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Tata Motors sets Sept 1 as record date for DVR to ordinary share conversion

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7 ordinary shares will be issued for every 10 A-shares held

MUMBAI: Tata Motors has fixed September 1 as the record date for the conversion of shares with differential voting rights (DVR) (also known as A-ordinary shares) into ordinary shares.

Under the plan, first proposed in July 2023, seven ordinary shares of Tata Motors will be issued for every 10 A-shares held and its outstanding A-shares will stand cancelled.

At the end of Tuesdayโ€™s trade, the DVR conversion plan presented a small arbitrage opportunity to only certain categories of investors such as mutual funds and insurance companies, who donโ€™t face any tax implications.

Value of A-shares

The value of 10 A-shares stood at Rs7,490, Rs 17, or 1.54 per cent, lower than Rs 7,607, the value of seven ordinary shares.

Shareholders buying the DVRs could be a cheaper alternative to buy shares of Tata Motors. However, this may not apply to all investors as the conversion plan has three levels of tax implications.

First, the cancellation of A-shares will be deemed as โ€˜dividend payoutโ€™ on accumulated profits at Tata Motors when the scheme becomes effective.

Dividend distribution tax

This will lead to the withholding of dividend distribution tax. Thereafter, any money A-shareholders get after the deemed dividend minus their cost of acquisition will be treated as long-term capital gains tax.

There will be a small element of short-term capital gains tax when the independent trustโ€”set up to carry out this capital reduction scheme โ€“ will buy and sell shares to pay the withholding taxes.

Tata Motors on Monday issued a detailed notice intimating tax deduction applicable to various categories of investors.

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