If you invest in the stock market, then you must have heard about Tata motor DVR shares and the thought must have come in your mind that when the company is one then why two types of its shares are listed. Actually, there can be many types of company shares in the stock market and DVR share is one of them. Now the question remains that what are DVR shares, why does the company issue them and how do we investors benefit from them. We have tried to answer all these questions in our article.
What is a DVR share?
Full form of DVR share is: Differential voting rights share.
DVRs are such shares which give its shareholders more or less voting rights than the common shareholders. Whenever you buy shares of a company, you become a shareholder in that company according to the shares purchased. As a shareholder, whenever the company takes any management decision, you can vote in favor or against it. DVR share can increase or decrease your voting rights. According to SEBI, no company can issue shares with more voting rights, hence only shares with less voting rights are issued in India. Generally, the price of these shares is lower than the ordinary shares and in these, the investor is offered more dividend than the ordinary shares.
Why does the company issue DVR shares?
The main reason behind issuing DVR shares by the company is to retain its stake in the promoters management. If the company issues ordinary shares, then the shareholders have equal rights to vote in the management of the company, due to which if the shareholders do not vote in favor of any decision of the company, then they may have to put that decision on hold. Whereas in the case of DVR shares, the shareholders have less voting rights, such as there is only one voting right for 10 DVR shares, due to which the company promoters also raise money from the public in exchange for shares and their stake does not decrease. . In exchange for less voting rights, the investor gets some benefits like higher dividends and buying shares at discounted or lower rates. According to the Companies Act 2013, if a business has reported profit for 3 consecutive years then it can issue DVR shares.
Why should one invest in DVR share?
Investing in DVR shares is beneficial for those people who have no interest in the management of the company and who only want to earn profit by investing in shares. It is also suitable for those people who want to invest in the shares of the company but have less capital. DVR shares usually trade at a discount, meaning their price is lower than ordinary shares. Through this, you can invest in the shares of your favorite company even with less capital. People investing in DVR shares do not have to face the hassle of taking part in the company’s management and its voting. Apart from this, the dividend received on DVR shares is higher than that on ordinary shares.
Difference between DVR share and ordinary share
Ordinary shares are those in which, after investing, the investor becomes a partner in the company, that is, he is considered to have an equal stake in the company’s management, voting and expressing his opinion. On the other hand, DVR share holders have less voting rights in company management decision making.
Usually DVR shares are offered at a discount rate, which means investors can invest in them even if they have less capital. To invest in normal or ordinary shares, the investor must have full capital.
In exchange for reduced voting rights, DVR shareholders are offered a higher dividend. This dividend is more than that of ordinary shareholders.
How to buy DVR share?
You can buy DVR shares from the stock exchange just like ordinary shares. For this you must have a demat and trading account. Once you have a trading account, you can go to your trading platform and search for the DVR shares you want to buy.
DVR share in India
Tata Motors was the first to issue its DVR shares in India. After this, three more companies namely: Stampede Capital DVR, Jain irrigation systems DVR and Future Enterprises have listed their DVR shares in the stock exchange. Apart from these four, no other company offers its DVR shares.
Conclusion
DVR shares are issued by the company promoter to avoid dilution of his stake and to maintain his hold in the management. Due to less voting rights, investors also get some benefits in these. It is also worth noting here that most of the investors do not have any interest in the management of the company and they invest and trade in shares only to earn profit. For these investors, DVR shares can be a better option than ordinary shares.
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