Tata Motors rights issue finds more takers for DVRs

Tata Motors, the largest truck maker, 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. According to the data available with exchanges, Tata Motors' DVR was subscribed 95 per cent on Thursday evening against 83 per cent for the ordinary shares of the company.

The issue that opened on April 17 will close on Saturday. Friday being a holiday and Saturday being a non working day for exchanges, Thursday was the last day for all the investors making online application using the ASBA (application supported by blocked amount) facility. ASBA is also mandatory for all applications for shares worth above Rs 2 lakh.

Retail investors with application for shares worth up to Rs 2 lakh also have an option to physically submit their forms at banks. For them, the last day would be Saturday. Subscription figures of such applications are available only with the registrar and are not available with exchanges. However, usually, such applications are in large volumes and it would easily make the issue for DVRs oversubscribed and that for ordinary shares fully subscribed.

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 Thursday, Tata Motors DVR closed at Rs 311, about 39 per cent discount to ordinary shares closing at Rs 508 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-10th 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 high as 84.27 per cent. However, gradually they brought their holding down to a negligible less than one per cent 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 per cent discount to their previous day closing. On Thursday, these shares closed at Rs 508 and Rs 311 a share on the BSE bringing down the discount to 11 per cent and 13 per cent, respectively.