Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), companies dealing in oil refining and fuel marketing, are planning to offer bonus shares to their shareholders. The boards of both companies will convene on May 9 to discuss and sanction the distribution of bonus shares.
What could be the benefit of these bonus shares and what is the BPCL and HPCL bonus share history?
Let us take a look!
Bonus Shares of BPCL and HPCL| Key Highlights
- BPCL and HPCL will consider issuing bonus shares to shareholders this week.
- Separate board meetings scheduled for May 9 to approve bonus share issuance.
- Bonus shares aim to enhance attractiveness for retail investors and reflect financial health.
- If approved, it will be BPCL’s fifth and HPCL’s third bonus issue.
- Previous bonus issues by HPCL and BPCL date back to 2017 and 2000, respectively.
What are Bonus Shares
A bonus issue, also called a scrip issue or capitalisation issue, means giving existing shareholders additional shares for free. This move doesn’t affect the company’s market capitalisation but increases the number of outstanding shares.
Bonus shares are like a reward that companies give to their existing shareholders.
Let’s say you own the shares of Bharat Petroleum Corporation Ltd (BPCL) or Hindustan Petroleum Corporation Ltd (HPCL).
Now, if the company decides to issue bonus shares, it means they’re giving you extra shares for free based on the shares you already have.
In the news we just read, BPCL and HPCL, oil refining and fuel marketing companies in India, are considering giving bonus shares to their shareholders.
So, why do companies give these?
Reasons for Bonus Shares
Companies issue bonus shares to make their stocks more appealing to retail investors. They offer an alternative to cash dividends and indicate financial stability.
Well, it’s a way to make their existing shareholders happy. It doesn’t change the overall value of the company, but it does increase the number of shares that exist.
This can make the shares more attractive to investors, and it’s also a way for the company to show that it’s doing well financially.
Types of Bonus Shares
There are two types of bonus shares:
- Fully paid bonus shares
- Partly-paid up bonus shares
Fully Paid Bonus Shares: These are shares given to investors without any extra cost based on their existing holdings in the company. They can come from profits, reserves, or premiums.
Partly-Paid Up Bonus Shares: Partly-paid shares are those not fully paid compared to the full issue price.
When bonus shares apply to partly-paid shares, it makes them fully paid without further payments. Thus, they become partly paid-up.
Now, are bonus shares and stock splits the same?
Let us take a look!
Bonus Shares and Stock Split
Bonus shares are additional shares distributed to existing shareholders without any cost, while a stock split increases the number of shares outstanding, keeping the total market value unchanged.
| Bonus Share | Stock Split |
| Company rewards shareholders with free additional shares. | Existing shares are divided into smaller units. |
| Increases the total number of shares in circulation. | Increases liquidity by making shares more affordable. |
| No change in the company’s overall value. | No change in the company’s total market capitalisation. |
| Aimed at rewarding shareholders without affecting company finances. | Intended to enhance accessibility for a wider range of investors. |
Previous Bonus Issuances by BPCL and HPCL
BPCL has previously issued bonus shares four times, with the latest in July 2017.
Meanwhile, HPCL has distributed bonus shares twice before.
HPCL Bonus Share History
HPCL previously provided bonus shares in July 2017 in a ratio of 1:2, meaning shareholders received one additional share for every two held.
In September 2016, they issued bonus shares in a 2:1 ratio.
BPCL Bonus Share History
BPCL, on the other hand, issued bonus shares in a 1:2 ratio in July 2017.
Before that, they gave it in a 1:1 ratio (one free share for every share held) on three occasions – July 2016, July 2012, and December 2000..
Upcoming Board Meetings
HPCL’s board will meet on May 9 to approve financial results for the 2023-24 fiscal year and the fourth quarter ending March 31. They will also discuss recommending bonus equity shares.
BPCL’s board will also convene on the same day to consider and approve financial results for the quarter and fiscal year ending March 31, 2024, and to discuss a recommendation for a final dividend. They may also contemplate issuing bonus shares in this meeting.
Official Notification by BPCL – May 6th, 2024
BPCL will inform BSE and NSE about a board meeting on May 9th, 2024. The meeting’s aim is to discuss financial results and potential bonus share issuance, as per SEBI regulations
Conclusion
BPCL and HPCL’s history of bonus share issuances reflects their commitment to shareholder value. As they gear up for upcoming board meetings to discuss potential bonus share distributions, investors should stay tuned for possible opportunities.
This move presents a chance for shareholders to reap additional benefits.
Source- moneycontrol.com
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.