ONGC Q2 net profit rises 6.2 per cent, announces bonus shares

Oil and Natural Gas Corp reported a healthy net profit of Rs 4,974.92 crore in the July-September quarter of the current fiscal year.

Oil and Natural Gas Corp's net profit was 6.2 per cent higher than Rs 4,681.39 crore earning in the same period a year ago, the company said in a regulatory filing.

The oil giant announced a bonus share to increase liquidity ahead of government disinvestment. ONGC also said its board approved issue of bonus shares in the proportion of one new equity share for every two existing ones of Rs 5 each.

With all of its about Rs 14,000 crore cash committed in future projects and capital expenditure, the company favoured issuing bonus shares rather than cash dividends as a method of providing income to shareholders.

Issuing bonus shares increases the issued share capital of the company, which is then perceived as being bigger than it really is, making it more attractive to investors.

When a company issues bonus shares, the price of its existing shares comes down by about the same ratio as the bonus shares that have been issued. So, if the bonus issue is 1:1, which means they are issuing one additional share for each existing share, the market price of the share will roughly halve.