 "PSU Stocks, Public Sector Undertaking")
The Gujarat government issued a new policy regarding the minimum amount of dividend distribution and bonus shares for its state public sector undertakings on Tuesday, April 26. The guideline also applies to companies listed on stock exchanges.
The new policy mandating compulsory dividends and bonus shares is expected to add to the valuation of Gujarat PSUs. In its resolution, the finance department of the state government stated that a minimum of 30 per cent of profit after tax or 5 per cent of the net worth of the PSU, whichever is higher, should be the minimum level of dividend declared for shareholders.
However, the new guidelines clarify that only the minimum level and maximum permissible level of dividends can be declared.
The market took the development positively, and the shares of most public sector companies in Gujarat rallied 8 to 15 per cent on April 26. Notably, all the seven listed PSUs of the state make profits.
The new policy also stated that 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, the shares of the state-owned PSUs would undergo a split in case their market price or book value exceeds 50 times their value. However, the face value of shares should be more than Rs 1 for the split to happen.
The latest guidelines also talk about share buybacks. Every state PSU with a net worth of at least Rs 2,000 crore and cash and bank balance of Rs 1,000 crore will have to exercise the option to buy back their own shares.
