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Titans of Gujarat: PSU Getting Boost From New Policy Announced by State Govt.

Published 27-04-2023, 07:01 am
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Let us understand the new policy of mandatory dividends, bonuses, and buyback of shares announced by the state yesterday in 3 parts

Part 1) Dividend clause:
According to a new policy issued on Tuesday 25th April 2023, by the Gujarat government, state PSUs must pay their shareholders a minimum dividend of at least 30% of their profit after tax (PAT) or 5% of their net worth, whichever is larger.

Part 2) Buy Back clause:
Every PSU has been required to exercise the option to buy back its shares if it has a net worth of at least ₹2,000 crores and a cash and bank balance of ₹1,000 crore.

Part 3) Bonus Clause:
Additionally, state PSUs have been instructed to give their shareholders bonus shares if their defined reserve and surplus equal or exceed 10 times their paid-up equity share capital.

Generally, Gujarat-based listed companies and PSUs of the state had low dividend yield history, thus Overall a win-win policy for shareholders and state government.

Conclusion:
The new policy was welcomed with open arms by the investors as it would benefit both govt as well as shareholders by utilizing the idle cash as per the balance sheet with the condition being that there are no immediate capex plans for those stipulated companies.

So finally with this new policy of compulsory dividends and bonus shares and buyback options, the state aims to add to the valuation of Gujarat states’ PSUs. All 7 listed PSUs of Gujarat are making profits.

Hence stock prices of Gujarat Gas (NS:GGAS) Ltd (up 1.01%), Gujarat State Petronet (NS:GSPT) Ltd (up 7.15%), Gujarat Narmada Valley Fertilizers & Chemicals (NS:GNFC) Ltd (up 10.55%), Gujarat Alkalies&Chemicals Ltd (up 17.2%) Gujarat Mineral Development (NS:GMDC) Corporation Ltd (up ~20%),  Gujarat State Fertilizers (NS:GSFC) & Chemicals Ltd (up 20%), Gujarat Industries Power (NS:GJIP) Ltd (up ~20%), gained between 1% to 20% in today's trading session.

Disclaimer: The above article is for self-educational purposes. The analysis was conducted by the following students: G10, VJ, and Dimpy for learning purposes.

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