Tata Motors' DVR shares in low gear

The trading of Tata Motors’ shares with differential voting rights (DVR) has come to a standstill on the Bombay Stock Exchange (BSE) in the last one month. After February 3, only one DVR share of the auto maker was traded on BSE, while nominal trade was reported on the National Stock Exchange (NSE).

In February, only 41 DVR shares – a class of shares that carry one-tenth voting rights – have either been sold or bought through the bourses. On BSE, Tata Motors’ DVR shares closed at Rs 280 on February 27. While on NSE, they closed at Rs 158 after a trade of only 16 shares on March 2, a slide of over 48 per cent from the issue price of Rs 305.  On the other hand, the recently-listed DVR shares of Pantaloon Retail have attracted more buyers and sellers, though there was a drastic fall in their prices. On February 19, a record 520,000 Pantaloon DVRs were traded in the market. About 41,300 shares traded On Wednesday.
 

NEAR HALT Tata Motors' last five DVR trade
Trade Date	Quantity BSE	Quantity NSE
Mar-2	Nil	16
Feb-27	1	2
Feb-25	Nil	3
Feb-24	Nil	9
Feb-19	Nil	5

“Lack of awareness among investors and the ongoing liquidity crunch are the basic reasons for the low volume trade of DVR shares. The volume of ordinary shares traded also fell because of the same reason. Moreover, investors are concerned about the financial position of Tata Motors, especially after the acquisition of Jaguar and Land Rover (JLR)  and the reported fall in sales. In Western markets, shares having differential voting rights are popular instruments since investors are more aware,” said Rajeev Dalal, Partner (Transaction Advisory Services), Ernst & Young.

Tata Motors had witnessed a fall of almost 9 per cent in sales at 334,135 units for the nine months ended December 31, 2008, according to Society of Indian Automobile Manufacturers. This subdued performance was reflected when Tata Motors, India’s largest auto company by revenue, posted a net loss of Rs 263 crore in its third quarter results for 2008-09. Total demand for its vehicles (commercial and passenger cars) in domestic as well as foreign markets fell by 31.7 per cent to 98,670 units as against 144,608 units sold in the corresponding quarter of the previous year.

Tata Motors had issued 64.17 million DVR shares as a part of its plan to raise Rs 4,145 crore through a rights issue for repaying the loan taken for JLR’s buy.

Of the total issue, about 54.08 million DVR shares, or 84.27 per cent, are held by the promoters, while the public holds over 10 million DVR shares.