Shares of the Kishore Biyani-promoted Pantaloon Retail with differential voting rights (DVR) have surprised the market by gaining close to 35 per cent in two trading sessions, compared to the seven per cent gain in underlying shares.
According to market experts, most new investors entering the Pantaloon counter had preferred DVRs over ordinary shares due to the 40 per cent gap between the two. Further, the company’s decision to increase voting rights in February for the shares with DVR had further boosted its appeal among investors.
Shares of Pantaloon Retail closed on Wednesday at Rs 183, down 2.53 per cent, while the DVRs, also called Class-B shares, ended at Rs 135.45, up 14.21 per cent. After the sharp rise, the gap between the two has narrowed from 40 per cent to 26 per cent.
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Retail (DVR)
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Data compiled by BS Research Bureau
“Discount on the DVR is a factor of sentiment. At present, the market is bullish on Pantaloon Retail, which has resulted in a sharp rise in the DVR and narrowing of the gap,” said independent stock market analyst S P Tulsian. Added Deven Choksey, managing director at KR Choksey Shares & Securities, “Investors who are taking fresh positions in the Pantaloon counter on hopes the change in management will help the company, are preferring the DVR route due to the attractive discount.”
On Monday, Aditya Birla Nuvo decided to pay Rs 800 crore for buying a controlling stake in Pantaloon’s clothing brand and retail chain formats, which will be demerged from Pantaloon Retail. The move will help Pantaloon Retail pare debt by Rs 1,600 crore.
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In February, the company passed a resolution to alter voting rights available to holders of DVRs. Under the new scheme, three votes will be granted for every four Class B shares. Earlier, 10 Class B shareholders had the right to only one vote. The dividend on DVRs was also reduced from five per cent to two per
According to experts, increased voting rights could see more institutional investor participation in the DVRs.
Shareholding data for the quarter ended March shows institutional investor holding in the DVRs was just seven per cent, while that in ordinary shares was 37 per cent. At present, the major activity continues to remain in the ordinary shares due to the high float stock. The Pantaloon Retail counter clocked a turnover of Rs 50 crore on Wednesday, while DVR witnessed just Rs 4 crore worth of trades.