1:5 Split: Tata's DVR Stock Turns Rs 2 Lakh To Rs 16.50 Lakh In 13 Years; Dividend Payout Soon, Technicals!

The story of Tata Group's differential voting rights (DVR) stock started during the time the world grappled with a global recession in 2008. Time skip, Tata's DVR shares have not disappointed its investors despite having limited decision-making and voting rights in the company. DVR stock of Tata didn't just come with perks of dividend rewards, but in the long run, it multiplied investors' wealth, thanks to one stock split.

The tech-to-power conglomerate introduced the Indian market's first DVR stock holding the name of its auto giant Tata Motors in November 2008. The reason to do so? Was to meet the debt obligations for acquiring the luxury car brand Jaguar Land Rover (JLR) which was back then owned by Ford.

Tata Motors DVR is listed on both BSE and NSE. However, Tata Motors DVR has no brokerage coverage, zero buy or sell rating, and it does not have any fundamentals such as profits or revenue. Tata Motors DVR is simply riding on the wagon of Tata Motors. So, the DVR is more prone to the sentiment that revolves around Tata Motors' share price.

There are many benefits of DVR shares and Tata Motors DVR is surely special too. But before that let's understand its long-term performance.

Tata Motors DVR was listed on November 5, 2008. Currently, it has an adjusted P/E of 1.70. While majority of its shareholding is held by the public to the tune of 92.33%, while promoters hold 7.67%.

Some of the renowned public shareholders of Tata Motors DVR are -- Icici Prudential Equity & Debt Fund (11.84% Stake), Sbi Long Term Equity Fund (2.12%), Post Office Life Insurance Fund (1.37%), Government Of Singapore (1.81%), and Government Pension Fund Global (3.36%). Among individuals, Rekha Jhunjhunwala is the largest shareholder with a 1.92% stake in Tata Motors DVR.

In total, there are 46,94,99,948 public shareholders and they all have seen impressive returns both short-term and long-term.

As per NSE data, in 365 days, Tata Motors DVR shares have skyrocketed by a whopping 185% which is the second best-performing Tata Group stock in a year.

Currently, Tata Motors DVR shares are at Rs 660.10 apiece, with a market cap of Rs 33,566.28 crore on NSE. On April 15th, the stock tumbled by around 1.64%. This was tracking the performance of Tata Motors which dipped by 2.02% to end at Rs 997.95 apiece on Monday.

Tata Motors DVR share price has a 52-week high of Rs 712.60 apiece which was touched in early March 2024, and its 52-week low is at Rs 231.95 apiece that was touched on April 13, 2023. Hence, Tata Motors DVR is a multi-bagger!

Tata Motors DVR has delivered massive dividends to its investors. In 2023, the DVR stock paid dividends of Rs 2.10 per share, which was higher than the Rs 2 per share payout by Tata Motors.

The highest dividend payout since listing by Tata Motors DVR is Rs 20.50 per share which was delivered in the same year it turned ex-split for the first time by a 1:5 ratio. That was in 2011!

1:5 ratio led to the split of 1 equity share of Tata Motors DVR with a face value of Rs 10 each into 5 equity shares with a face value of Rs 2 each. This was effective since September 12, 2011.

Data from NSE showed that Tata Motors DVR shares were at Rs 448 apiece after market hours of September 11, 2011. On the ex-split day, September 12 of that year, the share price was at Rs 85.30 apiece after market hours.

So let's suppose, an investor held 500 shares of Tata Motors DVR before September 12, 2011. After the stock splits, that 500 shares will multiply to a total of 2,500 shares (500X5). Adjusted to stock split prices, 2,500 shares of Tata Motors DVR were valued at Rs 2,13,250 at the stock price on ex-split day. By the end of April 15, 2024, 2,500 shares of Tata Motors DVR are now valued at Rs 16,50,250 (2,500 x Rs 660.10).

Accordingly, Tata Motors DVR shares have risen by a breathtaking 674% in 13 years.

What will drive Tata Motors DVR shares ahead?

It is the Q4 earnings of Tata Motors for FY24 and possible dividend announcement on May 10, for both ordinary and DVR shareholders, that may stir upside.

For Q4FY24, JM Financial expects Tata Motors' standalone CV business revenue to grow by 6% YoY and standalone PV business revenue to grow by 22% YoY. Expect JLR revenue to grow by 16% YoY.

Also, the brokerage added, that it expects Tata Motors CV business margins at 11.5% (vs. 10.1% YoY) led by moderating RM inflation and lower discounts. Expect stand. PV business margin at 6.8% (vs. 6.6% QoQ). Expect JLR EBITDA margin to improve by 60bps QoQ.

Further, JM Financial expects Tata Motors's JLR business revenue growth to be 9% QoQ led by healthy volume performance. Expect flattish ASP QoQ. Also, the brokerage expects the EBITDA margin to improve by 60bps QoQ led by higher operating leverage and
moderating RM inflation partially offset by an unfavourable mix and higher marketing costs.

On the back of stable earnings, chances are Tata Motors DVR shares will see an upside if Tata Motors does.

Also, Tata Motors is planning to recommend dividends, if any on the Ordinary Shares and 'A' Ordinary Shares in the Company for the financial year ended March 31, 2024, for the approval of the shareholders at the forthcoming 79th Annual General Meeting of the Company. This will be another big booster for Tata Motors DVR.

Among the technicals, as per Trendlyne data, Tata Motors DVR's RSI is at 55.1, which is steady in range since an RSI below 30 is considered oversold and above 70 overbought. Also, its Tata Motors DVR Score is 61.2, stock is technically moderately strong. Stocks with scores between 60 and 70 are considered technically Moderately Strong. Further, the stock's weekly average delivery volume is 65.4%, while it's trading above 6 out of 8 SMAs, and above 4 out of 9 Oscillators in the bullish zone. Lastly, it is trading above its Pivot 658.28.

Benefits of DVR stocks:

Explaining in brief, Motilal Oswal's website highlighted that Differential Voting Rights (DVR) is a class of shares that grant varying voting rights to different shareholders within a company. They allow certain shareholders to exercise multiple votes per share, amplifying their influence over decision-making processes.

Further, Motilal highlighted three benefits of DVR shares:

1. Capital attraction: DVR shares allow investors to gain exposure to high-growth companies that offer significant potential for returns. Thus, they can align their interests with the company's long-term growth prospects by accepting a limited role in decision-making.

2. Risk mitigation: DVR shares can provide stability and continuity to the company's operations by granting certain shareholders greater voting power. This can help mitigate the risk associated with sudden shifts in leadership or strategic decision-making.

3. Liquidity opportunities: DVR shares allow investment in companies that may not otherwise be accessible or available in the public market. This can open up new opportunities for diversification and potentially higher returns.

Currently, Sharekhan and KR Choksey have recommended buying Tata Motors. Sharekhan sets a target price of Rs 1,188 and KR Choksey's target is at Rs 1,178 apiece. In the short term, Prabhudas Lilladher has set a target price of Rs 1,075. If this is the case ahead, Tata Motors DVR may also see a bull run, however, at the latest, Q4 and dividend recommendations are key factors to drive sentiments.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.