Along with its results, the business disclosed today that, upon the implementation of the Scheme, it would issue 7 fully paid-up new ordinary shares having a face value of INR 2 for every 10 “A” ordinary shares with an INR 2 face value. The ‘A’ ordinary shares will be reduced in value and canceled in exchange for this issuance.
The corporation will create a trust prior to the start of the Scheme in order to simplify the transfer of consideration for the reduction of the “A” Ordinary Shares. In accordance with the terms of the Scheme, this trust will accept the New Ordinary Shares from the company on behalf of the pertinent shareholders. The trust shall distribute the remaining New Ordinary Shares to the appropriate shareholders in accordance with the rules of the Scheme after meeting specific duties, such as taxes and other acts stipulated in the Scheme.
- The Board of Tata Motors Ltd. has authorized a scheme of arrangement for a capital reduction of the ‘A’ Ordinary shares and the issuance of Ordinary shares as a consideration for the reduction.
The Capital Reduction Consideration represents a 23% premium1 to the price of the ‘A’ Ordinary Share and will result in a 4.2% decrease in the number of equity shares outstanding, adding value for all owners. All traded equity securities of Tata Motors will be streamlined and consolidated into Ordinary Shares listed only on NSE and BSE as a result of the end of the ADS program and the proposed scheme for capital reduction of “A” Ordinary shares.
- Regulatory and shareholder approvals are required for the aforementioned transaction.
25 July 2023, Mumbai: Tata Motors Ltd. (“TML”)) now has two classes of listed equity instruments, namely Ordinary Shares and ‘A’ Ordinary Shares, following the conclusion of the delisting of the American Depository Shares the as of January 23, 2023, New York Stock Exchange
The ‘A’ Ordinary Shares have five percentage points more dividend rights and one-tenth the voting power of Ordinary Shares. The Board of Directors of TML today adopted a Scheme of Arrangement (“Scheme”) for the cancellation of “A” Ordinary Shares and 7 Ordinary Shares will be issued for every 10 “A” Ordinary Shares as payment (referred to as “Capital Reduction Consideration”). This will further streamline the capital structure.
As consideration (referred to as “Capital Reduction Consideration”), 7 Ordinary Shares will be issued for every 10 “A” Ordinary Shares. The capital structure will be further simplified as a result. Since then, restrictions on the issuing of these securities with differential voting rights have been put in place, and TML is still the only sizable listed corporation holding one of these securities.
Currently, the Ordinary Shares trade for 43% less than the ‘A’ Ordinary Shares. The capital reduction consideration entails a 23% premium1 over the closing share price of the ‘A’ Ordinary shares the day before, which translates to a 30% discount over the price of an Ordinary Share and is significantly below its historical norms. The Scheme will result in a 4.2% decrease in the number of outstanding equity shares, adding value for all shareholders.
The Plan also calls for the establishment of a Trust, with a neutral third party serving as the Trustee, to carry out the numerous steps necessary to give the Plan legal force. Following the payment of any necessary taxes, the Trust will receive the Ordinary Shares that TML has issued to the holders of Class A Ordinary Shares. It will then issue the Class A Ordinary Shares to the shareholders of Class A Ordinary Shares on a “net” basis in accordance with the Capital Reduction Consideration.
The Scheme requires shareholder and regulatory approvals. Citigroup and Axis Capital serve as fairness opinion providers for the ‘A’ Ordinary and Ordinary shareholders, respectively, while PWC serves as the independent registered valuer for the transaction. TML’s legal counsel for the deal is Cyril Amarchand Mangaldas.
The Fairness Opinion for this transaction was offered by Axis Capital, India’s Preferred Investment Banking & Institutional Equities Partner. The Fairness Opinion on the Tata Motors merger is provided by Axis Capital.