Difference Between Tata Motors Share vs Tata Motors DVR Share

What are DVR shares?

Differential Voting Rights share is a share that has different amounts of voting rights than normal shares. Normally when you own a share of the company you get voting rights proportionate to the amount of shares you own but in DVR’s these rights are different. Normally there are 2 types of DVR’s:

1. Higher Voting Rights: You get more votes than the number of shares held. For e.g.- 10 votes for 1 share (Not allowed in India).
2. Lower Voting Rights: You get less votes than the number of shares held by you. For e.g.- 1 vote for 10 shares.

Secondly, DVR’s dividend pay-out ratio is higher than that of the normal shares. The shareholder of a DVR share gets more money in case a dividend is declared. For e.g.- Tata Motors declares a dividend of Rs 20 the DVR shareholders will get Rs 21. That is 5% extra.

Difference

Reasons for companies to issue DVR’s

1. Prevention of Hostile Takeovers– The company promoters want to take the decisions and not give control to anyone else.
2. Safeguard dilution of voting rights– The company does not want its voting rights to be distributed among many investors
3. Bringing in Passive strategic investors- Bringing in passive investors who want to invest and sit for long term.

Benefits of DVR’s

1. Higher Dividend Pay-out
2. Shares are offered at a discounted price than normal shares.
3. It is attractive for retail investors who are not interested in voting rights.

By Yash Tanna ( https://www.linkedin.com/in/yash-tanna-6ba368191 )