Tata Motors DVR shares experienced a remarkable upturn of over 13% on July 26, following the board’s decision to approve the conversion of Differential Voting Rights (DVRs) shares to ordinary shares. The board’s resolution entails the issuance of 7 Ordinary Shares for every 10 DVRs held, with each ordinary share having a face value of Rs. 2. Initially, the spread favored DVRs by 20%, but the spread narrowed to 8% in favor of DVR holders after the stock prices opened on July 26.
The price of Tata Motors DVR stood at Rs. 423.55 at 9:20 am on the same day, marking a 13% increase compared to the previous closing price. In contrast, the ordinary shares of Tata Motors were priced at Rs. 654.
Tata Motors DVR Shares Surge Over 13% After Board’s Approval for Conversion
Experts suggest that an ideal spread for taking fresh positions should be around 15%. Abhilash Pagadia, Head of Alternative & Qualitative Research at Nuwama, advises existing shareholders with DVR spreads to consider liquidating their positions if the spread remains at 8-10% in the near term.
DVR to Ordinary Share Conversion: 7 Ordinary Shares for Every 10 DVRs Held
Tata Motors had issued DVR shares in 2008, followed by additional issuances in QIP in 2010 and Rights issues in 2015. The conversion of DVRs into ordinary shares will result in a 4.2% reduction in the company’s equity shares, ultimately benefiting all shareholders. However, this conversion process is expected to take approximately 12-15 months, and capital gains tax will be applicable.
PWC will serve as the Independent Registered Valuer for this transaction, while Citigroup and Axis Capital will provide fairness opinions. Tata Motors has engaged Cyril Amarchand Mangaldas as the legal advisor for this significant conversion.
