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Tuesday, September 04, 2007

OIL will issue bonus shares after IPO

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.

The modalities of the bonus issue have not been decided as the company is waiting for the listing formalities to be completed.

The decision to come out a with bonus issue would have to be taken by the company's board and approved by the shareholders.

OIL would also need to comply with Sebi clause 49, calling for the appointment of independent directors on the company's board, before the IPO application is approved.

Sources said the ministry of petroleum and natural gas has short-listed some names and appointments may take place soon.

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.

Last week, the Cabinet Committee on Economic Affairs had decided that the company would come out with a fresh issue of 10% of the post-issue paid-up capital, coupled with 1% for employees and disinvestment of 10% of pre-issue paid-up capital in favour of Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation Ltd.

The disinvestment would reduce government equity in the company to 78.53% from 98.13%.


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