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S&P BSE Indices, which publishes benchmark equity indices for the BSE, has announced rules on the inclusion of shares with differential voting rights (DVRs) on the S&P BSE Sensex, BSE 100, BSE 200 and BSE 500 indices.
Shares with differential voting rights are similar to common equity shares in all respects other than dividend received and voting rights. 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 DV₹so as to raise public funds without diluting their voting capital. DV₹generally trade at a discount to the common equity share on stock exchanges.
Currently, four companies — Tata Motors (₹350.50), Future Retail (₹54.60), Gujarat NRE Coke (₹2.73) and Jain Irrigation Systems (₹47.40 — have issued DVR shares.
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. The DVR will also be analysed independently to meet inclusion standards.
If the ordinary shares are dropped from the index, the DVRs will be dropped as well.
An inclusion of a DVR will increase number of stocks in a fixed count index, such as the BSE 100, but the number of companies will remain fixed. Hence, the index, after the inclusion of a DVR, will remain BSE 100.
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