Here's why these seven Gujarat-based PSU stocks gained today

Shares of Gujarat Mineral Development Corporation Ltd, Gujarat Narmada Valley Fertilizers & Chemicals Ltd, Gujarat State Petronet Ltd, Gujarat State Fertilizers & Chemicals Ltd, Gujarat Industries Power Ltd, Gujarat Gas Ltd, and Gujarat Alkalies and Chemicals Ltd jumped 7% to 20% on Wednesday's trading session, following the news of Gujarat government's minimum rules for bonus shares, dividends, buybacks, and stock splits for all the public sector undertakings (PSUs) in the state on Tuesday.

According to a new policy issued on Tuesday by the Gujarat government, state PSUs must pay their shareholders a minimum dividend of at least 30% of their profit after tax (PAT) or 5% of their net worth, whichever is larger.

Every PSU has been required to exercise the option to buy back its own shares if it has a net worth of at least ₹2,000 crore and a cash and bank balance of ₹1,000 crore.

Additionally, state PSUs have been instructed to give their shareholders bonus shares if their defined reserve and surplus equal or exceed 10 times their paid-up equity share capital.

The new policy of mandatory dividends and bonus shares, according to the state government's statement on Tuesday, will raise the market value of Gujarat state PSUs.

According to Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, a surprise policy announcement brings in cheers in all Gujarat based listed companies and PSUs of the state wherein traditionally those companies have low dividend yield history.

"As per the new policy for minimum levels of dividend distribution would be considered and issue bonus shares which is a good attempt to generate shareholders value and increase confidence and sentiment in the stocks. I believe, this policy would benefit both govt as well as shareholders by utilising idle cash on balance sheet, if there are no immediate capex plans on table. Overall a win-win policy for shareholders," added Tapse.

According to S Ranganathan, Head of Research at LKP Securities, 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 capital expenditure (capex) requirements with robust free-cash generation,” added Ranganathan.

On the technical front, analysts believe that today's upmove in the stocks are supported with high volumes and it is expected to continue.

Gujarat Mineral Development Corporation Ltd, closed at the upper circuit of ₹159.75, an increase of ₹26.60 or 19.98% from previous close of ₹133.15.

Gujarat Narmada Valley Fertilizers & Chemicals Ltd, closed at ₹586.90 apiece, an increase of ₹55.95 or 10.54% from the previous close price of ₹530.95.

Gujarat State Petronet Ltd, closed at ₹283.80 apiece, an increase of ₹18.15 or 6.83% from the previous close price of ₹265.65.

Gujarat State Fertilizers & Chemicals Ltd, the stock ended at 20% upper circuit of ₹153.30 apiece. The stock opened at the day's intraday low of ₹135 apiece however picked up momentum to freeze at the upper price band.

Gujarat Alkalies and Chemicals Ltd, the stock opened at the day's intraday low of ₹659.80 apiece however picked up momentum and closed at ₹734.80 apiece, up 17.31% or ₹108.40. 

Gujarat Gas Ltd, the stock closed at ₹463.30, an increase of ₹4.55 or nearly 1%. The stock touched a intraday high of ₹465.

Gujarat Industries Power Ltd, the stock ended at 20% upper circuit of ₹91.33 apiece. The stock opened at the day's intraday low of ₹79.61 apiece however picked up momentum to freeze at the upper price band.