Mumbai, Sept. 4: Indian Oil Corporation is mulling a bonus issue.

The board of directors of the state-owned oil refiner will meet on September 13 to consider a proposal to issue bonus shares.

IOC had last declared a bonus in 2003 when it had issued one share for every two shares held.

Before that, the company had issued bonus shares in 1999 and 1994 in the ratio of 1:1 and 2:1, respectively.

Market circles are optimistic that IOC will issue a 1:1 bonus this time.

On the Bombay Stock Exchange, the scrip rose less than half a percentage point to close at Rs 616.95.

However, the company announced plans for a bonus issue after market hours. The stock is expected to surge when the market reopens on Monday.

The sudden largesse from the state-owned oil refiner comes as a bit of a surprise. In a bonus issue, a company dips into its free reserves to offer the bonus shares and, thereby, increases its equity capital base.

A number of public sector firms have very small capital bases in proportion to the size of their reserves. The government has been considering ways to boost the equity capital of these companies and a bonus issue is one of the easiest ways to do that.

IOC has a relatively small equity capital base of Rs 1,192.37 crore compared with its reserves and surpluses of Rs 42,789.29 crore as on March 31. The government holds almost 79 per cent in the oil refiner.

The bonus announcement comes at a time when public sector refiners are spooked by the spectre of losses for selling petrol, diesel and cooking gas at government-mandated prices that are below cost.

A senior IOC official had said it could stand to lose over Rs 25,000 crore in revenues this fiscal.

IOC, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd are losing Rs 90 crore a day on fuel sales.