Gujarat government on Tuesday announced a new policy for minimum levels of dividend distribution and bonus shares for its state public sector undertakings (PSUs) including listed companies.

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

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

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For the buyback of shares, every state PSU having a net worth of at least Rs 2,000 crore and cash and bank balance of Rs 1,000 crore have 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 splitting of shares, 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 of a share is more than Rs 1.

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In an interview with CNBC-TV18, Nilesh Shah, MD of Kotak Mahindra AMC said, “The step taken by the government of Gujarat recommending their PSUs to follow dividend distribution policy, is a welcome step as it gives clarity to minority shareholders as to how the company’s cash will be utilized.”

“This is something which is recommended probably for all companies to follow. It brings more clarity, and improves governance,” Shah added.

(Edited by : Pradeep John)

First Published:Apr 25, 2023 9:39 PM IST