According to analysts, the difference between these two shares may go down to around 10 percent as compared to the present 28 percent which has put the auto industry into a tizzy.
Tata Motors has been included with differential voting rights or DVR in the MSCI India Index and this could lead to a discount in its value to the ordinary shares of Tata Motors going down in the near future. The DVR shares of Tata Motors closed at around INR 288 on Monday which represented a 28% discount to the main shares which are traded at INR 400. Analysts are forecasting a further drop in this difference to a low 10% in the next few months. Shares with DVRs always trade at discounts to normal shares globally since they hold lower voting powers as well.
Yet, they always garner higher dividends as observed till date. DVR shareholders in India are entitled to possess 1/10th of the total voting rights and they also receive 5% of added divided as compared to ordinary share investors. This discount between DVR and ordinary shares has been between 25-50% over the last few years for Tata Motors. The discount will narrow down over the next few years post the inclusion in the MSCI India Index and higher liquidity will bring down the discount. DVR shares will possess 0.5% force in the Index from the 1st of December. This entire stock should draw around INR 640 crore post the change being made effective.
This is a development that has certainly got automobile investors thinking. According to several experts, the DVR shares can fetch higher dividends as compared to regular shares and are suitable for retail investors who are not really bothered with voting rights. As per other reports, an investment of INR 1 lakh in Tata Motors’ DVR shares is now worth INR 1.79 lakh inclusive of dividend in comparison to INR 1.49 lakh for 1 lakh put into ordinary Tata Motors shares.