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News: In its board meeting yesterday, Tata Motors approved delisting of Tata Motors – DVR shares and offered a share swap deal for conversion of every 10 Tata Motors – DVR shares (CMP: ₹ 375) with 7 ordinary shares of Tata Motors (CMP: ₹640) subject to regulatory approvals. It’s a non cash transaction with applicable withholding taxes in the hands of investors.
Views: Share swap deal is in favour of Tata Motors – DVR shareholders with fair value of the same now pegged at 30% discount to prevailing price of Tata Motors ordinary shares vs. the prevailing discount of 40%+. At the current market price of Tata Motors, the fair value of Tata Motors – DVR is derived as ~₹450/share, a substantial premium of ~20% to yesterday’s closing price. We expect Tata Motors – DVR to open Gap up in morning trade today. For Tata Motors it is further simplification of shareholding structure and is EPS accretive in nature. It’s a win-win for both Tata Motors Ordinary Shareholders as well as Tata Motors – DVR shareholders.
Impact: Positive