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State-owned Engineers India Ltd will consider issuing bonus shares to reward shareholders and liquidity of the stock next week.
The board of EIL will meet on November 16 to consider “the issue of bonus shares’’, the company said in a regulatory filing.
A bonus issue, also known as a scrip issue or a capitalisation issue, is an offer of free additional shares to existing shareholders. A company often distribute such shares as an alternative to increase the dividend payout.
EIL had last issued a 2:1 bonus share in March 2010. A similar ratio bonus share was issued in December 1999 and August 1999.
The government had asked profit-making public sector units to issue bonus share, do share split or pay special dividend to help capitalise its holding.
Companies low on cash may issue 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 to give a perception of being bigger than it is really is, making it more attractive to investors.
Also, increasing the number of outstanding shares decreases the stock price, making the stock more affordable for retail investors.
The Government holds 59.37 per cent stake in EIL.
EIL shares were trading up by 4.56 per cent at Rs 262.30 on the BSE.
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