DVRs find flavour with investors

Tata Motors, Jain Irrigation, Future Retail and Gujarat NRE Coke DVRs are up 4-10% on the Bombay Stock Exchange.

DVR shares, or shares that have Differential Voting Rights, are in demand and rallied up to 11% on Thursday even though their main shares are trading flat on the bourses. DVRs of all four companies – Tata Motors, Jain Irrigation Systems, Future Retail and Gujarat NRE Coke – are trading higher in the range of 4-10% on the Bombay Stock Exchange (BSE), as compared to less than 1% gain in their main shares and the benchmark index, S&P BSE Sensex.

“Most of the DVRs are quoting at a discount as compared to their main shares and these do carry a preferential dividend option as well. So, all this makes them more attractive to an investor who wants to invest in these counters. This is one of the main reasons why these stocks have seen a steady rise,” says K Subramanayam, assistant vice – president for Institutional Research at Asit C Mehta Securities

A DVR share is just like an ordinary equity share, but with voting fewer rights. Usually, companies issue DVR shares to prevent hostile takeovers and dilution of voting rights. This also helps strategic investors who are looking at a big investment in a company, but with fewer voting rights.

Sharp spike

Globally, DVRs usually trade either at parity or at a marginal discount to their main shares.

Except Tata Motors, the price of all three companies’ DVRs has more than doubled in past three months. Tata Motors DVR has soared 10% to Rs 326 in trade today, also its record high on the BSE. In past three months, it has rallied 70%, as against 14% gain in its main / underlying stock.

Tata Motors DVR has 10% of the ordinary voting rights and higher dividend per share by 5% than the aggregate dividend rate for main shares.

Among the other DVRs, Jain Irrigation Systems has rallied 11% to Rs 76.60, followed by Future Retail (10% at Rs 69) and Gujarat NRE Coke (4% at Rs 7.10) in intra-day trades on BSE.

Outlook

Going ahead, analysts expect the up move in the DVRs to continue but advise investors to be selective while taking a fresh call.

“I think the rally in these stocks can continue on the back of a dramatic improvement in investor sentiment. So, the rise in the days ahead will ensure that the premium gap between the DVRs and the main shares starts to narrow,” Subramanayam says.

Adding: “Among the lot, Tata Motor’s DVR looks attractive at the current levels. Jain Irrigation is showing strength due to promise by the Modi government on agriculture / irrigation related reforms. However, I would be a little wary about this DVR at the current levels. Future Retail and Gujarat NRE Coke can be avoided for now.”

G. Chokkalingam, founder and managing director, Equinomics Research and Advisory also feels that the discount to the main shares has attracted investors to the DVRs, who are fining valuation comfort in these counters now.

“People are trying to find valuation shelter under these stocks now. I am comfortable buying Tata Motors DVR at the current levels,” he says.