TVS Motor Company Limited has received approval from the National Company Law Tribunal (NCLT), Chennai Bench, for its Scheme of Arrangement to issue fully paid-up redeemable preference shares worth approximately Rs. 1,900 crore to its shareholders.
The move is aimed at distributing surplus reserves among shareholders without impacting the company’s long-term liquidity.
The scheme, sanctioned under Sections 230 to 232 of the Companies Act, 2013, allows the company to issue 4 preference shares of ₹10 each for every 1 equity share of ₹1 held by shareholders as on the record date. These preference shares will be listed on the BSE and NSE and will carry a 16 percent coupon rate, payable upon redemption within 12 months of allotment.
Key Highlights of the Scheme
- Bonus Ratio: 4 Preference Shares for every 1 Equity Share
- Face Value: ₹10 per Preference Share
- Coupon Rate: 16% per annum
- Total Issue Size: ₹1,900.35 crore
- Redemption: Within 12 months from allotment
- Listing: To be listed on BSE and NSE
Rationale Behind the Scheme
According to the company’s submission, TVS Motor has accumulated significant surplus reserves—₹7,574 crore as of December 31, 2023—which exceed its current and future operational requirements. The board decided that part of this capital should be returned to shareholders in the form of preference shares while retaining operational flexibility.
The preference shares, being tradable instruments, are designed to function as near-cash equivalents for shareholders, thus providing liquidity while enabling the company to maintain a strong capital structure.
Regulatory Compliance and Observations
The Tribunal noted that all procedural requirements had been fulfilled, including the issuance of notices to relevant statutory and regulatory authorities such as the Registrar of Companies, SEBI, Income Tax Department, Reserve Bank of India, and both stock exchanges. There were no objections from these entities.
The Regional Director (Southern Region) did raise certain compliance-related observations, including the existence of an active charge with the State Bank of India. TVS Motor submitted a declaration confirming the charge and a letter from SBI stating that there are no outstanding liabilities. The company also provided undertakings to comply with Section 63(3) of the Companies Act and to file the required forms for capital enhancement.
Valuation and fairness opinion reports submitted by Bansi S. Mehta Valuers LLP confirmed that the bonus issuance will not adversely impact existing non-convertible debenture holders and that the scheme is fair.
Tribunal’s Final Order
The NCLT sanctioned the Scheme of Arrangement and directed the company to:
- Allot the bonus preference shares as outlined
- Comply with statutory requirements including filing revised charter documents
- Submit a certified copy of the order to the Registrar of Companies within 30 days
The Tribunal emphasized that the order does not exempt the company from applicable stamp duties or other statutory charges.
Conclusion
The approval marks a significant step in TVS Motor’s corporate strategy to reward shareholders while maintaining a prudent financial framework. With all regulatory clearances obtained and a clean compliance record, the scheme sets a precedent for similar capital restructuring initiatives in the corporate sector.
