New Delhi, Jul 25 (PTI) Tata Motors on Tuesday announced a simplification and consolidation of its capital structure that will result in a 4.2 per cent reduction in the number of outstanding equity shares.

The board of the company has approved a scheme of arrangement for a capital reduction of the 'A' ordinary shares and issue ordinary shares as a consideration for the reduction, Tata Motors Ltd (TML) said in a statement.

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At present, Tata Motors has two types of listed equity securities -- ordinary shares and 'A' ordinary shares, which carry 1/10th of the voting rights of ordinary shares and are entitled to five percentage points higher dividend.

Earlier on January 23, 2023, the company had completed delisting of the American Depository Shares (ADS) from the New York Stock Exchange.

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To further simplify the capital structure, the board approved the cancellation of 'A' ordinary shares, and issue of 7 ordinary shares for every 10 'A' ordinary shares as consideration, the company said.

"This will also result in a 4.2 per cent reduction in our capital base in the number of outstanding equity shares, making it value accretive to all shareholders while being almost cash neutral to the company," Tata Motors Group Chief Financial Officer PB Balaji told reporters in an earnings call.

The scheme is subject to regulatory approvals, he said, adding, it was likely to take 12 to 15 months to complete.

Tata Motors had first issued the 'A' ordinary shares in 2008 and subsequently in a further QIP in 2010 and rights issue in 2015.

The company said regulatory changes have since restricted the issuance of such instruments with differential voting rights and it remains the only large listed corporate with such an instrument.

The 'A' ordinary shares currently trade at a 43 per cent discount to ordinary shares on the basis of closing prices on NSE as of July 24, 2023, it added.

The capital reduction consideration implies a 23 per cent premium on the previous day's closing share price of 'A' ordinary shares, translating to a 30 per cent discount over ordinary share price and significantly below its historical averages, Tata Motors said.

Further, the company said the scheme also envisages the creation of a Trust with an independent third-party acting as a Trustee, to operationalise the various actions required to give effect to it in accordance with applicable laws.

"The Trust shall receive the ordinary shares issued by TML to the 'A' ordinary holders and will then issue the ordinary shares as per the capital reduction consideration on a 'net' basis to the 'A' ordinary shareholders, post settlement of applicable taxes," it said.

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