Indian Oil Corporation rallied today  on reports that the company has recommended a 1:2 bonus issue of equity shares to its shareholders.

By 12:10 IST, the scrip of the state-run oil company jumped by 4.01% to Rs 392 on the BSE on sustained buying support, but eased from its intra-day high of Rs 405. A volume of over 8.2 lakh  shares were recorded on the counter. The scrip has risen by 67% from Rs 235 on 30 April 2003.

Today's rise in the Indian Oil Corporation (IOC) stock was due to reports that the company has recommended a 1:2 issue of bonus equity shares i.e. one new share for two existing equity shares. This will increase the company's equity base to Rs 1,168.02 crore from the current Rs 778.68 crore.

However, dealers said that domestic institutions booked profit in the IOC stock, as it had surged substantially in the last few sessions.

Meanwhile, the shares of oil refiners are in the limelight on improved growth  prospects. With Bharat Petroleum Corporation (BPCL) coming out with solid Q4 results, the same is expected of IOC. The company is expected to declare a huge dividend of around Rs 40 per share (400% on a face value of Rs 10 per share) for FY 2002-03.

Fundamentally, IOC looks very strong. It has 10 refineries and 22,000 petrol pumps, representing 42% of the total refining capacity and 53% of petroleum product sales in India. IOC owns 6,523 km of crude and product pipelines in India, including eight of the 11 product pipelines.

IOC's huge investment of Rs 4,280 crore in shares of oil companies is also expected to earn it huge dividends. The company has invested in shares of ONGC, Gas Authority of India (GAIL), IBP, Chennai Petroleum and Bongaigaon Refinery at historically low prices. All these companies have posted record profits and announced fat dividends.

For the third quarter ended 31 December 2002, IOC recorded a 37% increase in net profit to Rs 776.56 crore (Rs 567.79 crore) on a 10% rise in net sales to Rs 31,212.23 crore (Rs 28,416.87 crore).

As on 31 March 2003, the Government of India held 82.03% equity stake in IOC, while the public and institutions held 3.70% and 4.94% respectively.