The differential voting rights shares of Jain Irrigation Systems hit the lower circuit on Friday when the scrip fell by around 20 per cent to end the day at Rs 61.20 per share. This is the second consecutive day that it is hitting the lower circuit, having declined 20 per cent on Thursday as well to end the day at Rs 76.40.
The DVR of Jain Irrigation Systems was listed on November 30, at Rs 95.45.
A DVR or Differential Voting Right (DVR) share of a company is an equity share which offers lower voting rights, but higher dividend to its shareholders. Due to this, these shares are listed at a discount to the parent share of the company.
Previous move
Earlier, the company had issued DVR shares as bonus shares to existing shareholders. The bonus ratio was 1:20 (1 DVR share for every 20 ordinary existing shares). Ten DVR shares have the same voting right as 1 ordinary share.
“The shares have only been trading for three days now. Therefore, the share is trying to find its bottom from where it can pick up. Investors are looking to exit their investments,” said Mr. Rikesh Parikh, Vice-President — Equities, Motilal Oswal Securities.
These investors must be exiting their investments leading to a drop in the price of the DVR shares, said analysts. The parent share of Jain Irrigation Systems ended the day on Friday at Rs 120.35, up by 1.1 per cent from its previous close.
Generally, DVR shares in India list at around 50 per cent discount to the parent share of the company. The global average for the same is around 10-15 per cent of the parent share. The concept of differential voting rights shares is relatively new in India, which is why the steep difference in the DVR share prices in comparison with the parent share, say analysts.
“The acceptance among shareholders is just not there, nor is there enough understanding about these shares,” added Mr Parikh.
Among the other, Tata Motors' DVR shares are trading at a discount of 47 per cent to the underlying, at Rs 100.95 a share. The parent share of the company ended the day at Rs 191.25. Pantaloon Retail (India)'s parent share closed at Rs 213.90, while the DVR closed at a 40 per cent discount, at Rs 128 on Friday. The DVR of Gujarat NRE Coke (Rs 14.20) is trading at a 23 per cent discount to its parent share (Rs 18.60).