Shares of Gujarat-based state public sector undertakings (PSUs) rallied on Wednesday after the Gujarat government laid out minimum requirements for dividends, bonus shares, buybacks, and stock splits for these firms.
Stocks of almost all the Gujarat government-owned companies surged 7-15 percent in the opening trade on Wednesday.
In a new policy announced on Tuesday, the Gujarat government said that it was mandatory for <a href="https://www.cnbctv18.com/market/stocks/gujarat-announces-new-policy-for-dividend-distribution-bonus-shares-for-state-psus-16498131.htm">state PSUs to pay a minimum dividend of at least 30 percent</a> of profit after tax (PAT) or 5 percent of net worth, whichever is higher, to its shareholders.
For the buyback of shares, every state PSU having a net worth of at least Rs 2,000 crore along with cash and bank balance of Rs 1,000 crore have been mandated to exercise the option to buyback their own shares.
Also, state PSUs have been told to issue bonus shares to their shareholders if their defined reserve and surplus is equal to or more than 10 times their paid-up equity share capital.
<img class="alignnone wp-image-16501251 size-full" src="https://images.cnbctv18.com/wp-content/uploads/2023/04/Gujarat-Government-PSUs.png" alt="" width="1920" height="1080" />
The Gujarat government has also mandated splitting of shares where the market price or book value of state PSUs’ shares exceeds 50 times their value, provided the existing face value of a share is more than Re 1.
The state government on Tuesday said that the new policy of compulsory dividends and bonus shares will add to the valuation of Gujarat state PSUs.
Let us take a look at these companies on an individual basis. The numbers mentioned are from financial year 2022:

<img class="alignnone wp-image-16501391 size-full" src="https://images.cnbctv18.com/wp-content/uploads/2023/04/Gujarat-Gas.png" alt="" width="1920" height="1080" />

<img class="alignnone wp-image-16501421 size-full" src="https://images.cnbctv18.com/wp-content/uploads/2023/04/GSFC.png" alt="" width="1920" height="1080" />

<img class="alignnone wp-image-16501431 size-full" src="https://images.cnbctv18.com/wp-content/uploads/2023/04/Gujarat-Alkalies.png" alt="" width="1920" height="1080" />

<img class="alignnone wp-image-16501481 size-full" src="https://images.cnbctv18.com/wp-content/uploads/2023/04/GMDC.png" alt="" width="1920" height="1080" />

Based on this data, all companies can issue bonus shares, while GMDC can go ahead with a potential buyback of shares. GNFC and GSPL meet all the criteria mentioned above and will have to do both a buyback as well as pay a higher dividend.

Deepak Shenoy of Capital Mind said that GNFC can pay a dividend of Rs 30, compared to Rs 10 paid last year, while GSPL can pay Rs 12 as dividend, compared to last year's Rs 2.

Shares of these state-run companies in Gujarat are trading with gains between 7-15 percent on Wednesday. GMFC and GNFC are trading with gains of 14-15 percent.

New dividend, bonus shares policy in Gujarat: Here is how the listed entities stack up

For the buyback of shares, every state PSU having a net worth of at least Rs 2,000 crore along with cash and bank balance of Rs 1,000 crore have been mandated to exercise the option to buyback their own shares.

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New dividend, bonus shares policy in Gujarat: Here is how the listed entities stack up

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New dividend, bonus shares policy in Gujarat: Here is how the listed entities stack up

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