Conversion of DVR shares to ordinary shares by Tata Motors

To facilitate the transfer of consideration for the reduction of the ‘A’ Ordinary Shares, the company will establish a trust before the Scheme’s effectiveness. This trust will receive the New Ordinary Shares from the company on behalf of the relevant shareholders as outlined in the Scheme. After fulfilling specific obligations, such as taxes and other actions specified in the Scheme, the trust will distribute the remaining New Ordinary Shares to the relevant shareholders according to the terms of the Scheme.

• The Board of Tata Motors Ltd has approved a Scheme of Arrangement for a capital reduction of the ‘A’ Ordinary shares and issue Ordinary shares as a consideration for the reduction.

• The Capital Reduction Consideration translates to a 23% premium1 to the ‘A’ Ordinary Share price.

• This will result in a 4.2% reduction in the number of outstanding equity shares, making it value accretive for all shareholders.

• The termination of the ADS program along with the proposed scheme of capital reduction of ‘A’ Ordinary shares will simplify and consolidate all traded equity securities of Tata Motors into Ordinary Shares listed only on NSE and BSE.

• The above transaction is subject to regulatory and shareholder approvals

Mumbai, July 25, 2023: Post completion of delisting of the American Depository Shares from the New York Stock Exchange as of 23rd January 2023, Tata Motors Ltd (“TML”)) has currently two types of listed equity securities, namely Ordinary Shares and ‘A’ Ordinary Shares. The ‘A’ Ordinary Shares carry 1/10th of voting rights of Ordinary Shares and are entitled to five percentage points higher dividend. To further simplify the capital structure, the Board of Directors of TML, have today approved a Scheme of Arrangement (“Scheme”) for cancellation of ‘A’ Ordinary Shares, and issue of 7 Ordinary Shares for every 10 ‘A’ Ordinary Shares as consideration (“Capital Reduction Consideration”).

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% 1 discount to Ordinary Shares. The Capital Reduction Consideration implies a 23% premium1 on the previous day’s closing share price of ‘A’ Ordinary shares, translating to 30% discount over Ordinary Share price and significantly below its historical averages. The Scheme will lead to a reduction in the outstanding equity shares by 4.2%, making it value accretive for all shareholders.

The Scheme also envisages creation of a Trust with an independent third party acting as a Trustee, to operationalize 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 and will then issue the Ordinary Shares as per the Capital Reduction Consideration on a ‘net’ basis to the ‘A’ Ordinary shareholders, post settlement of applicable taxes.

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 are the legal advisor to TML for the transaction.

Axis Capital, India’s India’s Preferred Investment Banking & Institutional Equities Partner has provided the Fairness Opinion on this transaction. Axis Capital provides the Fairness Opinion on Tata Motors transaction.

Updated: 25 Jul 2023, 04:53 PM IST