27 Nov, 2025
5 mins read
DVR share refers to equity that carries Differential Voting Rights, meaning the shareholder receives fewer votes per share compared to standard equity. These instruments were introduced in India to help companies raise capital without giving up too much control.
Although these instruments offer lower voting power, they usually compensate investors with either a higher dividend or a discounted market price, making them attractive for certain types of retail participants.
The central idea behind a differential voting structure is straightforward. When a company issues such equity, each unit carries reduced voting privileges during shareholder resolutions.
For example, if a regular equity unit provides one full vote, a DVR unit might offer only a fraction of that. This structure restricts decision-making influence but still offers full participation in the company’s economic gains.
Investors who prioritize financial returns over governance may prefer these instruments since they receive dividend incentives or favorable pricing in exchange for lower influence in corporate matters.
Companies opt for reduced-vote equity for several strategic reasons:
Promoters often use this route to raise capital without diluting their controlling stake. It allows them to fund operations, expansion, or debt reduction while retaining decision-making authority.
Issuing equity with limited voting power increases the promoter’s effective control, limiting the risk of external groups acquiring a significant influence.
These instruments attract investors who focus more on cash flows and long-term value rather than voting participation.
Companies can tap the market at a lower cost because these instruments usually trade at a discount, making them more affordable and attractive to retail investors.
Although both represent ownership in the company, they differ in several aspects:
| Feature | DVR Shares | Ordinary Shares |
|---|---|---|
| Voting Rights | Limited/Enhanced | Full rights |
| Price | Usually issued at a discount | Regular market price |
| Dividend | Often higher | Standard dividend |
| Liquidity | Generally lower | High liquidity |
| Suitable For | Investors focused on returns | Investors seeking both rights and returns |
This difference in voting power is the primary reason for pricing variations between the two categories.
The price of reduced-vote equity is determined through the same market forces as ordinary shares. However, three additional factors influence their valuation:
Since they offer limited decision-making power, these instruments trade at a discount compared to the main equity.
If a company offers a higher dividend on limited-vote units, the discount narrows because investors factor in better income potential.
These instruments often see lower trading volumes, which can widen the discount as buyers become selective.
Only a few companies in India have issued such equity. Historically, the most recognised names include:
Tata Motors (now discontinued in 2023 after conversion)
Jain Irrigation
Future Enterprises
Although the number of such listings has been limited, renewed regulatory openness may encourage more companies to consider this route.
Investors often find these instruments appealing due to the following advantages:
1. Lower Entry Cost
The discounted pricing makes them more accessible, especially for retail investors seeking ownership at a lower cost.
2. Higher Dividend Yield
To compensate for reduced voting rights, companies often offer higher dividends.
3. Suitable for Long-Term Investing
Investors who prioritize stable returns rather than voting influence can benefit from these instruments.
4. Reduced Volatility
Due to lower trading volume and long-term investor interest, the price movement may be less erratic.
Like any investment, limited-vote equity also carries risks:
1. Lower Liquidity
These instruments usually have fewer buyers and sellers, which may affect exit opportunities.
2. Limited Influence on Corporate Decisions
Shareholders cannot meaningfully influence board resolutions or company policies.
3. Discount May Persist
The gap between ordinary equity and limited-vote units may remain wide for extended periods.
4. Not Suitable for Active Traders
Due to liquidity constraints and limited volatility, short-term traders may not find them attractive.
These instruments are ideal for:
Long-term investors who focus on steady returns
Investors who do not prioritize voting rights
Individuals seeking lower-priced entry into a fundamentally strong business
Income-focused investors who value dividend boosts
They may not suit those who want direct influence in corporate decisions or frequent trading opportunities.
Before investing, consider the following factors:
Check whether the company provides higher dividends on limited-vote units.
Understand the extent of reduced voting rights compared to ordinary shares.
Verify average trading volumes to avoid difficulty in entering or exiting positions.
Analyse the long-term discount trend between the two categories of equity.
Review profitability, governance, debt levels, and long-term business prospects.
Tax treatment is the same as regular equity:
Short-Term Capital Gains at 15 per cent (if sold within one year)
Long-Term Capital Gains above the exemption limit, taxed at 10 per cent
Dividends taxed as per the investor’s income slab
There is no separate tax rule for limited-vote equity.
Differential voting right equity offers a unique blend of lower ownership cost and attractive income potential while reducing a shareholder’s role in corporate decision-making. Investors who focus on long-term returns rather than voting influence may find these instruments suitable for portfolio diversification. As Indian markets evolve and more companies explore flexible capital structures, these instruments may gain increased relevance.
It is an equity unit that gives fewer voting rights but offers the same economic benefits as ordinary shares.
Because investors receive reduced voting power, the market prices in a discount to compensate for lower control.
They carry the same business risks as normal equity. Safety depends on the company’s fundamentals, not the voting structure.
Yes, companies can choose to convert them, but it depends entirely on corporate policy and regulatory approval.
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