Castrol India to consider capital reduction, stock gain 5%

The board to consider return a part of the nominal value of the shares to the shareholders of the company.

Castrol India has rallied 5% to Rs 327 after the oil marketing and distribution company announced capital reduction plan.

“The board of directors of the company is meeting today to consider the reduction in the share capital of the company i.e. return a part of the nominal value of the shares to the shareholders of the company,” Castrol India said in a filing.

The reduction of capital is done by companies for numerous reasons including increasing shareholder value and producing a more efficient capital structure.

After a capital reduction, the number of shares in the company will decrease by the reduction amount. In some capital reductions, shareholders will receive a cash payment for shares cancelled - but, in other situations, there is minimal impact on shareholders.

Meanwhile, the board will also to take on record the unaudited financial results for the quarter first quarter ended March 2013 (Q1).

The stock opened at Rs 313 and touched a high of Rs 328 on NSE. A combined 151,135 shares have changed hands on the counter till 0954 hours against an average around 100,000 shares that were traded daily in past two weeks on NSE and BSE.