The Board of Tata Motors has approved a Scheme of Arrangement for capital reduction of ‘A’ ordinary shares, which will result in a 4.2% reduction in the number of outstanding equity shares. Ordinary shares will be issued as a consideration for the reduction.
The termination of the ADS (American Depository Shares) program from the NYSE, along with the proposed scheme of capital reduction of ‘A’ ordinary shares, will simplify and consolidate all the traded equity securities of Tata Motors into ordinary shares, listed only on the BSE and the NSE. Earlier on January 23, 2023, the company had completed delisting of the American Depository Shares (ADS) from the New York Stock Exchange.
As per today’s Scheme of Arrangement, to further simplify the capital structure, the board approved the cancellation of ‘A’ Ordinary Shares, and issue 7 Ordinary Shares for every 10 ‘A’ Ordinary Shares as 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 around 43% discount to Ordinary Shares.
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.