Gujarat PSU shareholders set to gain from new policy steps

The new policy lays down norms for dividend distribution, bonus and share splits

-  Ujjval Jauhari

The Gujarat government’s new policy announcements on dividend distribution, bonus, share splits and buybacks triggered sharp gains in stock prices of state-run public sector undertakings (PSUs) on Wednesday with stocks of three of seven listed companies rallying by as much as 20%.

Shares of Gujarat Narmada Valley Fertilizers and Chemicals (GNFC), Gujarat State Fertilizers and Chemicals (GSFC), Gujarat State Petronet Ltd (GSPL), Gujarat Mineral Development Corporation (GMDC), Gujarat State Finance Corporation, Gujarat Alkalies & Chemicals Ltd and Gujarat Industries Power saw strong investor interest during the day.

Nilesh Shah, managing director, Kotak Mahindra Asset Management Company, said, “The policy decision taken by the government of Gujarat for dividend, buy back, split and bonus shares for state PSUs is a step in the right direction for better corporate governance. It will give much needed clarity to minority shareholders."

According to the new policy issued on Tuesday by the Gujarat government, state PSUs must pay their shareholders a minimum dividend of at least 30% of their profit after tax or 5% of their net worth, whichever is larger. This has made the state PSUs more attractive for investors in the form of greater dividend-yielding stocks.