Select PSU stocks in demand on bonus issue hopes

Shares of eight state-run companies rose 1.63% to 4.66% on reports the government may ask them to issue bonus shares.

National Thermal Power Corporation (NTPC) rose 2.30% to Rs 234.50, Bharat Heavy Electricals (Bhel) gained 4.30% to Rs 2470.50, Steel Authority of India (Sail) rose 1.63% to Rs 268.55, Oil and Natural Gas Corporation (ONGC) advanced 4.32% to Rs 1242.20, Indian Oil Corporation (IOC) moved up 2.83% to Rs 646, Bharat Petroleum Corporation (BPCL) rose 2.54% to Rs 443.10, Hindustan Petroleum Corporation (HPCL) gained 1.69% to Rs 316.50 and GAIL India surged 4.66% to Rs 501.25

Meanwhile, BSE Sensex was up 526.26 points or 2.75% to 19,685.80 as stronger-than-expected US consumer spending calmed fears the world's top economy was heading into a recession.

As per reports, the government may ask these public sector firms (PSUs) to issue bonus shares as their reserves and surplus have increased to several times their paid-up capital.

According to official guidelines in place for public sector enterprises (PSEs), they should issue bonus shares to its shareholders if their reserves are in excess of three times their paid-up capital.

The department of public enterprises (DPE) has prepared a list of 75 PSEs, including about two-dozen listed companies that are sitting on huge reserves and surplus. DPE plans to take the Prime Ministers Office (PMO's) help to direct PSEs to issue bonus shares. PMO would intervene in case of such companies where paid-up capital would be Rs 100 crore or more, as per the report.

Indian Oil Corporation (IOC's) reserve and surplus is 29 times (Rs 33,365 crore) its paid-up capital (Rs 1,168 crore). In case of Hindustan Petroleum Corporation (HPCL), it is 28 times (reserves Rs 9,260 crore, paid-up capital Rs 339 crore), Bharat Petroleum Corporation (BPCL) 27 times (reserves Rs 9,912 crore, paid-up capital Rs 362 crore), and Oil and Natural Gas Corporation (ONGC) 28 times (reserves Rs 59,785 crore, paid-up capital Rs 2,139 crore).