Tata Motors, one of India’s leading automotive manufacturers, has achieved an overwhelming mandate from its shareholders for the conversion of shares with differential voting rights (DVR) into ordinary shares. The resolution, which received an impressive 99.81% ‘for’ votes, signifies a significant step forward in simplifying the company’s capital structure.
The shareholder approval marks a pivotal moment for Tata Motors, enabling the conversion of DVR shares (also known as A-ordinary shares) into ordinary shares and streamlining its capital framework. This move aims to enhance transparency, governance, and investor confidence in Tata Motors.
Key shareholders in Tata Motors, including LIC, Vanguard, SBI MF, the Rakesh Jhunjhunwala family, Blackrock, ICICI Prudential AMC, and Norges Bank, have shown overwhelming support for the conversion scheme.
Initially announced in July last year, the scheme involves issuing seven ordinary shares of Tata Motors for every 10 A-ordinary shares held. Consequently, all outstanding A-ordinary shares will be canceled, leading to a consolidation of the company’s share structure.
At the close of the latest trading session, ordinary shares of Tata Motors were priced at Rs 1013.8, while DVR shares ended at Rs 684.55, presenting a 3.7% discount for DVRs compared to ordinary shares.
Proxy advisory firms have endorsed the conversion plan, highlighting its potential benefits. IIAS stated that the consolidation of capital structure would eliminate the price discount between A-ordinary shares and ordinary shares, leading to a 4% earnings per share (EPS) accretion for all shareholders and improving overall market capitalization.
Stakeholders Empowerment Services emphasized that the termination of the DVR program was necessary for Tata Motors to proceed with its proposal to demerge into two separate listed entities, one housing the commercial vehicles business and the other the passenger vehicles businesses, including Jaguar Land Rover (JLR).
The decision to terminate the DVR program marks the end of an era for Tata Motors’ innovative fundraising approach, which allowed promoters to raise capital without diluting their voting power. While such instruments are popular in the US, changes in regulations have restricted Indian companies from issuing shares with DVRs.
The overwhelming shareholder mandate underscores Tata Motors‘ commitment to transparency, shareholder value, and strategic realignment in the evolving automotive landscape.