What are Differential Voting Rights (DVR) shares?

DVR shares are a type of stock that gives investors either fewer or higher voting rights than common shareholders. They're often used by companies that want to raise capital but don't want to dilute the voting power of existing shareholders. DVR shares often trade at a discount to common shares, since they have fewer rights. They can also be used to give certain shareholders more control over the company, since they have a higher concentration of voting power.

For Ex.:

In a 10:1 ratio, higher voting rights entail 10 votes per share owned. In a 1:10 ratio, there would be one vote for every ten shares held. DVR shares issued in the market, however, have restricted voting rights since Indian rules forbid businesses from issuing equity shares with broader voting rights. Similar to regular shares, they are traded on the stock exchange, but at a lower price and with a greater dividend.

TATA Motors & TATA Motors DVR:

	TATA Motors	TATA Motors DVR
Voting Rights	1:1 (1 voting Right per Share)	1:10 (1 voting Right for every 10 Shares)
Dividend Payouts	Lower dividend yield	Higher dividend yield

10% more votes can be cast with a Tata Motor DVR than with a conventional Tata Motor share.

But why the company issue DVR shares:

To raise capital without diluting the voting power of existing shareholders.
To prevent a hostile takeover by making it difficult for a third party to acquire a controlling stake in the company.
To give the company's founders or existing shareholders greater control over the company's decisions.
To create a dual-class share structure, where the different classes of shares have different voting rights.
To offer investors a lower-cost option for investing in the company without giving up voting rights.