Tata Motors to issue 7 ordinary shares for every 10 ‘A’ shares at 23% premium

Tata Motors on Tuesday announced its decision to cancel its 'A' ordinary shares as part of an effort to simplify its capital structure. This move will result in a reduction of the company's overall outstanding shares by 4.2 per cent.

To compensate shareholders, Tata Motors will issue seven ordinary shares for every ten 'A' ordinary shares, offering a 23 per cent premium compared to the previous day's closing level of 'A' ordinary shares, said a regulatory filing by the company on BSE.

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. Presently, these shares are trading at a considerable 43 per cent discount in comparison to the company's ordinary shares.

This recent development comes after Tata Motors' announcement in November, wherein it revealed its intention to delist its American Depositary Shares starting January. This decision marks the culmination of approximately 18 years since the company's American Depositary Shares were first introduced for trading.

By cancelling the 'A' ordinary shares, Tata Motors aims to streamline its capital structure, potentially offering benefits and improved clarity for its shareholders. The move represents a strategic step as the automotive giant continues to evaluate and optimise its operations in the global market. 

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 ADR’s, this action will also simplify, streamline and consolidate trading of Tata Motors equity shares to the TML ORD shares on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

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