Tata Motors board approves scheme to simplify capital structure

The board of Tata Motors has approved a scheme of arrangement for a capital reduction of ‘A’ Ordinary shares. The company will issue Ordinary shares as a consideration for the reduction.

According to a statement from the company, this capital reduction consideration will result in a 23% premium to the ‘A’ Ordinary Share price and a 4.2% reduction in the number of outstanding equity shares. This is positive news for all shareholders.

The capital reduction scheme comes after the termination of the American Depository Shares from the New York Stock Exchange in January 2023. The purpose of this scheme is to simplify and consolidate all traded equity securities of Tata Motors into Ordinary Shares. Under this arrangement, the ‘A’ Ordinary Shares will be cancelled, and 7 Ordinary Shares will be issued for every 10 ‘A’ Ordinary Shares as Capital Reduction Consideration.

Tata Motors group chief CFO PB Balaji stated that the whole process will take 12-15 months to complete. He added that around 15 crore shares will be removed, resulting in a 4% uplift in EPS due to the reduction in the capital base.

The ‘A’ Ordinary shares were first issued by TML in 2008, followed by a further QIP in 2010 and a rights issue in 2015. As part of the scheme, a trust will be created with an independent third party acting as a trustee to carry out the necessary actions. PWC is the independent registered valuer for the transaction, while Citigroup and Axis Capital are the fairness opinion providers for the ‘A’ Ordinary and Ordinary shareholders respectively. Cyril Amarchand Mangaldas is the legal advisor to the company for the transaction.