Tata Motors to cancel ‘A’ ordinary shares for capital reduction, seek NCLT approval

economictimes.indiatimes.com:

Tata Motors Board has approved the cancellation of all the ‘A’ ordinary shares of the company through a scheme of arrangement, and allotting ordinary shares, which would rank pari passu with the existing ordinary shares in the company. The move is aimed at capital reduction, and the automaker will seek National Company Law Tribunal’s approval for the same, it said. Holders of ‘A’ ordinary shares have different voting and dividend rights when compared to holders of ordinary shares.

Tata Motors had issued ‘A’ ordinary shares back in 2008 when it did a rights issue. Under the scheme of arrangement, the company will issue 7 fully paid-up ordinary shares of face value Rs 2 each, for every 10 ‘A’ ordinary shares. Tata Motors will create a Trust, which will receive the new ordinary shares from the company on behalf and for the benefit of each of the relevant shareholders.

The issuance of shares instead of cash will help in preserving the liquidity for the company’s future growth. Besides, it will allow the holders of the ‘A’ ordinary shares to continue to participate in the company’s performance through the ordinary shares. The reorganization of the share capital is expected to simplify and consolidate the company’s capital structure and be value accretive for all shareholders.

The announcement of cancellation of ‘A’ ordinary shares was taken by the board along with the quarterly earnings of the company. Tata Motors reported a higher-than-expected consolidated net profit of Rs 3,203 crore for the quarter ended June, as against a net loss of Rs 5,007 crore a year ago. Consolidated revenue from operations increased 42% on year to Rs 1.02 lakh crore.