You must have seen Tata Motors DVR trading in the market; in fact this is the only DVR that is also part of the Sensex. DVR shares have been around in India for over 10 years now with companies like Tata Motors, Jain Irrigation, NRE Coke and Future Group having issued such shares. Differential Voting Rights (DVR) shares are a unique way to raise capital for business without diluting control. That became most evident in the Mindtree case where founding promoters with just 10% stake in the company had to cede control to L&T despite their best efforts. The original promoters of Mindtree could have actually prevented the loss of control if they had issued DVR shares in such circumstances.

The reason DVR shares are back on the radar is that on 16th August, the government issued new norms for DVR shares, to make the instrument more meaningful. While the norms are fine, the big challenge will be in creating the DVR market. Who would want to really buy DVR shares with lower voting rights unless adequately compensated? Normal stocks without voting rights will not be exciting to investors unless other sweeteners are thrown in. For example, a semi-convertible structure would work better where there is a fixed payout for some time before being converted into equity. That should interest a lot of institutions, who are not particular about voting rights anyway. Market creation could hold the key!