Gujarat PSU Shares Rally 15 Per Cent After Govt Announces New Guidelines For Dividend, Bonus Shares

Shares of Gujarat Industries Power Co Ltd and Gujarat Mineral Development Corp Ltd surged as much as 20 per cent, Gujarat State Fertilisers & Chemicals Ltd also rose 18 per cent on Wednesday

Shares of public sector companies (PSUs) of the Gujarat government rallied up to 15 per cent on Wednesday after it announced a policy for minimum levels of dividend distribution and bonus shares. The state government also set guidelines for when to go in for stock splits and share buybacks.

According to a Moneycontrol report, shares of Gujarat Industries Power Co Ltd and Gujarat Mineral Development Corp Ltd surged as much as 20 per cent, Gujarat State Fertilisers & Chemicals Ltd rose 18 per cent, Gujarat Alkalies & Chemicals Ltd rose 14 per cent, Gujarat Narmada Valley Fertilizers & Chemicals 10 per cent, Gujarat Cotex gained 12 per cent, and Gujarat Craft Industries gained 10 per cent during intraday trade.

The Gujarat government on Tuesday released a new guideline regulating the minimum distribution of dividends and bonus shares for its state PSUs. It is anticipated that the new policy requiring mandatory dividends and bonus shares will increase the value of Gujarat PSUs.

According to the state government's finance department, the minimum level of dividend announced for shareholders should be at least 30 per cent of after-tax profit or 5 per cent of the PSU's net worth, whichever is larger. However, the new guidelines clarify that only the minimum level and maximum permissible level of dividends can be declared.

In accordance with the new policy, all state PSUs with fixed reserves and surplus equal to or more than ten times the amount of paid-up equity share capital will have to issue bonus shares to their shareholders.

Additionally, if the market price or book value of the shares of state-owned PSUs exceeds 50 times their value, the shares will be split. However, for the split to take place, the face value of the shares must be greater than Rs 1.

The new guidelines also cover share buybacks. The option to buy back must be used by every state PSUs with a net worth of at least Rs 2,000 crore and a cash and bank balance of Rs 1,000 crore.