Tata Motors DVR's discount to stock narrows after Nifty50 inclusion

NEW DELHI: Shares of Tata Motors DVR narrowed their discount to Tata Motors ordinary shares after the NSE's index maintenance sub-committee modified its stock selection criteria to include the former in benchmark Nifty50 index.

At 10.40 am, Tata Motors DVR was ruling 3.81 per cent higher at Rs 250.70. This was against a 0.38 per cent fall (to Rs 317.60) in the ordinary shares of Tata Motors. At that point, Tata Motors DVR was trading at a discount of 21 per cent to Tata Motors shares.

The discount between the two stocks was as high as 30 per cent on December 1, 2015, but it has been falling since then. On Monday, Tata Motors DVRs were available at 24.24 per cent discount to Tata Motors ordinary shares. Monday's decision narrowed the gap further .

A DVR share gets similar treatment as ordinary shares on the stock exchanges, but it offers lesser voting rights to the shareholder. The discount at which they trade vis-à-vis ordinary shares could be seen as a compensation for the lesser voting rights.

"Tata Motors DVR is a good buy, because it is now entering the Nifty50. It is available at a discount and, for a Tata company, I do not feel it calls for big discounts just because you do not have voting rights, as you do not have any corporate governance issues there. Tata Motors has always been good buy at these prices," said Parag Thakkar, Head-Institutional Sales, HDFC Securities.

Meanwhile, DVRs of other listed companies such as Future Retail and Jain Irrigation put up a mixed show.

Future Retail DVR was trading 1.52 per cent higher at Rs 100. Jain Irrigation Systems DVR was trading 1.59 per cent higher at Rs 38.25. Gujarat NRE Coke was at Rs 1.96, down 2.49 per cent.

The NSE panel added four stocks, while excluding three, to raise Nifty50 components to 51 for the first time since its inception. The changes will take effect from April 1.