The Scheme of Arrangement between TVS Holdings and its shareholders has become effective. The company filed Form INC 28 with the Registrar of Companies, Chennai, making the scheme operative from August 27, 2026.

The National Company Law Tribunal (NCLT) Chennai bench had sanctioned the scheme on August 18, 2026, following a vote where 99% of attending equity shareholders approved the plan. This order allows TVS Holdings to distribute surplus reserves by issuing fully paid-up preference shares as a bonus to equity holders.

Record Date and Eligibility

Pursuant to the scheme, the company has fixed September 8, 2026, as the record date. Shareholders whose names are recorded in the register of members or depository records as equity shareholders on this date will be eligible to receive the preference shares.

Scheme Mechanics

Under the approved terms, TVS Holdings will issue 46 preference shares of face value ₹10 each for every 1 equity share of face value ₹5 held. This issuance utilizes the company's retained earnings. The preference shares are cumulative, non-convertible, and redeemable instruments carrying a coupon rate of 6% per annum.

The board holds the discretion to redeem these shares anytime after 12 months from allotment. There is no lock-in period for the preference shares, providing immediate liquidity options for shareholders once listed.

Regulatory Compliance

The tribunal addressed observations from the Regional Director regarding the appointed date and dividend compliance. It ruled that linking the appointed date to the effective date complies with Ministry of Corporate Affairs General Circular No. 9 of 2019. Furthermore, since the company declared an interim dividend of ₹86 per share for FY25-26, the bonus issuance does not violate Section 63(3) of the Companies Act, which prohibits issuing bonus shares in lieu of dividends.

What the Numbers Show

The scheme structure prioritizes liquidity over direct cash distribution. By issuing tradable preference shares rather than cash, TVS Holdings retains capital within its balance sheet until redemption. This approach allows the company to manage its free cash flow flexibility while rewarding shareholders with an income-generating asset yielding 6% annually, distinct from its existing non-convertible debentures rated CARE AA and AA+.

As a Core Investment Company registered with the RBI, TVS Holdings will update its memorandum and articles of association to reflect the enhanced authorized capital.

The National Company Law Tribunal (NCLT), Chennai Bench, has sanctioned a scheme of arrangement between TVS Holdings and its shareholders under Sections 230 to 232 of the Companies Act, 2013. The order, pronounced on August 18, 2026, allows the company to distribute accumulated surplus reserves by issuing fully paid-up preference shares by way of bonus.

The tribunal’s approval follows a unanimous vote from equity shareholders, with 272 out of 273 attendees voting in favor. The scheme aims to optimize excess funds that exceed the company’s current and foreseeable business requirements, providing shareholders with a near-cash instrument while maintaining liquidity flexibility for the company.

Scheme Details

Under the approved terms, TVS Holdings will issue 46 preference shares of face value ₹10 each for every one equity share of face value ₹5 held on the record date. The issuance will be funded from general reserves and retained earnings.

The preference shares will be listed on stock exchanges where the company’s equity shares are traded. The board retains discretion to redeem the shares at any time after 12 months from the date of allotment, with mandatory redemption upon expiry of 15 months.

Regulatory Compliance

The NCLT addressed observations from statutory authorities, including the Regional Director and the Income Tax Department. The tribunal confirmed that the event-based appointed date linked to the effective date is compliant with Section 232(6) of the Companies Act, 2013, as per MCA General Circular No. 9 of 2019.

Regarding Section 63(3) of the Companies Act, which prohibits issuing bonus shares in lieu of dividends, the tribunal noted that the company had already declared an interim dividend of ₹86 per equity share for FY26. Consequently, the bonus preference share issuance is not considered a substitute for dividend distribution.

What the Numbers Show

The structure of the payout reveals a strategic shift in capital return mechanics. By issuing redeemable preference shares rather than cash, TVS Holdings preserves its cash position for operational needs or future investments while still rewarding shareholders. The 6% coupon rate provides a defined income stream to investors, who can trade the listed instruments without lock-in restrictions. This approach allows the company to manage liquidity timing through its discretionary redemption rights after 12 months, aligning shareholder returns with the company’s free cash flow generation from instrument redemptions.

Next Steps

TVS Holdings must file a certified copy of the NCLT order with the Registrar of Companies and the Reserve Bank of India within 30 days of receipt. As a Core Investment Company (CIC) registered with the RBI, the company is required to comply with relevant regulatory notifications. The company will also file revised Memorandum and Articles of Association to reflect the enhanced authorized capital.