Tata Motors DVR surges 14% on back of heavy volumes, nears 52-week high

Shares of Tata Motors (DVR) rallied 14 per cent to Rs 163.70 on the National Stock Exchange (NSE) in intra-day trade on Wednesday on the back of heavy volumes.  The stock is trading close to its 52-week high level of Rs 169.75 touched on June 15, 2021.

Nearly 13 million shares, representing 2.5 per cent of the total equity of Tata Motors (DVR) had changed hands on the NSE and BSE till 02:51 pm. Currently, the stock is trading at Rs 157.40, up 10 per cent against its Tuesday closing price of Rs 143.15. In comparison, the Nifty50 index was up 0.86 per cent at 17,529 points.

At the same time, shares of Tata Motors were up 2 per cent at Rs 311.80, after hitting a high of Rs 312.45 on the NSE in intra-day deals. The counter also witnessed huge trading volumes, with a combined around 21 million equity shares having changed hands on the NSE and BSE so far.

As per June 30, 2021, shareholding pattern data, ace investor Rakesh Radheshyam Jhunjhunwala held a 1.97 per cent stake in Tata Motors (DVR) and 1.15 per cent holding in Tata Motors.

Differential Voting Rights (DVR) shares are shares that are permitted to be issued with differential voting and differential dividend rights. DVR shares are different from ordinary shares in two distinct ways. Firstly, they offer lower voting rights compared to ordinary shares. These DVR shares are therefore very useful for companies that want to raise money in the market without diluting effective control of the company. Secondly, to compensate for the lower voting rights, these DVR shares are paid a dividend premium of 10-20 per cent. This ideally should make sense for the small and retail shareholders as they normally do not participate in the voting process.

Giving away part of their voting rights for higher dividends is a good ploy for these shareholders. Additionally, since DVRs have always been quoted at a discount of 30-40 per cent in the Indian context, the higher dividend pay-out makes the DVR a lot more attractive in terms of dividend yields, the brokerage firm Motilal Oswal Securities said in a blog post.

Despite today’s run-up, in the past three months, the stock of Tata Motors (down 11 per cent) and Tata Motors (DVR) (down 3 per cent) have underperformed the Nifty50 index, which has rallied 11 per cent during the same period.

Jaguar Land Rover’s (JLR’s) order book remains strong at 110,000 units, but wholesales are unable to meet demand. During the April-June quarter (Q1FY22), wholesales (ex CJLR) were low at 84,000 units, and Q2 guidance was lower at 65,000 units. Management hopes for an improvement to 90,000 units in Q3 and a further increase in Q4, led by a pick-up in semiconductor supplies.

"Near-term stock catalysts include better standalone volumes, a probable tie-up of JLR with larger OEMs for licensing of EV platform and the possibility of partial divestments of India PV division. In addition, JLR’s sales upcycle is expected from H2 onward," analysts at Emkay Global Financial Services said in the June quarter result update.

The JLR management continues to raise concerns over the shortage of semiconductor chips in the near term that would hit wholesales by 28-30 per cent in H1FY22 due to the resultant supply constraints. However, the management indicated that the availability of semiconductor chips is likely to improve gradually from H2FY22 onwards, as the global capacity of semiconductor chips is expected to increase. Retail sales and orders remain robust, which is likely to keep wholesales strong, as the issue of semiconductor chip shortage is set to improve gradually from Q3FY22 onwards, the brokerage firm Sharekhan said.