Mumbai, August 22, 2024 – Tata Motors Limited (TML) has announced a significant update regarding its capital reduction scheme, impacting holders of its ‘A’ Ordinary Shares. The scheme, sanctioned by the Hon’ble National Company Law Tribunal (NCLT), Mumbai Bench, involves the cancellation of ‘A’ Ordinary Shares and the subsequent issuance of New Ordinary Shares to shareholders. The Record Date for determining eligible shareholders is set for Sunday, September 1, 2024.
Key Details of the Capital Reduction Scheme
Under this scheme, shareholders holding ‘A’ Ordinary Shares on the Record Date will receive 7 New Ordinary Shares for every 10 ‘A’ Ordinary Shares they currently hold. This distribution will be considered a Capital Reduction Consideration and is subject to withholding tax (WHT) obligations under the Indian Income Tax Act, 1961.
To manage this process, TML has established an irrevocable private trust named “TML Securities Trust,” with Axis Trustee Services Limited acting as the independent trustee. The trust will be responsible for selling the necessary number of New Ordinary Shares to cover WHT obligations and distributing the remaining shares to shareholders.
FAQs and Additional Information
TML has published a detailed FAQ section on its website to address common questions from shareholders regarding this scheme. Some of the key points include:
- What is the Capital Reduction Scheme?
- Shareholders will receive 7 New Ordinary Shares for every 10 ‘A’ Ordinary Shares held as of September 1, 2024. This distribution is subject to WHT and capital gains tax, particularly for non-resident shareholders.
- What is Deemed Dividend?
- The distribution of new shares is treated as a deemed dividend under Section 2(22)(d) of the Indian Income Tax Act, 1961, making it taxable.
- Record Date and Effective Date:
- Both are set for September 1, 2024.
- Withholding Tax (WHT):
- TML will issue a TDS certificate for WHT deducted on the deemed dividend and capital gains.
- Accumulated Profits:
- Accumulated profits, which will be used to calculate deemed dividend, stand at INR 10,033 crores as of June 30, 2024.
- Timeline for Share Distribution:
- The process will commence on September 1, 2024, with shareholders expected to receive their new shares and any applicable cash entitlements by September 20, 2024.
- Cost Basis for New Shares:
- The fair market value of the New Ordinary Shares on September 1, 2024, will determine the cost basis for tax purposes.
TML’s capital reduction scheme marks a significant change for its shareholders, with the issuance of New Ordinary Shares and associated tax implications. Shareholders are advised to review the FAQ and consult with financial advisors to understand the full impact of this scheme. Further updates will be provided by TML as the process unfolds.
