For ages, the financial planet’s basic concept had been “one share, one vote,” before DVR shares were launched in India in 2000. However, do you know what is dvr shares? and what is the difference between a DVR share and an ordinary share? If your answer is no, let’s discuss these topics in detail.
Table of Contents
What is dvr shares?
The dvr full form in stock market is Differential Voting Rights. DVR shares are similar to an ordinary equity stock but with less voting rights for the stakeholders specially in India. As according to the laws of Indian Government, corporations in India are not permitted to issue equity stocks with higher voting rights.
However, Outside India, DVR stocks may have either a higher or lower voting right than ordinary equity stocks but in India DVR shares only have lower voting rights than ordinary stocks.
These stocks are listed on a stock market and traded in the similar manner as ordinary shares are traded, with the exception that DVR are usually traded at a discount.
Example of dvr share in India
Few Indian firms that have issued DVR shares include Tata Motors, Pantaloon Retail, Jain Irrigation and Gujarat NRE Coke.
Advantages of DVR Share for Investors
- An investor will enjoy all other rights, including bonus shares, right share issue, and so on, Apart from the voting rights.
- When compared to ordinary stocks, DVR shares are normally issued at a discount, requiring less funds for investment.
- DVR shares usually pay a better dividend than common equity stocks.
- DVR shares offer you the chance to earn from a highly profitable commercial enterprise without bothering to stress about the firm’s daily operations.
Advantages of DVR Share for company
Businesses need capital to enhance and succeed in the modern environment. Pioneers and key investors are frequently required to call directly to possible shareholders who are likely to invest in the business.
However, this requires a reduction in authority and a transfer of certain control. DVR shares allow enterprises to maintain their interests while also allowing them to collect the extra money they need to stay stable.
- The firm will determine how much of its power to dilute by issuing DVR shares, while still maintaining ownership and raising funds.
- The company will decide how many voting rights each shareholder will receive and what type of stocks will be issued.
- It protects against unwanted takeover because when equity shares with voting rights are released, there is a risk that a shareholder will acquire a mandate and take authority in the firm ‘s board.
Disadvantages of DVR Shares
- DVR shareholders are not entitled to earn too higher dividend than ordinary shareholders, according to Securities and Exchange Board of India (SEBI) Rules. In the case of the DVR share issue, the dividend differential is not particularly appealing which does not encourage investors
- Furthermore, without voting rights, institutional investors are unwilling to participate in DVR shares.
- Liquidity is also a concern in DVR shares, as HNI and institutions are unwilling to invest.
Difference between DVR Share and Ordinary share
| Base | DVR Share | Ordinary share |
| Voting Right | DVR shareholders get less voting rights than the ordinary share in India. | Normal shareholders enjoy higher voting rights than DVR share. |
| Dividend | DVR shareholders enjoy higher dividend than normal shareholders. | Ordinary shareholders get less dividend than DVR Shareholders. |
| Trading Price | They normally traded at a discounted price. | They are usually traded on market price. |
| Investors | Mostly retail investors invest in DVR share. | Everyone likes to invest in ordinary shares. |
| Investment | DVR shares are mostly suitable for long-term investment. | Investors can do all kinds of investment in Ordinary shares. |
Why should individual investors buy DVR shares?
DVR shares are perfectly suited for long-term investors, especially those who aren’t participating in voting but want a better dividend. DVR shares, like ordinary shares, are listed in the same manner.
DVR shares, on the other hand, are sold at a discount because shareholders have limited voting rights. Investors will benefit from the price difference between DVR and ordinary shares.
Steps from Government to make DVR shares popular
- SEBI has authorized a structure that requires individual companies to issue shares with superior voting rights while prohibiting further offer of stocks with lower voting rights, as per a recent revision.
- The Indian government has also eased start-up regulations, allowing them to have up to 74 percent DVR shares of overall capital, increased from the previous limit of 26 percent. Companies would be able to maintain control when raising equity capital as a result of this step.
Conclusion
DVRs are a positive idea, but unless they can allow for versatile structuring of DVRs, as in the United States, this product is unlikely to take off in a big way in India.
This is all from our side regarding What is dvr shares? and Difference between DVR Share and Ordinary share. Let us know your views in the comment section.
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FAQ About dvr shares in india
Full form of DVR?
The dvr full form in stock market is Differential Voting Rights.
DVR shares in India?
Tata Motors, Pantaloons, Gujarat NRE Coke and Jain Irrigation are major DVR shares in India.
How to buy DVR shares?
DVR shares are also listed on stock exchanges. You can buy DVR shares same the as ordinary shares.
Disadvantages of DVR shares?
The major disadvantages of DVR shares are Liquidity is less and They don't get a too high dividend than normal shares.
List of DVR shares in India?
Major DVR shares are Tata Motors, Pantaloon, Gujarat NRE Coke and Jain Irrigation in India.
