turn more operational without changing its owners.
Revenue changes the equation
TESS is the heavyweight in this plan. It posted FY26 standalone revenue of ₹67,542 crore. Its profit was far smaller, at ₹1,025 crore. In other words, it brings sales scale more than profit.
TCE is much smaller, with revenue of ₹1,932 crore and profit of ₹226 crore. Tata Sons itself reported revenue of ₹42,367 crore and profit of ₹31,961 crore.
Added together, revenue reaches ₹1,11,841 crore and profit ₹33,212 crore. These are simple sums, not audited post-merger accounts.
Tata Trusts estimates about 64% of Tata Sons’ revenue would then come from operating businesses.
The NBFC test
This shift matters because of RBI rules for non-banking financial companies (NBFCs). The RBI’s test looks at two things. One is whether financial assets exceed 50% of total assets. The other is whether income from financial assets exceeds 50% of total income.
More operating revenue could shift the income side. The asset side, however, still counts. So higher operating revenue alone does not settle Tata Sons’ classification. The 64% figure is Tata Trusts’ estimate, not an RBI finding.
Why these two companies?
Clean ownership made TCE and TESS natural candidates, experts say. Tata Sons owns 100% of TCE directly. TESS is wholly owned by Tata Electronics, itself fully owned by Tata Sons. So the merger would bring no new shareholders into Tata Sons.
Farokh Subedar, an adviser to Tata Trusts, said TCE shares would be cancelled. That would leave Tata Sons’ share capital and shareholders unchanged, he said.
Listed subsidiaries would be harder to merge. Their minority shareholders would need to be accounted for. Gaurav Pingle of Forefront Legal Consulting said creditor approval may be the only procedural challenge.
Electronics brings scale
TESS assembles iPhones at two facilities in India. One runs through a joint venture with Taiwan’s Pegatron Corp. In January 2025, Tata Electronics bought 60% of Pegatron’s India iPhone operations.
Subedar said TESS has the right to buy the remaining 40%. If TESS became full owner, he estimated about ₹60,000 crore more income could follow. That remains a possibility, not a certainty.
Why not merge all of Tata Electronics? It is investing heavily in semiconductor fabrication, assembly and testing. Those units have not started operations and may take years to turn profitable. TESS, by contrast, already makes money.
Why other businesses are harder
Tata Advanced Systems and Tata Realty and Infrastructure are also wholly owned. But one expert flagged a track-record issue. Firms bidding for government projects must show past performance on similar work. Merging them into Tata Sons could put those credentials at risk, the expert said.
TCE also works on government projects, including the new Parliament building. Its client base, however, is diversified beyond government, according to Icra.
The listing question
The proposal lands amid debate over a possible Tata Sons listing. On 17 September, Tata Trusts chairman Noel Tata opposed N Chandrasekaran’s reappointment. The rest of the board said listing needs made his continuity necessary.
The merger is seen as a way to avert a listing. Pingle questioned whether the RBI or NCLT would view it only that way. If the board and RBI approve, completion could take 12–18 months, he estimated. Queries to Tata Trusts and Tata Sons went unanswered.
More than an internal merger
The merger would make Tata Sons bigger, but size is not the point. The real question is whether it becomes more operator than investor. How regulators read that shift remains the open question.
