Tata Motors board proposes to convert DVR shares to ordinary shares

Tata Motors: The company reported a consolidated net profit of Rs 3,203 crore for the first quarter of fiscal year 2023-24 (Q1 FY14), boosted by the improved margin of its passenger vehicle (PV) business and robust sales at its luxury car unit, Jaguar Land Rover (JLR). Revenue from operations increased 42 percent to Rs 1.02 lakh crore in the quarter under review.

Tata Motors on July 25 said its board of directors approved a Scheme of Arrangement for the cancellation of ‘A’ Ordinary Shares, and issue of seven Ordinary Shares for every 10 ‘A’ Ordinary shares held by shareholders.

The ‘A’ Ordinary Shares carry 1/10th of voting rights of ordinary shares and are entitled to five percentage points higher dividend. They are listed as Tata Motors DVR on BSE and NSE. After the conversion, it will be delisted from exchanges.

The ‘A’ Ordinary shares were first issued by TML in 2008 and subsequently in a further QIP in 2010 and rights issue in 2015. Regulatory changes have since restricted the issuance of such instruments with differential voting rights and TML remains the only large listed corporate with such an instrument.

The ‘A’ Ordinary Shares currently trade at 43 percent discount to Ordinary Shares. The Capital Reduction Consideration implies a 23 percent premium on the previous day’s closing share price of ‘A’ Ordinary shares, translating to 30 percent discount over Ordinary Share price and significantly below its historical averages, the company said.

The Scheme will lead to a reduction in the outstanding equity shares by 4.2 percent, making it value accretive for all shareholders, Tata Motors said.

The Scheme also envisages the creation of a Trust with an independent third party acting as a Trustee, to operationalise the various actions required to give effect to the Scheme in accordance with applicable laws. The Trust shall receive the Ordinary shares issued by TML to the ‘A’ Ordinary holders. It will then issue these shares according the current shareholding in Tata Motors DVR.

The Scheme is subject to regulatory and shareholder approvals. PWC is the independent registered valuer for the transaction, with Citigroup and Axis Capital acting as fairness opinion providers for the ‘A’ Ordinary and Ordinary shareholders respectively. Cyril Amarchand Mangaldas is the legal advisor to Tata Motors for the transaction.