Government-owned Oil India Ltd (OIL) would issue bonus shares, once it completes its planned initial public offer (IPO) in February 2008.This was part of the government approval for the company's disinvestment and IPO issue.Sources said the department of public enterprises suggested the issue of bonus shares during the course of inter-ministerial discussions on OIL's public issue.
While agreeing with the suggestion, OIL conveyed to the government that a bonus issue would be beneficial only after the IPO."We felt a bonus issue at this stage would not be beneficial since the government was the only shareholder," said an official.The move would enable OIL to provide prospective investors with an incentive to invest in its public issue.
Though a bonus issue reduces the value of earnings per share (EPS) of a company, it is usually considered beneficial in the long run.
Currently, OIL has a book value of around Rs 320 crore and an EPS of Rs 76.63. The company has reserves of about Rs 6,635 crore and an equity base of Rs 214 crore.
Read more in The DNA Money article.
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