Gujarat PSEs lose Rs 1,100 cr in a day

Listed PSE companies from Gujarat took a huge beating on the bourses as investors sold heavily in these stocks, following the state government’s logic-defying ‘request’ to these entities to set aside 30 per cent of their profit before tax (PBT) for social causes.

On a single day, the market capitalisation of Gujarat Mineral Development Corp (GMDC), Gujarat Alkalies and Chemicals (GACL), Gujarat State Fertlizers and Chemicals (GSFC), Gujarat Narmada Valley Fertilizers Corp (GNFC), Gujarat Industrial Power Corp (GIPCL) and Gujarat State Petronet Limited (GSPL) fell by Rs 1,097 crores.

More importantly, the value of government’s holding in these companies was shaved off by Rs 590 crore on a single day. Shares of GMDC, which has already declared in its annual report it would contribute nearly Rs 123 crore for social causes, fell like a rock. Only GSPL could hold on to slender gains on a day the Sensex fell by around one per cent.

Analysts have already criticised government’s move saying it would erode the equity of these companies, as was evident to everyone on Thursday. Instead, they have suggested that these companies pay higher dividend to shareholders and the government, being the majority shareholder, use that amount for social causes.

TOI learnt that managing directors of all these six listed companies had together made a representation to the state government against the move, even as they prepared to call annual general meetings (AGM) to seek consent of shareholders to comply with the government’s wishes. At least three PSEs — GMDC, GSFC and GIPCL — have their AGMs scheduled within this month. The decision to transfer 30 per cent of profit before tax was taken earlier this year amid strong opposition from IAS officials heading these PSEs.

The most vocal among critics of the move was GNFC CMD Sudha Anchalia, who had clearly told the government that such a move, aimed at ensuring corporate social responsibility, would not only bring down the rating of the companies but also affect their expansion plans because of reduced liquidity.