What Are Differential Voting Rights (DVR) shares?

DVR or differential voting rights shares are like ordinary equity shares but with differential voting rights. Shares can have higher or lower voting rights as compared to ordinary equity shares. Since Indian regulations do not permit companies to issue equity shares with higher voting rights Indian DVR shares provide for lower voting rights as compared to ordinary equity shares.

DVR shares are highly illiquid, they do not trade in high volumes as compared to ordinary shares.

Why would a company issue DVR Shares?

1. Prevention of a hostile takeover, different from the company's interest
2. It also helps strategic investors who do not want control but are looking at a reasonably big investment in a company due to its low price and high dividend.

When Tata Motors had declared its dividend in 2006, it gave the DVR holders a dividend of six per cent and the ordinary shareholders one per cent. For example, the Tata Motors DVR shares were trading at Rs 689.80 on the National Stock Exchange (NSE) and the ordinary ones at Rs 1,255.75 on Wednesday.