Tata Motors DVR shares extend gains, zoom 18% today to hit fresh one-year high; here's why

Shares of Tata Motors DVR continued to rise for the sixth consecutive session in Wednesday's trade. The stock today soared 17.93 per cent to hit a 52-week high of Rs 440 over its previous close of Rs 373.10. The carmaker's DVR shares saw a sharp rise after it announced conversion of differential voting rights into ordinary shares. The move is aimed at simplifying and consolidating the Tata Motors' capital structure and preserve liquidity for the auto major's growth.

Tata Motors' board approved a scheme of arrangement for reduction of capital of the company by way of cancellation of the entire 'A' Ordinary Shares of the auto major and issuance and allotment of the ordinary shares.

As per the arrangement, the shareholders of Tata Motors DVRs would receive 7 fully paid-up shares of Tata Motors for every 10 Tata Motors DVRs they held.

The 'A' ordinary shares were initially issued by Tata Motors in 2008, followed by a share sale in 2010 and a rights issue in 2015.

In November last year, Tata Motors revealed its intention to delist its American Depository Receipts (ADRs). The company, in its regulatory filing, also said that the transaction is subject to regulatory approvals and it could take 12-15 months for completion.

Along with the delisting of ADRs, this action would also simplify, streamline and consolidate trading of Tata Motors equity shares.

Usually, DVR shares offer lower voting rights so they are considered useful for companies that want to raise money in the market without diluting effective control of the firm.

In the June 2023 quarter (Q1 FY24), Tata Motors's net profit surged, helped by strong demand for its luxury Jaguar Land Rover (JLR) cars. The UK-based JLR unit, which accounted for 70 per cent of the company's revenue, has benefited from strong demand for its higher-margin SUVs and an improving supply of semiconductors.

Subsequently, JLR logged its highest production levels in nine quarters in April-June, while strong retail sales led to a 66 per cent surge in revenue.

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Tata's revenue from passenger vehicles rose 11 per cent. However, Q1 revenue was slower than the 15 per cent growth in the previous quarter.

The Mumbai-based automaker posted a consolidated net profit of Rs 3,203 crore for the April-June quarter, compared with a year-ago loss of Rs 5,007 crore.

Tata Motors shares also touched their fresh one-year high. The stock jumped 4.04 per cent to hit a day high of Rs 665.30.

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