DVR share swap to cost Rs 100 crore: Tata Motors

economictimes.indiatimes.com:

Tata Motors’ move to cancel its DVR (differential voting rights) shares, which are trading at a discount to its ordinary shares, will cost the company Rs 100 crore, said chairman N Chandrasekaran, primarily due to stamp duty. The auto major is cancelling DVR shares, which carry lower voting rights but higher rate of dividend, 15 years after it issued them. With shareholders quizzing Chandrasekaran on Tata Motors’ equity capital reduction move at the annual general meeting (AGM) on Tuesday, the chairman said that it is being done with the objective of fairness for both kinds of shareholders (ordinary and DVR).

He added that Tata Sons (promoter) approved the move on the basis of what is good for the company and in the interest of shareholders. Chandrasekaran said the cancellation of DVRs will also result in promoter’s voting rights getting diluted by 3.2%. Tata Motors was the first company to issue DVRs in India.

It issued them to finance the acquisition of Jaguar Land Rover in 2008. It is now reducing the equity capital by issuing seven ordinary shares for every 10 DVR shares held by investors. Tata Motors decided to go for a share swap as against paying cash to buy back the DVRs as it will preserve liquidity for its growth.

Chandrasekaran also said that the company is evaluating launching a ‘jeep’-like SUV line. He, however, added that they will not be ‘me-too’ vehicles. “We continue to evaluate the spaces where we want to operate.