Tata Motors Boosts FTSE Presence as DVR Shares Head for Delisting

Tata Motors, according to the reports,  is planning to see an increase in its weightage on FTSE indexes following the delisting of its ‘A’ Ordinary Shares on August 30, 2024. These shares, also known as Differential Voting Rights (DVR) shares, will be exchanged for ordinary shares. The company confirmed that it will remain in the index with increased shares in issue total from 3,323,739,001 to 3,679,691,028. The investability weighting will rise from 55.45% to 57.34%, although the tax adjustment for this event will not affect the index treatment.

Capital Structure Simplification

The move to delist DVR shares, first announced in July 2023, is part of Tata Motors’ broader strategy to simplify its capital structure going ahead. As per the scheme, the company will issue seven ordinary shares for every ten DVR shares held by investors. This restructuring will reduce the company’s equity capital by approximately 4% and decrease the effective shareholding of the promoter and promoter group by 3.16%.

DVR Shareholder Details

As of August 27, 2024, public shareholders held a major 92.33% stake in Tata Motors DVR, with the remaining 7.67% held by the promoter and promoter group. Among public shareholders, mutual funds had a 16.09% stake, with ICICI Prudential Value Discovery Fund holding the largest portion at 7.88%. Foreign portfolio investors, including Vanguard, BNP Paribas, and Franklin Templeton, collectively held 33.67%. Notably, Rekha Jhunjhunwala held 10,162,000 shares, accounting for a 2% stake.

Historical Context

Tata Motors introduced the ‘A’ Ordinary Shares in 2008 as part of a rights issue aimed at raising funds for global investments. These shares, while carrying similar rights to ordinary shares, offer a 5% additional dividend but only one-tenth of the voting rights, resulting in their discounted trading compared to ordinary shares.

Conclusion: To wrap up, the delisting of Tata Motors’ DVR shares, effective August 30, will surely impact the company’s share structure and its position on FTSE indices. With the restructuring, Tata Motors has planned to streamline its capital base, strengthening shareholder value. Shares of Tata Motors closed 1.2% lower at Rs. 1,079.90 apiece on the BSE, in contrast to the 0.02% gain in the benchmark Sensex.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.