Tata Motors DVR Shares Conversion: What Common Shareholders Need to Know

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Tata Motors (TML) announced a significant change for its DVR shareholders. On September 1, 2024, Tata Motors DVR shares were officially suspended from trading as part of a plan to convert them into regular ordinary shares of TML. Here’s a simplified breakdown of what this means for you as a shareholder.

What’s Happening?

Tata Motors is converting DVR shares into ordinary shares. If you owned DVR shares on September 1, 2024 (Record Date), you will now receive 7 ordinary shares for every 10 DVR shares you held. This is called the conversion ratio, which in this case is 10:7.

How Will This Happen?

To handle this conversion smoothly, Tata Motors has set up a private trust called TML Securities Trust, managed by Axis Trustee Services. This trust will handle the conversion process, including taxes and other costs, on behalf of the DVR shareholders.

Here’s a step-by-step breakdown of the process:

  1. Issuing New Shares: Tata Motors will issue the new ordinary shares to TML Securities Trust.
  2. Covering Tax and Other Costs: The trust will sell a portion of these shares to cover taxes (like Withholding Tax) and transaction-related expenses (such as Securities Transaction Tax).
  3. Share Distribution: After selling the necessary shares for tax and expenses, the remaining shares will be distributed to you, the DVR shareholders.

So, while you’re supposed to receive 70 new ordinary shares for every 100 DVR shares, you may end up with slightly fewer shares due to taxes and costs.

Important Dates to Remember

  • September 1, 2024 (T): Record Date and the start of share allotment to the trust.
  • T+9 Days: Tax details for each shareholder will be finalized.
  • T+10 Days: The new ordinary shares will be listed and ready for trading.
  • T+15 Days: The trust will sell some shares to cover taxes and fractional entitlements.
  • T+17 Days: The remaining new shares will be credited to your account.
  • T+20 Days: If there’s any extra cash left from the block deal and sale of fractional entitlements, it will be sent to you.

What About Taxes?

There are some important tax rules you need to be aware of:

  1. Withholding Tax (WHT): This is a tax on accumulated profits up to August 31, 2024. Tata Motors will pay this tax on your behalf, but it will come out of the shares you were supposed to receive.

  2. Capital Gains Tax (For Non-Residents): If the value of the new ordinary shares you receive is higher than what you originally paid for the DVR shares, you may have to pay Capital Gains Tax.

Why Is Tata Motors Doing This?

By converting DVR shares into ordinary shares, Tata Motors aims to:

  • Increase Shareholder Control: DVR shares have limited voting rights, while ordinary shares give you more voting power.
  • Enhance Shareholder Value: Ordinary shares are generally considered more valuable.
  • Flexibility: This move simplifies the company’s share structure, making it more straightforward for shareholders and investors.

What Should You Do Next?

As a shareholder, you don’t need to take any action. Tata Motors and the TML Securities Trust will handle everything for you, from the share conversion to paying the necessary taxes. However, keep an eye on the timeline to know when your new shares will be credited to your account.

This conversion is designed to benefit shareholders by giving them more value and control in Tata Motors. For investors Tata Motors have released this FAQs on Conversion and also a calculation sheet for your reference. Stay informed and check for updates as Tata Motors proceeds with this transition!

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