Tata Motors DVR merger will have dividend & capital gains tax implications for shareholders… Does it make more sense to sell DVR shares now itself and shift to normal shares. Atleast dividend tax portion will get saved…
Haven’t done independent calculations, but as per this article it appears that dividend component would be hardly 2-3 Rs. per share.
Tata Motors DVR: Decoding the tax math for shareholders post Tata Motors share allotment - CNBC TV18
In that case, it wouldn’t be worthwhile to take effort of selling and buying back to save probably a rupee of tax 
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As per the FY24 annual reports (Pg 285, 317 of total 531)
Ordinary share o/s was 332.45 crores
‘A’ share (DVR) 50.87 crores
Total shares o/s 383.30 crores
Total other equity amounts to ₹ 92,327.43 crores
Total other equity attributable to DVR should be ₹ 92,327.43 crores / 383.30 * 50.87 = ₹ 12,254.29 crores
DVR per share total other equity = ₹ 12,254.29 crores / 50.87 crores = ₹ 240.88 per share.
According to this calculation, the share dividend is around 240 per share and the rest of the gain from your cost price is capital gains.
My average price is below ₹200 with a 20% SLAB tax bracket so I’m selling these shares (assuming my calculations are correct).
I’m not completely sure about how CNBC TV18 calculates their figures.
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Are we discussing the taxation part because the deemed divided portion will be taxed at slab rates (higher the slab, higher the tax), whereas the capital gains will be taxed at special rate ( like 12.5% for LTCG with the exemption of ₹1,25,000) ?
So, if someone falls in a tax slab higher than 12.5% (assuming LTCA), it would be wise to sell now and utilise the exemption and lower tax, instead of paying a higher tax on the dividend portion by letting the DVR get cancelled/extinguished.
However the tax savings will occur only if the deemed dividend is a significant portion of the distribution.
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Yes, that’s the issue here.
According to CNBC, the deemed dividend was ₹ 2 to 3 per share in this case I won’t mind converting my shares. But I believe it’s going to be around ₹ 240.
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Oh…
That article seems to be at least 1 year old, so not sure if those calculations still hold good.
And there is no way for us to know the exact dividend portion now right ? Will it be known only after Sep 1 ?
Correct, but we can do rough calculations based on the latest financials.
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Company has estimated Dividend portion at around Rs. 197 per DVR share. please refer page no. 15 of https://www.bseindia.com/xml-data/corpfiling/AttachLive/529a722e-6319-4cde-b464-79b19b4a467b.pdf
You may also refer summary article at Srinivas Ch on LinkedIn: 𝐓𝐚𝐱 𝐢𝐦𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬 𝐨𝐧 𝐓𝐚𝐭𝐚 𝐌𝐨𝐭𝐨𝐫𝐬 𝐃𝐕𝐑…
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Company has issued FAQs and Excel simulator for further clarity. (https://www.bseindia.com/xml-data/corpfiling/AttachLive/4d0e07f1-bfd2-400c-b02b-63e6193ee8db.pdf)
Yeah…
The actual deemed divided however will be calculated based on the distributable profits as on 31st August 2024.
FAQ: https://www.tatamotors.com/wp-content/uploads/2024/08/A-ordinary-shareholders-faqs.pdf
Illustrator: https://www.tatamotors.com/wp-content/uploads/2024/08/A-ordinary-shareholders-illustrator.xlsx
Sample illustration:
But i don’t understand the part relating to TML securities trust and what they mean when they say that TML securities trust will sell at ₹1050 , when they assume the price will be ₹1,000 on the effective date.
Why is the short term capital gains at 23.92 % i thought it was 20%
It is because of Surcharge (15%) and Cess (4%).
(20% x 1.15) x 1.04 = 23.92%
Surcharge is capped at 15% for capital gains where the total income exceeds ₹1 cr
Since they would have to withhold tax on the deemed dividend portion (refer to S.no 24) and pay to the government, they need cash for that, and to generate this cash they sell shares in the market, which would incur capital gains tax.
The total amount of tax to be withheld for all shareholders put together will certainly exceed ₹1cr, so they have included surcharge and Cess in determining the STCG tax rate.
(I still lack clarity on the TML securities trust part selling at ₹1,050)
It is an assumption to indicate that there might be STCG liability.
Effective date is 1st Sep for Transaction. However Trust will not be selling the share at same day. Expected timeline is T+15 days.
So there is a chance share price might increase by then and STCG would be applicable on that gain. Hence they have assumed sell price as 1050 to show STCG calculation.
However, if the price does not change, or actually goes down, there will not be any STCG.
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Decided to sell DVR and hence sold and bought TATA MOTORS. Thank you all for the insights!
I had 600 DVR shares @ average price of 659.9 and as per the calculation I should receive 408 but received only 406. Now Kite showing price discrepancy, should I update the same 659.9? Please clarify.
+1 Dear Zerodha Team,
I hope this message finds you well.
I am writing to address a discrepancy regarding the recent demerger involving my TATAMTRDVR shares. I held 30 TATAMTRDVR shares (with an average price of ₹456 before the record date, along with 3 ordinary TATAMTR shares. Based on the conversion ratio, I was expecting to receive 21 ordinary TATAMTR shares in total. However, I have only received 20 ordinary shares credited to my account. Also do fix the consolidated AVG price
Could you please investigate this matter and provide clarification on the missing share?
Thank you for your assistance.
Hi,
Team Zerodah,
As per the Ordinary-shareholders-Illustrator.xlsx Excel sheet which has been provided for calculating the number of eligible shares of TATA MOTORS which must be credited with respect to TATAMTRDVR shares. Filling up with all the required fields the number of shares to be credited is 184 shares of TATA MOTOR but the number of shares credited is only 94 shares of of the calculated value. Please update for the same as I am anxious about the number of shares that has been credited or there is a glitch.
I have also attached the screenshot of the calculation as per the excel sheet provide.
Regards
Imdad Ahmed