Tata Motors DVR hits over 3-yr high; gains 12% on the back of heavy volumes

Shares of Tata Motors DVR hit an over three-year high of Rs 172 after they surged 12 per cent on the BSE in the intra-day trade on Thursday, on the back of heavy volumes. The stock surpassed its previous high of Rs 169.75, touched on June 15, 2021 and was trading at its highest level since June 2018.

Differential Voting Rights (DVR) shares are shares that are permitted to be issued with differential voting and differential dividend rights.

In the past two weeks, the DVRs of Tata Group commercial vehicle manufacturer have rallied 22 per cent. Trading volumes on the counter jumped 1.6 times with a combined 14.22 million equity shares having changed hands on the NSE and BSE till 02:54 pm.

On sudden spurt in the stock price and volumes, Tata Motors DVR clarified that the Company did not possess any information /announcement (including impending announcement) which could have a bearing on the price behaviour of the Company’s scrip.

"DVR shares are different from ordinary shares in two distinct ways. Firstly, they offer lower voting rights compared to ordinary shares. These DVR shares are, therefore, very useful for companies that want to raise money in the market without diluting effective control of the company. Secondly, to compensate for the lower voting rights, these DVR shares are paid a dividend premium of 10-20 per cent. This ideally should make sense for the small and retail shareholders as they normally do not participate in the voting process," according to Motilal Oswal Financial Services.

Meanwhile, shares of Tata Motors were up 4 per cent at Rs 324 on the BSE. It had hit a 52-week high of Rs 360.65 on June 15, 2021. Tata Motors on Tuesday said it will increase prices of its commercial vehicle range by around 2 per cent with effect from October 1, in order to offset the impact of rising input costs.

The effective price hike, in the range of 2 per cent, will be implemented based on the model and the variant of the vehicle, the auto major said in a statement. "The continued rise in the cost of commodities, such as steel and precious metals, necessitates the company to pass on a part of it through increase in price of the products," it stated.

Tata Motors retail sales and orders remain robust, which is likely to keep wholesales strong, as the issue of semiconductor chip shortage is set to improve gradually from Q3FY22 onwards, according to the brokerage firm Sharekhan said.

The management has maintained healthy guidance for its Jaguar Land Rover (JLR) business, expecting positive cashflow by FY23, net debt to be zero by FY24and earnings before interest tax (EBIT) margins greater than 10 per cent by FY26. In respect of Tata Motor’s domestic business, we believe its growth drivers remains intact with the turnaround of passenger vehicle (PV) business and beneficiary of the domestic CV upcycle. The outlook for domestic commercial vehicle (CV) business is positive, with notable demand arising from the infrastructure, mining, it added.

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