Tata Motors DVR’s Discount To Ordinary Shares Highest In 15 Months

The ordinary shares of Tata Motors have been trading 58 percent higher that the company’s differential voting rights (DVR) shares, bringing the gap between the two to its highest in 15 months. On average in the last 15 months, the ordinary shares have traded at a 45 percent premium to the DVR shares.

What’s prompted the widening gap? Foreign institutional investors who have been buying Tata Motors' shares in large quantities prefer the company’s ordinary shares over DVR shares and this has helped widen the gap over the last few months.

But will this gap narrow? Parag Thakkar of HDFC Securities who is positive on the prospects of the company says the DVR shares offer greater to investors as one can buy the same business at a substantial discount without voting rights. He adds that ordinary shares are available at 4.5 times enterprise (EV) to EBITDA whereas DVR shares trade at 3 times, which reduces the risk for investors. He expects this to lead to a reduction in the price difference between the two.

But are investors buying that? Not yet.