If you are looking to buy a quality share at an extremely attractive price, you should buy the Tata Motors DVRs.
DVRs are nothing, but shares that comes with differential voting rights. They are shares and as shareholders, you are entitled to dividends, attending AGMs, getting rights, bonuses etc. We wish to reiterate that these are nothing but shares.
Here's why you should buy the Tata Motors DVR
1) An extra 5 per cent dividend
DVR shareholders are entitled to an extra 5 per cent dividend. This is certainly good and one would not mind lesser voting rights for that extra dividend.
2) Huge discount to Tata Motors shares
The Tata Motors shares are trading at Rs 401, while the DVRs are trading at Rs 293. This is at a discount of 25 per cent, which is worth it, for small shareholders, who may be least interested in voting. It is interesting to note, that the Tata Motors DVR discount to shares is very steep, when compared to discounts that we see in other markets.
3) Tata Motors stock is undervalued
The Tata Motors DVR has fallen from levels of Rs 380, to the current levels of Rs 290. This leaves tremendous scope for appreciation. Analysts expect the company to report an EPS of around Rs 42 for the current year. This means the DVRs trade at a p/e of just 8 times. This is less, as compared to peers like Maruti.
4) US markets seeing good growth
The company's Jaguar Land Rover models are doing better in markets like US, even though there are some concerns of growth in China. A slew of launches across the globe for various JLR models, could see robust growth in the future. The company recently signed Lionel Messi, as the global brand ambassador, which is certainly a great brand building exercise.
5) Volkswagen worries maybe JLR's gain
The company may stand to gain from the Volkswagen diesel engine scandal, with increasing preference for its vehicles. All in all, the DVRs looks a good bet at the current levels.