Tata Motors board plans to convert DVR shares to ordinary

26 Jul 2023 , 12:43 PM

Tata Motors announced that its board of directors authorized a Scheme of Arrangement for the cancellation of ‘A’ Ordinary Shares and the issuance of seven Ordinary Shares for every ten ‘A’ Ordinary Shares held by shareholders.

Ordinary shares ‘A’ has one-tenth the voting rights of ordinary shares and are eligible to receive five percentage point higher dividend. On the BSE and NSE, they are listed as Tata Motors DVR. It will be delisted from exchanges following the changeover.

TML originally issued ‘A’ Ordinary shares in 2008, followed by another QIP in 2010 and a rights issue in 2015. Since then, regulatory adjustments have limited the issuing of such instruments with differential voting rights, and TML remains the only significant listed company with such shares.

The ‘A’ Ordinary Shares currently could be seen at a 43% discount to Ordinary Shares. According to the company, the Capital Reduction Consideration represents a 23% premium on the previous day’s closing share price of ‘A’ Ordinary shares, which translates to a 30 percent discount over the Ordinary Share price and well below its historical averages.

According to Tata Motors, the Scheme will result in a 4.2% reduction in outstanding equity shares, making it value accretive for all shareholders.

The Scheme also contemplates the establishment of a Trust, with an independent third party serving as Trustee, to carry out the different measures required to give effect to the Scheme in line with applicable legislation. TML’s Ordinary shares issued to ‘A’ Ordinary holders will be received by the Trust. It will subsequently issue these shares in accordance with its current stake in Tata Motors DVR.

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