ONGC board approves stock split, bonus issue

The biggest government-owned company, Oil and Natural Gas Corporation Ltd (ONGC), today announced issue of three more shares against one through a stock split and a bonus share issue, prior to the company’s follow-on public issue in March. The company also decided to pay a special interim dividend of Rs 32 a share, entailing a cash outgo of Rs 6,844 crore in dividend and Rs 1,163 crore in dividend tax.

Besides the tax, the government, with a 74.11 per cent shareholding in the company, will get Rs 5,074 crore as dividend. The income will accrue to it even before its goes for a five per cent disinvestment in the company to raise about Rs 13,000 crore.

“Based on the current indications, the follow-on public offer (FPO) (of five per cent of government’s shares) should open around the first week of March,” R S Sharma, chairman and managing director, said at a press conference after the board meeting.

The payment of special interim dividend will reduce the company’s reserves by more than half, to Rs 7,000 crore from the present Rs 15,000 crore, said director (finance), D K Saraf. The special interim dividend is 320 per cent of the company’s total paid-up equity, even as its total dividend during 2009-10 was 330 per cent and 320 per cent in 2008-09.

While the record date for payment of special dividend has been fixed as December 21, the company will seek shareholder approval for the stock split and bonus issue through a postal ballot.

After the stock split and bonus issue, the face value of shares will be Rs 5 instead of Rs 10. The total number of shares will increase from 2,139 million to 8,556 million. The market value of ONGC’s shares, after the split, will be around Rs 335, as against today’s closing price of Rs 1,329 on the Bombay Stock Exchange. The lower share value will help attract retail investors for FPO.

Sharma said the book running lead managers for FPO are likely to be appointed by the first week of January. Besides, the company will appoint five independent directors to meet Sebi’s listing requirement.

The company will file its draft red herring prospectus before January-end. International reserve auditors — DeGolyer and MacNaughton and Gaffney, Cline and Associates — are expected to finalise their reserve estimates for ONGC by then.