Tata Motors DVR Share Price Soars 18%: Conversion to Ordinary Shares Promises Positive Impact
Tata Motors, a prominent player in India’s automotive industry, witnessed an impressive surge in the share price of its DVR (differential voting rights) shares after the company announced a significant decision. In a move to streamline its equity structure, Tata Motors revealed plans to convert its DVR shares to ordinary shares, resulting in a reduction of outstanding equity shares by 4.2%. This conversion has garnered attention from investors and experts alike, as it promises positive implications for the company and its shareholders. So here is a brief report on Tata Motors DVR Share Price.
Tata Motors DVR Share Price Skyrockets:
Following the announcement of converting DVR shares to ordinary shares, Tata Motors DVR share price experienced a remarkable surge of nearly 18%, reaching its fresh 52-week high of ₹440 on the BSE. The enthusiasm surrounding this development was mirrored on the NSE, where the stock recorded a substantial 17% jump.
Conversion of DVR Shares Explained:
The move to convert DVR shares to ordinary shares was unveiled by Tata Motors in its recent results announcement. The plan entails issuing seven fully paid-up new ordinary shares with a face value of ₹2 for every ten ‘A’ ordinary shares with a face value of ₹2. The issuance will serve as consideration for the reduction and cancellation of the ‘A’ ordinary shares. This decision aims to simplify and consolidate all traded equity securities of Tata Motors into Ordinary Shares listed only on NSE and BSE.
The Purpose of DVR Shares:
Tata Motors DVR Shares, introduced by Tata Motors in 2008, are designed to grant differential voting rights to shareholders compared to regular equity shares. While regular shareholders typically receive one voting right per share, DVR shares may offer either more or fewer voting rights based on the company’s structure. In the case of Tata Motors’ DVRs, they carry 1/10th of the voting rights of ordinary shares but entitle shareholders to a 5% higher dividend.
Impact on Tata Motors and Shareholders:
The conversion of Tata Motors DVR Share Price is expected to result in a 4.2% reduction in the number of outstanding equity shares, leading to earnings per share (EPS) accretion for all shareholders. Additionally, it will simplify and consolidate the company’s capital structure while preserving liquidity.
According to experts, the effective voting rights of the promoter and promoter group will be reduced by 3.16% upon completion of the conversion. Shareholders holding DVRs will receive seven ordinary shares (with a face value of ₹2) for every ten DVRs held, resulting in a premium of 23% over the previous day’s close of the DVR shares and a 30% discount to Tata Motors’ ordinary shares.
The scheme is effectively seen as a buyback without any cash outgo, hence having no impact on Tata Motors’ debt levels. The entire process is expected to be completed within 12-15 months, providing further clarity and stability for shareholders.
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Conclusion:
The decision by Tata Motors to convert its DVR shares to ordinary shares and Tata Motors DVR Share Price has sparked optimism among investors, leading to an impressive surge in share prices. The move is aimed at simplifying the equity structure, streamlining trading, and ultimately benefiting all stakeholders. With a reduction in outstanding equity shares and improved liquidity, the future looks promising for Tata Motors as it continues to solidify its position in India’s automotive landscape.