ONGC board to consider stock split, bonus issue on Dec 16

The board of state-owned Oil and Natural Gas Corporation (ONGC) will meet on December 16 to consider issuing a special dividend to its shareholders, a stock split and a bonus issue, the company said today.

ONGC plans to split equity shares of Rs 10 face value into two shares of Rs 5 face value each.

Furthermore, the board will consider a 1:1 bonus share issue -- with one new share issued against every existing equity held by shareholders -- as a precursor to the planned launch of the company's follow-on public offer (FPO) in March, 2011.

After the share split and bonus issue, the market value of ONGC's shares will dip to around Rs 335, as against today's closing price of Rs 1,337.70 on the Bombay Stock Exchange and it is expected this will be an attractive level for retail investors to subscribe to the company.

The ONGC board will meet on December 16 to consider issuing "bonus shares in the ratio of 1:1, split one share into two and to consider payment of an appropriate amount as special dividend before the proposed disinvestment," the company said in a statement.

Last week, the Cabinet Committee on Economic Affairs (CCEA) approved splitting every ONGC share with a face value of Rs 10 into two shares of Rs 5 each.

ONGC had suggested to the government that the company's stock should be split ahead of the FPO, under which the government plans to sell a 5 per cent stake in the company to raise around Rs 10,800 crore.

Following the offer, the government's stake in ONGC would come down to 69.14 per cent from 74.14 per cent at present.

ONGC has already appointed two international auditors -- DeGolyer and MacNaughton and Gaffney, Cline and Associates -- to certify its oil and gas reserves, a prerequisite for any exploration firm going for a public offering.

The company, which usually gets its reserves audited every five years, is getting certification done after just a three-year gap this time because of the planned FPO.