Tata Motors has received overwhelming approval from its shareholders for the conversion of shares with differential voting rights (DVR) into ordinary shares. This move will simplify the company's capital structure and eliminate the price discount between DVR and ordinary shares.
The resolution received 99.81% 'for' votes, paving the way for the conversion. The scheme involves issuing seven ordinary shares for every 10 DVR shares held. Following the conversion, all outstanding DVR shares will be cancelled.
Proxy advisory firms recommended 'for' votes, stating that the conversion will benefit all shareholders. It will simplify the capital structure, reduce the overall capital base, and make the company 4% earnings per share (EPS) accretive.
The termination of the DVR program is also necessary for Tata Motors' proposal to demerge into two separate listed companies, one for commercial vehicles and the other for passenger vehicles, including JLR.
The change in regulations no longer allows Indian companies to issue shares with DVRs. However, this innovative fundraising method allowed promoters to raise capital without diluting their voting power.