Tuesday, December 14, 2010

Always Buy DVR shares (Differential Voting Rights) !!!

DVR shares are Differential Voting Rights – which is just like ordinary Equity shares, paying dividends as ordinary equity shares, has voting rights. But the difference is that these DVR shares carry lower Voting Rights and higher Dividends.
The class “A” DVR shares carries 1/10th of voting rights i.e. 1 voting Right for every 10 DVR shares held. The class “A” DVR shares offers 5% more Dividend than ordinary equity shares.

Because of such reasons, DVR shares normally trade at 10% to 15 % discount to the ordinary equity shares of that company. The Companies Act allows companies to issue differential voting rights upto 25 % of its total issued share capital with the conditions that it should have distributable profits & no default in filing annual returns in past 3 years.

We hold Equity shares in small quantities and we do not attend Annual General Meetings of the companies, also our vote does not have any importance or relevance to these companies. So, in order to let go my voting rights (which I normally don’t use) I get paid with 5% extra dividends, my return on investment goes up, Dividend yield goes up, all that by just letting away my voting rights go, that’s it….. 

Globally DVRS trade between 10 % - 15 % discount to its Equity shares depending upon the extra dividend offered to DVR, for e.g. If a company's equity shares trades at Rs.100/sh and dividend declared is Rs.10/sh and its DVR holders gets Rs.10.50 as dividend (Rs.0.50 extra because he let go its voting rights) means that its DVR should be trading at Rs.89.50/share. But since the Indian audiences are not aware about this beautiful instrument, DVR trends to trade at 40 % - 50 % discount to its Equity shares. One should buy DVR at 40 % - 45 % discount to its EQ SH & Sell when DVR comes near to 10 % - 15 % discount to its EQ SH.

So, friends it makes sense to buy DVR shares.

Tata Motors DVRThe first company to come with an DVR, Tata Motors DVR trades at 30 % discount to its equity shares market price. Normally it should trade at 10% - 15% discount to its equity shares. Globally DVR’s are traded at 10% discount to its equity shares, but see the ignorance of us Indian investors who buys the shares which have No Fundamentals but fails to understand such a beautiful instrument. They feel that DVR’s are complicated & offers lower rights, but ideally he should buy such shares if the company offering DVR share is good in fundamentals.

TATA MOTORS offered 6.42 cr DVR share at Rs.295 which was at 10% discount to its equity shares price of Rs.330 on Nov 5th 2008 to raise Rs.1896.85 cr with 1 voting right for every 10 DVR shares held along with 5 % extra dividend over ordinary shares. The class “A” DVR share is 15.8% of total share capital of Tata Motors. Tata Sons holds 34.25% stake.
After Tatamotor , Pantaloon Retail India & Gujarat NRE Coke have also issued its DVR shares.
Pantaloon Retail India issued 1 bonus share with different voting & dividend rights for every 10 held in 2008. the new class is called "B" shares with 5% more dividend than ordinary shares & would have 1 vote for 10 shares held.
Gujarat NRE Coke issued DVR in May 2010 as bonus shares in ratio of 1 DVR bonus shares for every 10 Equity shares held, here the DVR bonus shares would hold 1 voting right to 100 shares held.  

DVR'sTata Motors DVRGuj NRE Coke DVRPantaloon Retail DVR
Total number of DVR Shares6,41,76,6805,07,14,2921,59,29,152
Promoters Holdings2,32,64,396 - 36.26 %2,41,01,468 - 47.51 %74,07,693 - 46.53 %
Number of Shares Holders16,7001,53,38218,998

