HPCL, BPCL To Consider Bonus Issue On May 9
If approved, this will mark the first time in seven years that both the oil companies have had a bonus issue.
Indian oil marketing companies Bharat Petroleum Corp. and Hindustan Petroleum Corp. will consider a bonus issue on May 9.
The oil marketing companies, through individual submissions to stock exchanges, announced that their boards are scheduled to convene on May 9 to consider and approve the issuance of bonus shares.
If approved, this will mark the first time in seven years that both oil companies have had a bonus issue.
What Is A Bonus Issue?
A bonus issue, also called a scrip or capitalisation issue, involves providing existing shareholders with free additional shares.
For instance, if a company announces a 1:2 bonus issue, the shareholders are entitled to receive two additional shares for each existing share they hold.
Such actions are taken by companies to stimulate further investment and reward shareholders. A bonus issue increases a company’s outstanding shares but not its market capitalisation. Companies usually fund a bonus issue through profit or existing share reserves.
The issuance of bonus shares is not taxable. However, shareholders must pay capital gains tax if they sell them for a net gain.
Background
If sanctioned, this would mark Bharat Petroleum Corp.'s fifth bonus issue, with the previous one occurring in July 2017.
The July 2017 bonus issue by Bharat Petroleum was in the ratio of 1:2. Prior to that, the company distributed bonus shares at a 1:1 ratio (one free share for each share held) on three occasions—July 2016, July 2012, and December 2000.
As for Hindustan Petroleum Corp., it will be the third instance of the company issuing bonus shares to its shareholders.
The previous bonus issue by the oil marketer was in July 2017 as well, where the provided shares were in the ratio of 1:2, granting shareholders an extra share for every two held.
Prior to this, in September 2016, the firm distributed bonus shares in a 2:1 ratio.
