Tata Motors rights issue finds more takers for DVRs

Tata Motors is finding more takers for its differentiated voting rights (DVRs) shares than ordinary shares in its ongoing rights issue to raise Rs 7,500 crore.

As per data available with exchanges, Tata Motors DVR was subscribed 54% on Wednesday evening against 38% subscription for the ordinary shares of the company. The issue that opened on 17 April will close on Friday.

In February S&P BSE Indices announced rules for considering DVRs in indexes including benchmark BSE index. This could narrow DVRs shares discount to regular shares. On Wednesday , Tata Motors DVR closed at Rs 317.9, about 39% discount to ordinary shares closing at Rs 519.9 on the exchange.

“Once the DVR is included in index then it may attract portfolio money as there are several fund managers whose performance is benchmarked against these indices," says Alok Ranjan, head portfolio management services at domestic brokerage and financial services firm Way2wealth.

Tata Motors DVR shares come at one-tenth voting rights to the ordinary shares but it provides 500 basis points higher dividend to the ordinary shares. Such shares are valued by non-promoter entities and individuals who are not looking at control over management.

These shares did not find enough takers when it was first introduced in late 2008 amidst financial meltdown and promoters had to bail out by subscribing as much as 84.27%. But gradually they brought their holding down to less than 1% as the DVRs started finding takers in the market.

The company had fixed the offer price for the issues at Rs 450 for ordinary shares and Rs 271 for DVRs respectively on March 25, offering a 15 and 14% discount to their previous day closing. The discounts have now come down to 13% for ordinary shares and and gone up to 15% for DVRs on Wednesday’s respective closing price of Rs 519.9 and Rs 317.9 on Bombay Stock Exchange. This also shows that DVRs have fallen more on the exchange than ordinary shares since the issue was announced.

The company is offering six fully paid-up shares for every 109 ordinary or DVRs shares held by existing shareholders as per the book closure date 8 April.

“Such issues get maximum subscription on the last day as investors try to minimise lock in period for their money till the shares are allotted to them,” said a lead manager to the issue. “We expect both ordinary and DVRs shares on offer to be fully subscribed,” he said requesting not to be identified as the issue is still open.