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. According to Indian Company Law, 1) the shares with Differential Rights shall not exceed 26 % of the total post-issue paid up Equity Share Capital including equity shares with differential rights issued at any point of time (voting rights ratio should range from 2:1 to 10:1 only), 2) Issuing company to have consistent track record of distributable profits for last 3 years. 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.
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. According to Indian Company Law, 1) the shares with Differential Rights shall not exceed 26 % of the total post-issue paid up Equity Share Capital including equity shares with differential rights issued at any point of time (voting rights ratio should range from 2:1 to 10:1 only), 2) Issuing company to have consistent track record of distributable profits for last 3 years. 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 DVR – The 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 Tata Motor , 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.
After Tata Motor , 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's | Tata Motors DVR | Guj. NRE Coke DVR | Pantaloon Retail DVR |
|---|---|---|---|
| Total number of DVR Shares | 6,41,76,680 | 5,07,14,292 | 1,59,29,152 |
| Promoters Holdings | 2,32,64,396 - 36.26 % | 2,41,01,468 - 47.51 % | 74,07,693 - 46.53 % |
| Number of Shares Holders | 16,700 | 1,53,382 | 18,998 |
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
GET MORE ON TATA MOTOR STOCK/DVR - CLICK HERE
