In a recently released government resolution, the state government said, “Every state PSU would pay a minimum annual dividend of 30 per cent of PAT (profit after tax) or 5 per cent of the net worth, whichever is higher subject to the maximum dividend permitted under the extant legal provisions”.

This new policy of the state government is in line with the dividend norms followed by the central public sector enterprises (CPSEs).

An analysis of dividend payout by state PSUs in Gujarat, over the last four years (FY18 to FY22), shows that barring a few instances, majority of them announced dividends less than 30 per cent of their annual net profit to their shareholders. The results for FY23 are yet to be declared by many of the companies.

Except for FY20, Gujarat State Fertilizers & Chemicals Ltd (GSFC)’s dividend payout ratio was below 23 per cent. During FY20, the company’s dividend payout ratio was 48.44 per cent.

In the period under review, Gujarat Mineral Development Corporation Ltd (GMDC)’s dividend payout stood at 45.82 per cent in FY19. In the other fiscals, it was below 35 per cent.

Similarly, dividend payout by Gujarat Industries Power Company Ltd (GIPCL) and Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) ranged between 9-24 per cent in the period.Dividend payouts by these state-run entities are much lower than what the CPSEs offer. While data shows that they have paid over 30 per cent each year, in certain instances it has gone up to as high as 75 per cent.

The Gujarat government also mandated every state PSU having a net worth of at least Rs 2,000 crore, and cash and balance of Rs 1,000 crore to exercise the option to buy back their own shares.

It said that the state PSUs that have defined reserve and surplus equal to or more than 10 times of its paid up equity share capital are required to issue bonus shares to its shareholders.

The state government also mandated splitting of shares where market price or book value of state PSUs shares exceeds 50 times of its value, provided its existing face value of share is more than Re 1.

Commenting on the announcement, Kotak Mutual Fund Group President and Managing Director Nilesh Shah said these new policies by the Gujarat government will bring in clarity to minority shareholders and also help in improving governance. He also suggested that other state-run and private companies should emulate these policies.

LKP Securities’ Head of Research S Ranganathan said while few of the Gujarat state-run entities may be facing temporary headwinds in few of its business verticals, the fact is that 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,” he said.

The shares of the Gujarat-based PSUs rallied on Wednesday after the state government ‘s new policies.

Gujarat Alkalies & Chemicals Ltd rose 17.31 per cent to end at Rs 734.80 apiece on Wednesday. Gujarat Mineral Development Corporation Ltd (GMDC) surged 19.98 per cent close at Rs 159.75. While Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC) rose 10.54 per cent, Gujarat Industries Power Company Ltd (GIPCL) climbed 20 per cent. Gujarat State Fertilizers & Chemicals Ltd (GSFC) also rose 20 per cent on BSE.

© The Indian Express (P) Ltd