Tata Motors to cancel 'A' ordinary shares in latest securities rejig

Tata Motors will cancel its 'A' ordinary shares, currently trading at a steep discount to the ordinary shares, reducing its overall share count by 4.2 per cent, the automaker said on Tuesday, in its latest move to simplify its securities structure.

Tata Motors is the only major listed company with 'A' ordinary shares, which, in the automaker's case, have voting rights at 10 per cent of ordinary shares but get a 5 per centhigher dividend.

The company will issue seven ordinary shares for every 10 'A' ordinary shares, implying a 23 per cent premium on the previous day's closing level of 'A' ordinary shares, Tata Motors said.

In January, the automaker delisted its American Depositary Shares, roughly around 18 years after they first started trading, to focus on its securities on the exchanges.

The 'A' ordinary shares, currently trading at a 43 per cent discount to the company's ordinary shares, were first issued by Tata Motors in 2008. It boosted that count via a qualified institutional placement in 2010 and a rights issue in 2015.

Dilution of voting rights 

The capital reduction will dilute the voting rights of the company's largest shareholders, called promoters, by around 3.2 per cent but boost its earnings per share without impacting either its cash balance or net debt, Tata Motors said.

It will also increase Tata Motors' free float of ordinary shares by 18 per cent and the elimination of the discounted securities will boost the company's market capitalisation.

Tata Motors' current market value is about $28 billion, while rival Maruti Suzuki India is the country's largest automaker by market value, at $36 billion.

The transaction, which is subject to regulatory approvals, is expected to be completed in 12-15 months.

The company also reported a better-than-expected quarterly profit on Tuesday, helped by strong demand for cars in its luxury Jaguar Land Rover (JLR) segment.