ONGC mulls stock split or bonus issue

Oil Natural Gas Corporation added to the bull party on the Dalal Street on Wednesday, after it announced that the company was contemplating a share split or bonus...

Oil 038; Natural Gas Corporation ONGC added to the bull party on the Dalal Street on Wednesday, after it announced that the company was contemplating a share split or bonus issue. 8220;We are sensitive to the concerns of small investors that they may be able to buy ONGC shares at current prices. And, therefore, in due course we will resort to a share split or bonus issue. However, I cannot say anything on the time frame,8221; ONGC chairman 038; managing director R S Sharma said.

A bonus issue will benefit the government hugely as it is the single-largest shareholder in the company. Last year, ONGC had announced a 1:2 bonus issue. However, analysts said the move did not make sense as the company8217;s equity base of Rs 2,852 crore was already on the high side. Moreover, they said ONGC being a zero-debt company, it should not look at another bonus issue as it can instead easily raise the same funds from the market. A stock split involves splitting the face value of each share into smaller denominations. This allows more people to invest in the company, at a possibly lower premium.

ONGC8217;s stock gained 5.9 per cent to Rs 901.05 on news of share split plus bonus issue. The stock touched an intra-day high of Rs 924.50 and a low of Rs 860 after opening at Rs 860. 8220;Today ONGC8217;s market cap is behind Reliance8217;s by over Rs 1 lakh crore, while last year, before it announced a 1:2 bonus, Reliance8217;s market cap was Rs 40,000 crore behind ONGC8217;s. So the question is why should ONGC even consider another bonus or stock split at this stage,8221; an analyst asked on condition of anonymity. The source also pointed out that since the announcement of a possible bonus or a stock split by ONGC was price sensitive information, it should have been made after informing the stock exchanges where the company is listed.

ONGC declared its highest-ever dividend of 310 per cent in 2006-07. It recorded its highest turnover of Rs 56,904 crore, up by 18 per cent over that of the previous year, and its highest-ever net profit of Rs 1,643 crore, which is 8.4 per cent more than that of the previous fiscal.

PRICE SENSITIVE

8226; Bonus will benefit govt as it is ONGC8217;s single-largest shareholder

8226; Analysts question move as equity base already at high Rs 2,852 cr

8226; Company stock gained 5.9 to Rs 901.05 on the news of split-bonus

8226; ONGC declared its highest-ever dividend of 310 in 2006-07