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Shares of Tata Motors with differential voting rights (DVR) rose 3.7 per cent to close at Rs 193.30 on Friday, with investors wanting to buy these on the judgement that the discount to the company’s ordinary shares was steep.
The gap between the DVR shares and ordinary shares narrowed to less than 50 per cent on Friday for a second day in a row. The discount was 56 per cent in August. On Friday, the Tata Motors DVR touched a 52-week intra-day high at Rs 196.20, up 53.5 per cent from the 52-week low on August 7.
“The DVR price has been rising on account of the widening gap between the DVR and the main stock price. It is catching up after having underperformed the main stock, which has been gaining on the back of improved JLR (Jaguar Land Rover, the British arm) volumes,” said Arun Agarwal, auto analyst at Kotak Securities.
Tata Motors’ ordinary shares rose 3.6 per cent to close at a 52-week high on Friday at Rs 389.50. They ended the day at Rs 385.15 a share. Analysts said the DVR shares had been range-bound for a year and was now ripe for a sharp uptake. “We must look at how the DVR had been doing before August. It had been very range-bound and the discount was way too high compared to the stock, which has a lot of buying interest,” said Siddharth Bhamre, head of derivatives, Angel Broking.
Some analysts feel investors should not get swayed by the decrease in discount, owing to the DVR’s volatile nature. “Typically, a DVR has low promoter holding and high institutional investor interest, which makes its movements very volatile. Since its listing in 2008, it has had a very volatile history. So, investors should not get carried away by the reduction in the discount,” said Surjit Arora, research analyst, institutional equities, Prabhudas Lilladher.
He added that the DVR’s performance was closely related to that of the main stock and would reflect its movements. However, the discount between the two could see heavy fluctuations.
For now, analysts said with the discount narrowing, the interest among investors for owning the DVR had increased and would continue as long as the main stock continued to perform.
