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Business News/ Markets / Stock Markets/  Tata Motors DVR share price soars on dividend news: What are DVR stocks?
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Tata Motors DVR share price soars on dividend news: What are DVR stocks?

Tata Motors DVR share price: This DVR stock witnessed a strong buying on Monday after the auto giant Tata Motors declared a dividend of 105% for the shareholders. Tata Motors robust Q4 numbers further lifted the performance in the DVR stock.

The main reason for holding DVR shares is to earn higher dividend on them.Premium
The main reason for holding DVR shares is to earn higher dividend on them.

Tata Motors DVR share price records stellar buying on Monday after the automobile flagship of Tata Group delivered a strong fourth-quarter earnings report for FY23. Tata Motors' DVR stock has hit a new 52-week high and is up by nearly 5% on BSE. This DVR shares skyrockets on a 105% dividend good news which Tata Motors will pay to the shareholders.

At the time of writing, Tata Motors DVR share price traded at 274.40 apiece on BSE, soaring by 4.61%. But the stock has also touched a new 52-week high of 274.70 apiece in the early trade.

On the other hand, the regular share price of Tata Motors share price is trading at 532.25 apiece up by 3.2% on BSE. The stock has also touched a new 52-week high of 537.15 apiece earlier today.

On May 12, Tata Motors announced that it will pay 2.10 per ‘A’ Ordinary Share of 2 each (@105%) for the financial year ended March 31, 2023. This will be paid to DVR shares.

The dividend payment is much higher for DVR shareholders than compared to the investors holding regular shares of Tata Motors.

The regular shares investors will receive a final dividend of 2 per share (100%) having a face value of 2 each.

The main reason for holding DVR shares is to earn higher dividends than compared to regular shares. But, there is also a catch, with DVR shares -- these investors have lower voting rights.

DVR shares are differential voting rights (DVR) that are allowed to be issued by a listed company with differential voting and differential dividend rights. DVR shares are different from ordinary shares!

As per Motilal Oswal's blog, firstly DVRs have lower voting rights compared to ordinary shares. These DVR shares are therefore very useful for companies that want to raise money in the market without diluting effective control of the company. Secondly, to compensate for the lower voting rights, these DVR shares are paid a dividend premium of 10-20%. This ideally should make sense for the small and retail shareholders as they normally do not participate in the voting process.

In simple words, shareholders buy DVR shares for giving away part of their voting rights to earn higher dividends.

Tata Motors is the first to issue DVR shares in 2008, which later was followed by other companies as well. But there is still a limited appetite for DVRs and the majority of listed companies do not have DVR shares.

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Published: 15 May 2023, 10:20 AM IST
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