Modi's victory spurs Gujarat PSU stocks

Investors expect stalled selloff process to gain momentum

Share prices of Gujarat PSUs went up today in anticipation that the divestment process will be expedited by a victorious Narendra Modi government. Shares of state-owned PSUs have moved up anywhere between 3 and 9 per cent. In a strong market, prices of private sector stocks based in Gujarat also rallied.

Nearly a year-and-half ago, a high-level committee of the Gujarat government had recommended restructuring and divestment of seven state enterprises. A decision in this regard could be taken now, said sources.

Having won the state elections, the BJP government in Gujarat could be looking to divest a part of its stake in several state PSUs, according to sources in the fund management and brokerage fraternity. That is what is believed to have triggered a rally in many of these counters on Monday.

Market sources informed that Gujarat Mineral Development Corporation (where the state government holds 74 per cent), Gujarat Alkalies (36.71 per cent), Gujarat State Fertilisers & Chemicals Co (37.84 per cent), Gujarat Narmada Valley Fertilizers Co (41.18 per cent) and Gujarat Industries Power Co (55.78 per cent) were the top five companies likely to be divested first.

Apart from this, the Gujarat State Financial Corporation (state government holding 55 per cent) and Gujarat State Petronet (39 per cent) are the other state companies, which may be privatised.

The mood among investors was upbeat as they believed that the Modi government would be taking long-pending decisions on the divestment and restructuring of state enterprises.

Deven Choskey, managing director, K R Choksey Shares and Securities, expects that the Gujarat government will create a group of state-owned 'Navratna' companies, which Modi has been hinting at for some time now.

"Business environment in Gujarat has been favourable during the Modi tenure, which is evident from the fact that some of the top companies such as Reliance, Adani and Essar have set up base in the state. But if the government wants these companies to progress, then it will have to allow private participation," said S P Tulsian, private equity advisor.

The stocks of some of the other Gujarat-based firms, including Sintex Industries, Mundra Port, Welspun India, Sun Pharma and Adani Enterprises, too rose 5-10 per cent on the bourses on the perception that businesses environment in the state would remain unchanged.