Widening discount puts spotlight on DVRs

DVRs of Tata Motors and Jain Irrigation have risen by about 8% and 12% since March

Shares with differential voting rights (DVR) are seeing heightened investor interest after a widening of discount between these and ordinary ones in recent months.

DVR shares of Tata Motors and Jain Irrigation have risen eight per cent and 12 per cent, respectively, since March, outperforming ordinary ones. Experts said DVR shares had started to pip after the discount between the two reached 50 per cent.

On Wednesday, the Tata Motors’ DVR touched a year high at Rs 221 a share, up 4.5 per cent on previous close. Shares gained 2.6 per cent to Rs 413.6.

“The discount at which Tata Motors’ and Jain Irrigation’s DVR shares are available is making these attractive. The discounts should ideally not be more than 40 per cent,” said Mehraboon Jamshed Irani,  principal and head, Nirmal Bang.

The gap in the Tata Motors’ scrip was 53 per cent on Wednesday, while Jain’s was 47 per cent.

DVR shares generally trade at a discount to the main stock as these have no voting rights but pay higher dividends. According to analysts, globally, shares with DVRs trade at a 30-35 per cent discount compared to ordinary shares.

Tata Motors ordinary shares have risen 55 per cent in a year, while the discount gaps with DVR shares have remained between 45 and 60 per cent.

Jain’s ordinary shares have risen 8.6 per cent and the discount has fluctuated between 43 per cent and 52 per cent in a year.

“Ideally the DVR shares trade at a premium to parity to the underline stock in global market,” said Yogesh Radke, head of quantitative research, Edelweiss Securities.