The much-anticipated vote on the merger proposal between Tata Motors and Tata Motors DVR is scheduled to take place on Friday, April 26, following the announcement by the board of directors in July 2023. As per the proposal, Tata Motors will issue seven ordinary shares for every 10 Tata Motors DVR shares, effectively canceling the latter.
Currently, Tata Motors DVR shares trade at a significant discount of nearly 43% compared to Tata Motors shares. The proposed capital reduction suggests a 23% premium over the previous day’s closing share price, resulting in a 30% discount relative to Tata Motors shares, which is notably below historical averages. This valuation is based on the closing price on the National Stock Exchange (NSE) as of July 2023.
The ‘An Ordinary’ shares were originally issued by Tata Motors in 2008, with subsequent issuances in 2010 through a qualified institutional placement (QIP) and in 2015 through a rights issue. However, regulatory changes have since restricted the issuance of such instruments, making Tata Motors the only large listed corporation with such an instrument.
The proposed merger is expected to reduce the outstanding equity shares by 4.2%, gradually increasing the price for shareholders.
In a press release, Tata Motors stated that the merger is subject to regulatory and shareholder approvals. PricewaterhouseCoopers (PwC) has been appointed as the independent registered valuer for the transaction, with Citigroup and Axis Capital serving as fairness opinion providers for the ‘A’ Ordinary and Ordinary shareholders, respectively. Additionally, Cyril Amarchand Mangaldas has been appointed as the legal advisor to Tata Motors Limited for the transaction.
The upcoming vote on the merger proposal marks a significant milestone for both Tata Motors and Tata Motors DVR shareholders, with the potential to reshape the company’s capital structure and unlock value for investors.