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Shares of seven listed state-run PSUs from Gujarat jumped up to 15 per cent in Wednesday’s trade after the state government announced a new policy of compulsory dividends and bonus shares.
It also set guidelines for when to go in for stock split and share buybacks.
S Ranganathan, Head of Research at LKP Securities said while a few of the Gujarat state run entities may be facing temporary headwinds in few of business verticals, almost all of them are expanding in their product lines and looking to grow.
“Hence the New Policy in our view would go a long way towards boosting the confidence of minority shareholders since most of them are cash-rich even after their annual capex requirements with robust free-cash generation,” Ranganathan said.
Gujarat Industrial Power climbed 16.87 per cent to hit a high of Rs 88.95 on BSE. Shares of Gujarat State Fertlisers & Chemicals (GSFC) soared 10 per cent to hit their upper circuit limit at Rs 140.45 on BSE. Gujarat Alkalies & Chemicals surged 9.47 per cent to Rs 685.75. GMDC shares jumped 7.96 per cent to Rs 143.75. Gujarat Narmada Valley Fertilizers & Chemicals (GNFC) climbed 7.35 per cent to Rs 570. Gujarat State Petronet was up 7.34 per cent at Rs 285.15. Gujarat State Financial Corporation advanced 3.31 per cent to Rs 6.25.
The stocks gained even as the BSE PSU index was down 0.15 per cent at the time of writing this report.
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As per a release, the state mandated a minimum of 30 per cent of profit after tax or 5 per cent of net worth, whichever is higher, to be a minimum level of dividend declared for shareholders. It, however mentioned that only the minimum level and maximum permissible level of dividend should be declared.
Besides, every state PSU having a net worth of at least Rs 2,000 crore and cash and bank balance of Rs 1,000 crore is mandated to exercise the option to buy back their own shares.
The new policy also suggested that PSU would be required to split shares when market price or book value of the PSU exceeds 50 times of its value. This is provided the existing face value of the PSU is more than Re 1.
Meanwhile, state PSUs that declare reserves and surplus in excess of 10 times of the paid up share capital are required to issue bonus shares to their shareholders.
