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    Gujarat Titans! State PSUs rally up to 20% on new payout policy

    Synopsis

    Gujarat state public sector undertakings (PSUs) shares surged up to 20% after the state government implemented a new policy regarding minimum levels of dividend distribution and bonus shares, with the aim of adding to the valuation of Gujarat's PSUs. The state government has made it mandatory that a minimum 30% of profit after tax or 5% of net worth, whichever is higher, must be declared as a minimum level of dividend; this policy aims to bring further clarity to minority shareholders and improve governance.

    Gujarat Titans! State PSUs rally up to 17% on new payout policyGetty Images
    Shares of Gujarat state public sector undertakings (PSUs) zoomed up to 20% in Wednesday's trade after the state government announced a new policy for minimum levels of dividend distribution and bonus shares for its PSUs including listed companies.

    Shares of Gujarat Industries Power, Gujarat State Fertilizers & Chemicals and GMDC hit an upper circuit of 20% on the BSE in today's trade. Meanwhile, Gujarat Alkalies, GSPL, and GNFC surged up to 17%.

    With this new policy of compulsory dividends and bonus shares, the state aims to add to the valuation of Gujarat’s PSUs. All 7 listed PSUs of Gujarat are making profits.

    The state government has mandated a minimum 30% of profit after tax or 5% of net worth, whichever is higher, to be a minimum level of dividend declared for shareholders. However, only the minimum and maximum permissible levels of dividend should be declared.

    For the buyback of shares, as per the new policy, every state PSU having a net worth of at least Rs 2,000 crore and cash & bank balance of Rs 1,000 crore has been mandated to exercise the option to buy back their own shares.

    In the case of bonus shares, state PSUs that have defined reserve and surplus equal to or more than 10 times their paid-up equity share capital are required to issue bonus shares to their shareholders.

    In the case of share-splits, Gujarat has mandated splitting of shares where the market price or book value of state PSUs’ shares exceeds 50 times of its value, provided its existing face value is over Rs 1.

    "Fantastic step by Gujarat Government in formulating policies for dividend, buy back, bonus & splitting of shares for state PSUs. These policies give clarity to minority shareholders & improve governance," said Nilesh Shah, MD of Kotak Mutual Fund in a tweet.


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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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