After Wednesday’s statement from the BSE that it would consider including shares with differential voting rights (DVRs) to its main indices, investors’ interest in four listed DVRs went up.

Tata Motors DVR zooms Since DVR shareholders surrender the voting rights on their shares, companies compensate them with a higher dividend that paid to a common equity shareholder. Promoters issue DVRs to raise funds without diluting their voting capital.

DVRs generally trade at a discount to the common equity share on stock exchanges.

Tata Motors DVR, the most liquid of the four, gained 6.62 per cent to close at ₹373.70 while the common equity share lost over 1 per cent to close at ₹576.70.

Future Retail’s DVR moved up 2.11 per cent to close at ₹55.75, against a 0.85 per cent fall in the common stock to ₹117. Jain Irrigation Systems’ DVR gained 6.43 per cent at ₹50.45 while the common share gained 0.15 per cent at ₹66.90. The day’s biggest gainer was Gujarat NRE Coke, up 19.78 per cent at ₹3.27. The common equity share also gained an equivalent 19.96 per cent, ending the session at ₹5.83.

S&P BSE inclusion For the upcoming index rebalance in June, S&P BSE will consider the inclusion of these DVRs if the common equity shares are already part of a certain index and if the DVR shares outstanding are 10 per cent or more of the total shares outstanding (inclusive of ordinary shares and DVR shares) of the company.

Alex Mathews, Head — Research, Geojit BNP Paribas Financial Services, said demand for DVRs will begin to go up if there is a likelihood of them being included in an index. “Several mutual fund schemes track indices closely; so with the inclusion of a DVR, buying interest in the stock will naturally go up.”

But it is difficult to predict an ideal price differential between DVRs and the underlying stock, Mathews said, because demand for DVRs fluctuates over time. For instance,

it goes up before dividend payouts and reverses ahead of voting on a resolution.

Analysts in general, however, sound a note of caution with regard to DVRs. Currently, only Tata Motors DVR is available for trading in the derivative segment.