Investor interest in Tata Motors DVR rises

DVR trading at more than 50% discount to main stock

Tata Motors shares with differential voting rights have touched a 52-week high for the second consecutive session on Wednesday. Investors have been increasing exposure to the Tata Motors DVR as the discount between the DVR and the main company stock has been widening.

"The steep discount at which the DVR is available is making it attractive. This is the only explanation for the DVR price moving up," said Mehraboon Jamshed Irani, principal and head (PCG), Nirmal Bang. The shares of the Tata Motors DVR as on Wednesday was trading at a 53%. The discount gap between the main stock and the DVR has been increasing since March this year.

Tata Motors' DVR on Wednesday rose about 4.5% to touch a 52-week high of Rs 220 per share. Tata Motors gained about 2.6% to trade at Rs 413.60.

The gap was at its narrowest, 43-45%, in August last year. Since then, the gap has fluctuated widely between 52 and 47%. The discount gap seen on Wednesday was at its highest since June last year.

According to analysts globally the ideal gap between a DVR and its stock is 30-35%. In India, DVRs are known to trade at a discount of 40-45%. Market experts believe that there is still more upside left in the DVR before the discount gap narrows. Besides, the strong upmove in the Tata Motors stocks ahead of the elections is expected to keep the gap elevated going forward, analysts said.