Shares of Gujarat-based public sector undertakings advanced on Wednesday after the state government announced a new policy for dividend distribution and bonus shares.
The Gujarat government has mandated minimum requirements for dividends, bonus shares, buybacks, and splits for its public sector undertakings.
The state has mandated a minimum dividend of at least 30% of profit after tax or 5% of net worth, whichever is higher. In a resolution on Tuesday, it added that the minimum level and maximum permissible level of dividend should be declared.
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The state PSUs, which have a net worth of at least Rs 2,000 crore and cash and bank balances of Rs 1,000 crore, will be required to buyback their shares.
"It is expected that the new policy of compulsory dividends and bonus shares will add to the valuation of Gujarat State PSUs," it said in a resolution on Tuesday.
The state government also directed the PSUs to split shares when the book value of shares exceeds 50 times their value, provided the existing face value of the share is more than Re 1.
The seven listed PSUs in the state are all profit-making companies. They are Gujarat Alkalies and Chemicals Ltd., Gujarat Mineral Development Corp., Gujarat State Fertilisers and Chemicals Ltd., Gujarat Industries Power Co., Gujarat Gas Ltd., Gujarat Narmada Valley Fertilisers and Chemicals Ltd., and Gujarat State Petronet Ltd.
Shares of all seven companies closed higher on Wednesday.
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