Tata Motors DVR conversion to Tata Motors Ordinary Shares

Part 1

In this post, we will explain how to manage the Tata Motors DVR (Differential Voting Rights) - Tata Motors Allotment shares in MProfit.

Here, we will provide an explanation of how to enter transactions in MProfit. 

How do I manage this in MProfit if I am holding Tata Motors DVR?

Shares on the Record Date:

1. Enter a sale transaction in MProfit for the Tata Motors DVR Shares as per the details received in the note from Tata Motors.

Date: 01-Sep-24

Sell Quantity: The number of shares you hold of Tata DVR

Sell Amount: ‘The Value of Consideration Received’. (You can find this value in an email communication sent by Tata Motors under “B. Details relating to Taxation of Deemed Dividend and Capital Gains”)

Sell Price: Sell Amount (Value of Consideration Received) / Sell Quantity

2. Enter a buy transaction in MProfit for the New Ordinary Shares of Tata Motors as below:

Date: 01-Sep-24

Buy Quantity: The number of Tata shares credited to your demat account in exchange for Tata DVR shares.

Buy Price: 1111.35

Buy Amount: Buy Quantity x 1111.35

3. When filing your capital gains for Tata DVR, be sure to provide the Deemed Dividend value and TDS to your CA/Tax Advisor.

This will help reduce the capital gain for the Tata DVR shares.

You can find this information in an email communication sent by Tata Motors under “B. Details relating to Taxation of Deemed Dividend and Capital Gains.”

Part 2

This second part will cover the details of the scheme as explained by the company, including the exchange ratio, capital gains on Tata DVR shares, deemed dividend, TDS, and the cost of new Tata shares due to this exchange.

Details about the Scheme:

Just a quick reminder: Every shareholder will receive an email from Tata Motors explaining the exchange ratio of Tata DVR with Tata Ordinary shares, deemed dividend, consideration of value, and TDS.

Additionally, please remember that AOS shares are Tata DVR shares, and New Ordinary Shares (NOS) are the new Tata Shares received in exchange for Tata DVR shares.

1. The Record Date and Effective Date of the Scheme is 1st September 2024

2. In a Capital Reduction Scheme, the consideration distributed in the form of new shares is considered as a distribution of accumulated profits to the shareholders

This distribution will be treated as a deemed dividend in the hands of shareholders and will be taxable at the applicable tax rates, including slab rates for individuals

3. The Deemed Dividend for the AOS is INR 200.63 per share

4. The reduction through cancellation of the “A” Ordinary Shares (AOS) has a capital gains implication where:

Capital Gains = Value of consideration received of AOS – Deemed Dividend Income – Original Cost of Acquisition of AOS

If the shares were held as a “trading asset”, then the gains would be treated as Business Income.

5. New Ordinary Shares (NOS) of Tata Motors will be allocated to shareholders of the AOS in the ratio of 7 NOS for every 10 AOS held.

6. Since September 1st was a non-trading day, the closing price on NSE on August 30th, 2024 of INR 1,111.35 will be used as the sale price of the "A" Ordinary Shares and the cost of acquisition of the New Ordinary Shares.

7. A Deemed Dividend will trigger a TDS obligation, and the company will sell a specific quantity of New Ordinary Shares to cover this obligation.

The company will share details about the exact quantity of NOS sold, as well as the final number of NOS credited to each shareholder's demat account.

Reference documents provided by Tata Motors: 

1. FAQs: https://www.tatamotors.com/wp-content/uploads/2024/09/FAQs-Cancellation-of-A-Ordinary-Shares.pdf 

2. Video: https://www.tatamotors.com/wp-content/uploads/2024/09/Clarification-on-Tax-treatment-Cancellation-of-A-Ordinary-Shares-and-issuance-of-New-Ordinary-Shares.mp4 

3. Every shareholder will also have received a detailed calculation from Tata Motors with details about the exact number of shares allotted, capital gains, deemed dividend, TDS, etc.

Please note that this is just a guideline for your reference. Please consult your tax advisor or chartered accountant for further clarifications, especially before filing your capital gains.