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Saturday, October 29, 2011

What are DVR shares?

DVR stands for ‘Differential voting rights’. DVR share are similar to ordinary shares but differ in voting rights, which are fewer than ordinary shares.
One shall need 10 DVR shares with one-tenth voting rights to cast a single vote. Similarly, 100 DVR shares of one-hundredth voting rights shall be required to cast a single vote.
DVR shares are issued by the company whose management prefers lesser interference from the share holders, and apart from that DVR shares reduce the risk of hostile take-over.
Major DVR shares trading on the Indian bourses are Tata Motor DVR, Pantaloon Retail DVR and Guj NRE Coke DVR. Investors, who don’t want any control but seeking good returns only, too prefer DVR shares as they give more dividend than the ordinary shares.
Companies Act prevents a company from issuing DVR shares exceeding 25% of the total issued share capital.
Who should go for it?
Many retail investors who never turn-up at AGM’s and never cast their votes either in person or through a proxy, may go for DVR shares, as they get more dividend than the ordinary shares.
As these shares trade at a discount to the price of normal shares, investor’s get higher dividend yields.
Only disadvantage is, liquidity of DVR shares is comparatively lower than the normal shares.

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