BENGALURU (Reuters) -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%, 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% of ordinary shares but get a 5% higher dividend.
The company will issue seven ordinary shares for every 10 ‘A’ ordinary shares, implying a 23% 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 Indian exchanges.
The ‘A’ ordinary shares, currently trading at a 43% 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.
The capital reduction will dilute the voting rights of the company’s largest shareholders, called promoters, by around 3.2% 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% 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 India’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.
(Reporting by Chris Thomas in Bengaluru; Editing by Savio D’Souza)
