Stock Prices Displayed at a Securities Firm in Tokyo, Japan (Photographer: Tomohiro Ohsumi/Bloomberg)

For Third Year In A Row, Midcap DVRs Outperform Ordinary Shares

Shares with differential voting rights, or DVRs, of three midcap companies have outperformed their respective ordinary shares in 2016. For the third consecutive year, DVRs of Future Enterprises, Gujarat NRE Coke and Jain Irrigation have churned out better returns than their ordinary shares.

Future Enterprises’ DVRs, which have been trading barely at any discount to its ordinary shares, have returned 22.8 percent gains in 2016 compared to losses of 15.4 percent in ordinary shares.

Debt-laden Gujarat NRE Coke’s DVRs have been trading at an 8 percent discount to ordinary shares. The company’s DVRs have clocked a 12.4 percent return for the year as compared to a loss of 12.85 percent in ordinary shares.

Jain Irrigation DVRs too outperformed ordinary shares, though by a thin margin. Its DVRs jumped 31 percent in 2016 as against a 27 percent gain in ordinary shares.

The only exception is Tata Motors. The automaker’s DVRs have fetched a 4 percent return as compared to 21 percent gains registered by its ordinary shares.

What’s fuelling the DVR rally? Analysts say the demand for midcap DVRs is most likely coming from retail investors, who are more interested in earning a little extra from a stock in exchange for sacrificing a few voting rights they rarely exercise.

Some analysts say Tata Motors’ ordinary shares have done better because of interest from foreign portfolio investors in the company’s stock.

BloombergQuint