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Indian Oil hands out 1:2 bonus

New Delhi, June 6: The board of directors of Indian Oil Corporation today recommended a bonus share issue in the ratio of 1:2. The Fortune 500 company will issue one bonus share for every two equity shares held after the proposal is approved at the extraordinary general meeting scheduled for July 14.

The government, which holds an 82 per cent stake in the oil major, will be the chief beneficiary of this largesse. The present equity capital of the company valued at Rs 778.67 crore will shoot up to Rs 1,168.01 crore after the bonus issue. Each equity share is of Rs 10.

The public holding in the company is only 3.7 per cent; banks and financial institutions, such as UTI, control 2.3 per cent. The government and non-government institutions hold around 2.4 per cent and IOC employees own a little less than 4 per cent of the shares. Upstream oil major ONGC has a 9.1 per cent stake in IOC which was acquired through a share swap between the two companies.

This is IOCís second bonus issue to reward its shareholders as the company is doing well. IOC had issued bonus shares in the ratio of 1:1 in 1999-2000. Earlier, the company had announced a 50 per cent interim dividend which the government had used to reduce its fiscal deficit.

The profits of IOC have shown an increase after the administered price mechanism was dismantled in April 2002. However, being a public sector company, it is forced to hold the price line of petroleum products, especially LPG and kerosene.

Since the government holds an 82 per cent stake in the company, very few shares are actually traded on the stock market. Indian stock markets are notorious for being speculation-driven and do not reflect the true worth of the company either.

The increase in the number of the equity shares is also expected to increase the float of shares in the stock market. The IOC scrip has been rising steadily from Rs 235 on April 30 this year to Rs 392 today on the Bombay Stock Exchange.

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