TVS Motor Company Limited , a leading Indian two-wheeler and three-wheeler manufacturer, has made significant moves in both its international expansion and shareholder rewards strategy.

Killwatt GmbH Acquisition Completed

TVS Motor (Singapore) Pte Ltd, a subsidiary of TVS Motor Company Limited, has finalized its acquisition of an additional 9.72% stake in Killwatt GmbH. The company paid the final installment of EUR 0.40 million, completing the total consideration of EUR 4.00 million for this stake. This payment was made following Killwatt GmbH's achievement of a pre-agreed milestone.

The acquisition process was carried out in multiple phases:

• Initial payment: EUR 2.00 million
• Second payment: EUR 1.60 million
• Final installment: EUR 0.40 million

This strategic move is expected to strengthen TVS Motor's position in the European market and potentially enhance its capabilities in electric vehicle technology.

Bonus Preference Shares Announced

In a separate development, TVS Motor Company has received approval from the National Company Law Tribunal (NCLT) for a scheme of arrangement to issue bonus preference shares to its equity shareholders. Key details of the scheme include:

The company plans to utilize its general reserves and retained earnings for this issuance. As of December 31, 2023, TVS Motor's free reserves and retained earnings stood at INR 7,574.00 crore, which is sufficient to cover the redemption obligation of the bonus preference shares.

Rationale for Bonus Preference Shares

TVS Motor Company stated that this move aims to reward shareholders by optimally utilizing surplus reserves. The company believes it has built substantial surplus reserves over the years, which are well above its current and likely future business needs. By issuing these preference shares, TVS Motor intends to distribute funds to shareholders while maintaining flexibility in managing its liquidity.

Impact on Shareholders and Debenture Holders

The scheme is designed to benefit equity shareholders without affecting the company's existing non-convertible debenture holders. The preference shares will rank subservient to the non-convertible debentures in the priority of claims.

TVS Motor Company's shares are listed on the BSE Limited and National Stock Exchange of India Limited. The company has received observation letters from both exchanges regarding the scheme.

Investors and stakeholders should note that this scheme is subject to necessary statutory and regulatory approvals. The company will be required to file revised Memorandum and Articles of Association with the Registrar of Companies and make any requisite payments for the enhancement of its Authorized Capital.

As TVS Motor Company moves forward with these strategic decisions, it demonstrates a balance between international growth and shareholder value creation. The completion of the Killwatt GmbH acquisition and the approval of the bonus preference share scheme mark significant milestones for the company.

TVS Motor Company Limited , a leading player in the two and three-wheeler segment, has received approval from the National Company Law Tribunal (NCLT), Chennai Bench, for its Scheme of Arrangement to issue bonus preference shares to existing equity shareholders. The scheme, which aims to reward shareholders by utilizing the company's substantial surplus reserves, has been sanctioned under Sections 230 to 232 of the Companies Act, 2013.

Key Details of the Bonus Issue

Scheme Highlights

The scheme allows TVS Motor to issue fully paid-up preference shares as a bonus to equity shareholders recorded in the company's register of members or depository records on the specified record date. This move is designed to optimize the utilization of the company's surplus reserves, which have accumulated over the years from retained profits.

Financial Implications

TVS Motor plans to fund this bonus issue through its general reserves and retained earnings. As of December 31, 2023, the company's free reserves and retained earnings stood at INR 7,574.00 crores, significantly exceeding the proposed issue size of INR 1,900.35 crores.

Rationale Behind the Move

The company cites several reasons for this strategic decision:

1. Substantial surplus reserves exceeding current and future business needs
2. Strong free cash flow generation capability
3. Optimal utilization of excess funds to reward shareholders
4. Increased flexibility in liquidity management for the company

Listing and Trading

The bonus preference shares will be listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), providing shareholders with a near-cash, tradeable instrument.

Regulatory Compliance

The NCLT order directs TVS Motor to file the revised Memorandum and Articles of Association with the Registrar of Companies. The company is also required to make any necessary payments for the enhancement of its Authorized Capital.

Impact on Shareholders and Debenture Holders

The scheme is designed to benefit equity shareholders without affecting the interests of the company's Non-Convertible Debenture (NCD) holders. The preference shares will rank subservient to the NCDs in the priority of claims, ensuring no economic impact on the NCD holders.

Conclusion

This strategic move by TVS Motor Company demonstrates its commitment to shareholder value creation while maintaining a strong financial position. The bonus preference share issue provides an innovative way to reward shareholders while giving the company flexibility in managing its liquidity. As the scheme moves towards implementation, investors and market watchers will be keen to observe its impact on TVS Motor's stock performance and overall market perception.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research or consult with a financial advisor before making investment decisions.