Introduction:
In the dynamic world of the Indian share market, investors have a wide array of investment options to choose from. One such option gaining popularity is DVR shares, also known as Differential Voting Rights shares. This article aims to provide a comprehensive understanding of DVR shares in the Indian share market, their features, benefits, and how they can be a lucrative investment avenue for investors. Read on to explore the world of DVR shares and discover their potential in your investment portfolio.
What are DVR Shares?
DVR shares are a unique class of shares that grant shareholders differential voting rights compared to ordinary shares. Unlike ordinary shares, where each share carries one vote, DVR shares provide shareholders with either fewer or more voting rights than regular shares. This feature allows companies to offer shares to the public while maintaining control in the hands of the promoters or founders.
Features and Types of DVR Shares:
a) Dual-Class DVR Shares: In this type, there are two classes of shares: ordinary shares and DVR shares. Ordinary shares carry higher voting rights, while DVR shares carry lower voting rights. This structure allows promoters to retain control over the company's decision-making processes.
b) Superior Voting Rights DVR Shares: Some companies issue DVR shares that carry higher voting rights than ordinary shares. This enables founders or promoters to maintain a higher level of control over critical decisions, even if their ownership stake is relatively low.
Benefits of Investing in DVR Shares:
a) Promoter Expertise: DVR shares provide an opportunity for investors to align their interests with those of experienced promoters who have a proven track record of success. Investors can benefit from the expertise and vision of the company's founders.
b) Potential for Capital Appreciation: DVR shares may offer significant capital appreciation if the company performs well in the market. As the company's value grows, so does the value of the DVR shares, potentially resulting in higher returns for investors.
c) Voting Rights at Key Junctions: Despite carrying lower voting rights, DVR shareholders still have the power to influence crucial decisions during critical events such as mergers, acquisitions, or major corporate restructuring. This ensures that their interests are protected.
Risks and Considerations:
a) Liquidity: DVR shares may have lower liquidity compared to ordinary shares, making it important for investors to assess the trading volumes and liquidity of the particular DVR shares they intend to invest in.
b) Dilution of Voting Rights: If the company issues additional ordinary shares, the voting rights associated with DVR shares may be further diluted. Investors should carefully consider the potential impact of dilution on their voting power.
Investing in DVR Shares:
a) Research and Analysis: Before investing in DVR shares, thorough research and analysis of the company's fundamentals, financials, and corporate governance practices are crucial. Understanding the company's long-term prospects and growth potential can help make informed investment decisions.
b) Diversification: As with any investment, diversification is key. Investors should consider including DVR shares as part of a well-diversified portfolio, spreading the risk across different asset classes and sectors.
LIST OF DVR SHARE
Here are some of the DVR shares that are listed on the Indian stock market:
Tata Motors
Tata Power
Indian Hotels
L&T
Grasim Industries
Hindalco Industries
Reliance Industries
ONGC
Coal India
NTPC
These shares are issued by companies that want to raise money in the market without diluting effective control of the company. DVR shares offer lower voting rights compared to ordinary shares, but they are paid a dividend premium of 10-20% to compensate for this.
Here are some of the factors to consider before investing in DVR shares:
The company's track record
The dividend yield
The valuation
The risk appetite of the investor
It is important to do your own research before investing in any DVR shares.
Conclusion:
DVR shares offer a unique investment opportunity in the Indian share market, allowing investors to align with the vision of experienced promoters while potentially benefiting from capital appreciation. By understanding the features, benefits, and risks associated with DVR shares, investors can make informed investment decisions that align with their financial goals. Remember to conduct thorough research, seek professional advice if needed, and diversify your portfolio for a well-rounded investment strategy. Embrace the world of DVR shares and unlock their potential in your investment journey.