Equity Share With Differential Rights In Kings
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Tata Motors (TML) announced a significant change for its DVR shareholders. On September 1, 2024, Tata Motors DVR shares were officially suspended from trading as part of a plan to convert them into regular ordinary shares of TML.
Shares issued with differential rights shall not exceed 74% of the total voting power, including voting power in respect of equity shares with differential rights issued at any point of time.
Tata Motors, Gujarat NRE Coke, Pantaloon Retail, Jain Irrigation are some of the Indian companies that have issued DVR shares. E.g.: Tata Motors' DVR shares carry voting rights which are one-tenth of the ordinary equity shares.
Differential Voting Rights or DVR shares offer shareholders low or no voting rights. DVR shares are listed at discounted prices to attract more investors. Dividend yields are usually higher on DVR shares.
The following are the drawbacks of DVR shares. Limited awareness: Investors often miss out on opportunities to invest in DVR shares because they are unaware of their issuance. Reduced voting rights: DVR shareholders typically have fewer voting rights than holders of ordinary equity shares.
Example of DVR Share Issuance In 2008, the renowned brand Tata Motors issued 6.4 crore shares with DVR at Rs. 305/ share to raise funds.
The shares with Differential Voting Rights (DVRs) in a company means those shares that give the holder of the shares the differential rights related to voting, i.e. either more voting rights or less voting rights compared to the ordinary shareholders of the company.
Tata Motors' DVR shares will be delisted on August 30, 2024, increasing its FTSE index weightage, simplifying capital structure, and reducing promoter shareholding by 3.16%.
The company/startup should pass an Ordinary Resolution for the issuance of DVRs in the General Meeting of the shareholders. The voting power of DVRs equity shares should not exceed 74% of the total voting powers. There should be no default in filing the annual returns by the startups for the past three financial years.
