Domestic brokerage IIFL Securities on Wednesday said the Gujarat government's new policy regarding dividend, bonus shares, stock splits and share buyback may improve governance at the state-run PSUs and give more clarity to minority shareholders.
IIFL Securities said biggest beneficiary of this policy change would be GSFC, which has Rs 4,200 crore invested in other Gujarat PSUs and has a cash of Rs 2,360 crore, including subsidy receivable from the government.
Shares of GSFC closed 20 per cent higher at Rs 153.30 on BSE. On the other hand, shares of Gujarat State Petronet settled the day at Rs 283.80, up 6.83 per cent.
"The available cash is 40 per cent of the current market cap. Eventually, all the dividend and buy back benefits from the State owned PSU are likely to come to GSFC. Due to this policy change, GSFC and GSPL are our top picks," it said.
Gujarat-based PSU companies gained after the Gujarat government announced a new capital restructuring plan that potentially increases dividend payouts and bonus, said Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services.
Gujarat Industrial Power, GSFC, GMDC, GNFC: 7 Gujarat PSU shares rally up to 17% today. Here's why
Earlier today, S Ranganathan, Head of Research at LKP Securities said while a few of the Gujarat state run entities may be facing temporary headwinds in few of business verticals, almost all of them are expanding in their product lines and looking to grow.
"Hence the new policy in our view would go a long way towards boosting the confidence of minority shareholders since most of them are cash-rich even after their annual capex requirements with robust free-cash generation," Ranganathan said.
Shares of seven listed state-run PSUs from Gujarat jumped up to 20 per cent today.
As per the state government press release, the PSUs are mandated to share a minimum of 30 per cent of profit after tax or 5 per cent of net worth, whichever is higher, as minimum level of dividend declared for shareholders.
The release mentioned that only the minimum level and maximum permissible level of dividend should be declared.
In addition, every state PSU having a net worth of at least Rs 2,000 crore and cash and bank balance of Rs 1,000 crore is mandated to exercise the option to buy back their own shares. The new policy also suggested that PSU would be required to split shares when market price or book value of the PSU exceeds 50 times of its value. This is provided the existing face value of the PSU is more than Re 1.
Meanwhile, state PSUs that declare reserves and surplus in excess of 10 times of the paid up share capital are required to issue bonus shares to their shareholders.
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