SOME BRIEF ABOUT COMPANIES ISSUED DVR's GLOBALLY

COMPANY Country Voting rights (ord) Per Share DVR Extra Dividend Business
BMW Germany 1 N0€ 0.02 Automobile
Bombardier Canada 10 1 $0.001563 Aircraft & Train Mfg
Brown Forman US 1 No--- Alcohol
Comcast Corp US 1 No--- Media
Fiat Italy 1 Sp.cases € 0.31 Automobile
Forest City US 10 1 ---- Real Estate
Haverty Furniture US 10 1 5 % of FV Others
Hubbell Inc US 20 1 ----
Electrical s.
Lennar Corp US 10 1 ---- Real Estate
News Corp US 10 1 ---- Media
Samsung Electronics Korea 1 No---- Electronics
Telephone & Data System US 1 No---- Telecom
Viacom US 1 No---- Media
Volkswagen Germany 1 No€ 0.06 Automobile
Guj.NRE Coke India 1 1/10th ---- Metals
Tata Motors India 1 1/10th Re 0.50 Automobile
Pantaloon Retail India 1 1/10th Re 0.10 Retail

GET MORE ON DVR - CLICK HERE

18 comments :

  1. Thanks a lot Bhavik Shah for this useful information. Ankit Dalal

    ReplyDelete
  2. Good piece of information keep updating.Thanks

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  3. very good information....so it will go up certainly..

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  4. what is class B DVR Share? difference wrt to class A DVR

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  5. HI Killivalavan,
    Firstly Wish You and your loved ones a Very Happy New Year 2012.

    Class B DVR are Class A DVR have only two difference that is the dividend rate & voting rights.
    If Class A DVR has 10 % extra dividend from that of normal equity but the voting rights will be 10:1 i.e 10 DVR will have 1 voting right.
    Similarly, Classs be DVR will have 15 % extra dividend from that of normal equity but the voting rights will be 20:1 i.e 20 DVR will have 1 voting right.
    Normally, Class B is not common in Indian markets.
    I hope this was clear.

    BHAVIKK SHAH

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  6. thanks very much for the valuable information

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  7. In Tata Motor DVR, they are giving only additional dividend of 5% but the voting rights will be 10:1 i.e 10 DVR will have 1 voting right

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  8. HI Trivedisu,
    Thanks for commenting on the post and your visit.
    Yes you are right TATA MOTORS gives 5 % extra dividend on DVR with the 10:1 voting right i.e. 10 DVR = 1 Vote

    DO VISIT AGAIN. Add ur self up mail me for the blog post to ur inbox.

    ReplyDelete
  9. what is the future of Janin irrigation dvr . it is quoting near its all time low. is it worth investing for long term. need your valued honest opinion.
    thanks in advance
    -pruthvi

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  10. HI Pruthvi

    Firstly Thanks for visiting and commenting on my blog, I still believe that Jain has good fundamentals and I will buy its dvr at 40-45 as in my view its Fair Value comes at Rs.72

    DO visit again and send me your email id to get my post in your inbox. (Dont give your Id here mail me at montyuu@yahoo.com)

    ReplyDelete
  11. very usefull information indeed.

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  12. Hi Bhavik,
    Can you let me DVR shares curretnly available with BSE & NSE?

    Also will it be fine to drop you an email?

    Thanks,
    Divyesh Shah

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  13. Hi Divyesh Shah (Div)
    Your answer is there on this post see the box above the List of DVRs listed world wide.
    And you are always welcome , do drop in your request for free blog post...
    Do visit again

    Thanks
    Bhavikk shah

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  14. Hi Bhavikk,
    Thanks for quick response, list above mentioned looks a bit old, considering this there are only 4 scripts having DVR?

    Thanks,
    Div

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  15. HI DIVYESH,
    There are only DVR available and listed for TATA MOTORs, PANTALOON RETAIL, GUJ NRE COKE, AND NOW JAIN IRRIGATION ...to confirm just type DVR on nseindia.com on get quote section !!

    Do visit again,
    Thanks
    Bhavikk shah

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  16. Whats your view about Gujarat NRE coke DVR at current market price can buy ? and i have one more question if the company declares bonus or stock split for equity shares will the DVR also get same benefit ??

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  17. i am holding shares of guj nre coke. Is it advisable to convert these shares in DVR?

    ReplyDelete
  18. Hi Anonmous,
    It would more nice if I had a your good Name,
    Anyways try and shift from GUJ NRE into TATA MOTOR DVR

    ReplyDelete

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