Pretty disappointed with the shortchanging aspect of the DVR. Without a first hand experience with Tata I always formed an opinion about the group as being fair etc based on Media.
This swap ratio is clearly opportunistic.
Remember all the hoopla in all the news channels and online about the vedanta promoter trying to shortchange with the delisting offer at the covid lows?
Even the unfair pricing of ICICI security delisting is getting some attention.
But the tata motors’ unfair DVR swap goes thru silently without much noise anywhere.
Probably because get few people had it? I made out quite well with DVR (10x) but still fair is fair. If each share is entitled to equal part of the profit then by forcibly swapping DVR with regular with 7:10 is theft of minority shareholders.
Lesson learnt: in Indian market context there is rarely any activism for shareholders rights and to stay away from any novel structures like DVR stocks or other kind.
Share price is a function of demand supply and market perception. How many years Tata motors and DVR were in profit to pay any dividend to signify that 0.5% more for DVR holders?
When they issued DVR they valued it at 90% of original share and how come the DVR value dropped to 70%? What is management reasoning for this?
Here’s is a simple analogy to help you visualize the concept.
Imagine you buy a new car at a great price. However, when you take delivery, you discover a large scratch on the door that wasn’t disclosed. Even though you still got a good deal compared to the original asking price, you feel shortchanged because the car isn’t in the condition you expected.
The apologists might argue that since you bought the car for less than its original price, you still got a “good deal.” However, that doesn’t negate the fact that you were initially misled about the car’s condition.
Independent directors CLEARLY failed in their fiduciary duties towards retail investors… and so did Tata Sons as a “torch bearer” of “everything true and fair”
To put it simply they could have easily done a BUYBACK, but they took the route of liquidation and swap… a complex route for minority shareholders
Worst, there was very little information about the technicalities of this swap and it’s implications (tax incidence) from minority shareholders perspective
All in all not at all impressed… worst part it come from TATA group… such a shame
Management is saying they had appointed PWC to value, and this is their figure, and ofcourse voted by promoters, Jhunjhunwala, Vanguard, Blackrock, LIC because they were only going to gain!
Liquidation was carried out to put tax incidence on DVR minority shareholders and to protect “tata motors ordinary” shareholders
Also there was little pushback here from mutual fund, investment holding companies and insurance companies (HNI didn’t bother) as TDS don’t apply to them
Stakeholders Empowerment Services had said the termination of the DVR programme was needed for the Jaguar Land Rover (JLR) maker to go ahead with its proposal to demerge Tata Motors into two separate listed companies. Earlier this year, Tata Motors said it will form two separate companies, with one housing the commercial vehicles business and the other passenger vehicles businesses, including JLR.
Agree… or it would have made proposed PV-CV split cumbersome as DVR would have to split into two DVRs of seperate entities
My limited point here was that… this swap scheme was just a means / a mechanism, likewise buyback was available as a means to achieve the same outcome for Tata Motors before its proposed PV-CV split
But they choose the liquidation SWAP route… and that in my view has worked against minority retail shareholders
And in hindsight now I think I should have been more cautious as Tata Sons have in past undermined retail investors of Tata listed companies to benefit itself - be it intercompany loans, intercompany sweetheart deals, intercompany cross share holdings etc.
Tata Motors DVR shares will be swapped for ordinary shares on September 1, 2024, and the shares will be credited to accounts on September 18, 2024.
The cash entitlements will be remitted on September 21, 2024
From what i understand,
“cash entitlements” here means cash payments to shareholders majorly in case of ‘fractional entitlement sale’ like if someone have 1 dvr shares he/she will receive cash value.
