Tuesday, September 10, 2013

What are DVRs?
  • Differential voting rights shares are like ordinary equity shares, but are different in that they give the shareholder fewer voting rights compared with the rights that an ordinary shareholder has
  • Some companies that have issued DVR shares include Tata Motors Ltd, Future Retail Ltd, Jain Irrigation Systems Ltd and Gujarat NRE Coke Ltd. 
  • So while a normal Gujarat NRE Coke shareholder can vote as many times as the number of shares she holds, a DVR shareholder has one voting right on every 100 equity shares held. 
  • The voting rights on a DVR differs from one company to another.

Why are DVRs issued?
  • According to the Companies Bill, issue of such shares cannot exceed 25% of the total issued share capital. 
  • Companies usually issue these shares to stop a hostile takeover and dilution of voting rights. 
  • The issue of DVR shares also helps those investors who do not want control but are just looking at a sizeable investment in a particular company. 
  • DVR shares are also issued to fund large projects.

The disadvantage
  • Since DVR shares are very thinly traded stocks it makes them very illiquid. 
  • So finding buyers may be a little difficult. 

Sample this: on 4 September, a total of 13.95 lakh ordinary shares of Tata Motors were traded on BSE Ltd and only 1.42 lakh DVRs. A total of 3,206 DVR shares of Future Retail were traded on the same day compared with 5.54 lakh of its ordinary shares.


Blog Archive