Tata Motors DVRs vrooming up

Tata Motors DVR is showing a lot of activity today, clocking trades of over 2 lakh in the  morning session itself. The DVR is trading almost 4% up currently at Rs.250 levels, with an intra day high at Rs.258.20.

These Differential Voting Rights or VRS are up on news that it will be added in the benchmark Nifty50 index with effect from April 1. Three other stocks – Aurobindo Pharma, Eicher Motors and Bharti Infratel are also up for the same reason.

DVRs are not bonds, they are like any other equity share but as the name suggests, carries differential voting rights – this means they actually fewer voting rights than equity shares but these lower voting rights are compensated usually with a much higher dividend payout.  The good part about DVRs is that because investors are ready to relinquish some of their voting rights, they get the shares at much discounted rates but higher dividends. This is a great instrument for small retail investors who are not really seeking any voting rights in the company but are rather looking at higher returns via dividends – usually it is a dividend 5% higher than ordinary shares dividend.