Shares of Tata Motors DVR surged around 16% on Wednesday to hit their fresh 52-week high of Rs 437 on NSE in opening deals. The sharp rise in share price comes a day after Tata Motors announced that it will convert its DVR shares to ordinary shares. Tata Motors will create a Trust, which will receive the new ordinary shares from the company on behalf and for the benefit of each of the relevant shareholders
Tata Motors on July 25 said its board of directors approved a Scheme of Arrangement for the cancellation of ‘A’ Ordinary Shares, and issue of seven Ordinary Shares for every 10 ‘A’ Ordinary shares held by shareholders. Upon the effectiveness of the scheme, the company will issue 7 fully paid-up new Tata Motors ordinary shares with a face value of Rs 2 for every 10 'A' ordinary shares with a face value of Rs 2
Earlier in January, Tata Motors said the voluntary delisting of its American Depositary Shares, representing ordinary shares, from the New York Stock Exchange, would become effective close of trading on January 23, 2023. The termination of the ADS along with the proposed scheme of capital reduction of ‘A’ Ordinary shares will simplify and consolidate all traded equity securities of Tata Motors into Ordinary Shares listed only on NSE and BSE
DVR stands for differential voting rights. These shares are designed to give different voting rights to their shareholders compared to regular equity shares. In a company, each shareholder has one vote per share they hold. However, DVR shares may have either more or fewer voting rights than regular shares, depending on the company's structure
The ‘A’ Ordinary shares were first issued by Tata Motors Ltd 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
More than 92% of Tata Motors DVRs are held by the public, the automaker counts some marquee investors in this list. Mutual funds have a 28.82% stake in Tata Motors DVRs. Among foreign portfolio investors, Franklin Templeton, Government of Singapore, and Vanguard cumulatively hold 18.6% Tata Motors DVRs are also held by Rekha Rakesh Jhunjhunwala.
The ‘A’ Ordinary Shares carry 1/10th of voting rights of ordinary shares and are entitled to 5% higher dividend. They are listed as Tata Motors DVR on BSE and NSE. After the conversion, it will be delisted from exchanges. Tata Motors DVRs trade at a price almost half of that of ordinary shares, and therefore, provide arbitrage opportunities to investors
The scheme will lead to a reduction in the outstanding equity shares by 4.2%, making it value accretive for all shareholders, Tata Motors said. According to some experts, this is effectively a buyback without any spending and as there is no cash outgo, there would be no impact on the net debt. The whole procedure is likely to be completed in around one year to 15 months
As traders saw arbitrage opportunity, Tata Motors DVR shares jumped 18% to hit day's high of Rs 440 today on BSE. If the spread trades at around 8-10% +/-, then the existing DVR/ordinary share spread holders should unwind their positions Considering it will take around 12-14 months for the scheme of arrangement to come into effect, the ideal spread to set up a fresh position should be 15%, according to Nuvama Equities
Shares of Tata Motors also touched their fresh one-year high on July 26. The stock jumped 4.04% to hit 52-week high of Rs 665.40 per share. In the last one year, the stock has jumped around 46%, outperforming benchmark Nifty50.
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