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| Edited By: Gopal Modi & Sachin Kumar |Source: DNA |Updated: Mar 29, 2018, 04:39 AM IST
The global meltdown and the state government’s controversial ‘charity proposal’ that state PSUs contribute 30% of their profit-before-tax to social development, has led to foreign institutional investors (FIIs) withdrawing their money from the companies. In the last one year, FIIs have withdrawn more from Gujarat PSUs than from other listed equities.
The FIIs’ sudden loss of interest in Gujarat PSUs is being blamed as much on the companies’ ‘charitable tendencies’ aroused by government policy, as on the liquidity crunch caused by the global financial meltdown.
Four of the six state PSUs have agreed to give 30% of their profit-before-tax to the Gujarat Socio-Economic Development Society, formed by the state government to support the weaker sections. These four PSUs had no option but to yield to the government demand for charity because the state government holds majority stake in them.
Of the six listed PSUs, FII investment in Gujarat State Fertilizers & Chemicals Ltd (GSFC) declined by 42% between April 2008 and March 2009. FII holdings in Gujarat Alkalies & Chemicals Ltd (GACL) and Gujarat Industries Power Company Ltd (GIPCL) fell by 24% and 23%, respectively, between April 20008 and December 2008.
FIIs have also reduced their stake in Gujarat State Petronet Ltd (GSPL) and Gujarat Mineral Development Corporation Ltd (GMDC) by 9%, and 62%, respectively.
The GNFC is the only PSU which has not ceased to be attractive for FIIs. In fact, it has seen a marginal increase of 0.5% in FII holdings during the first three quarters of the 2009 fiscal. The Gujarat Narmada Valley Fertilisers Company Ltd (GNFC) is the only other PSU, besides GACL, which has refused to accept the government’s ‘charity proposal’.
“FIIs reducing their holdings is a phenomenon not limited to state PSUs. They have offloaded their holdings across the counter after the global meltdown,” said Yamal Vyas, research head, Khandwala Integrated Financial Service.
Others, however, blame the state government’s charity policy for the loss of FII investments. “FIIs offloaded their stake in four PSUs simultaneously, which shows that the government’s charity proposal has not gone down well with them,” said an analyst at Emkay Global Financial Services Ltd.
