Tata Motors proposes to convert DVR shares to ordinary shares

On July 25, Tata Motors announced the approval of a Scheme of Arrangement to cancel Class 'A' Ordinary Shares and issue seven Class 'A' Ordinary Shares for every 10 Class 'A' Ordinary Shares held by shareholders.

The dividend on Class 'A' Ordinary Shares is five percentage points greater and the shares carry the voting rights of only one tenth of an ordinary share. On the BSE and NSE, you can find them under the ticker symbol "Tata Motors DVR." It will no longer be traded once the changeover is complete.

TML's 'A' Ordinary Shares were originally issued in a qualified institutional placement (QIP) in 2008, followed by another QIP in 2010 and a rights issue in 2015. Since then, regulations have changed to limit the issuing of such instruments with differential voting rights, and TML is the only major listed corporation holding such an instrument.

Currently, the 'A' Ordinary Shares trade at a discount of 43% compared to the Ordinary Shares. In a statement, the business explained that the Capital Reduction Consideration represents a 23% premium over the 'A' Ordinary share price at market close on the previous trading day, a 30% discount over the price of an Ordinary Share, and a price that is significantly below the share price's historical norms.

All shareholders would benefit from the Scheme's value creation because it will reduce the number of outstanding equity shares by 4.2%, according to Tata Motors.

To implement the numerous activities necessary to give effect to the Scheme in compliance with applicable laws, the Scheme contemplates the creation of a Trust with an independent third party acting as the Trustee. TML's issuance of Ordinary shares to holders of 'A' Ordinary will be transferred to the Trust. Those shares will be distributed in accordance with the existing shareholding of Tata Motors DVR.

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Governmental and stockholder greenlights are needed for the Scheme to go forward. The independent registered valuer for the transaction is PWC, and the fairness opinion providers for the 'A' Ordinary shareholders are Citigroup and Axis Capital. For this deal, Cyril Amarchand Mangaldas is Tata Motors' legal counsel.