Shares of GAIL India rose as much as 3 percent on Monday after the company said in an exchange filing its board of directors would meet on July 27 to consider the issuance of bonus shares.

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Bonus share is an offer of free additional shares to existing shareholders. Companies low on cash may issue bonus shares rather than cash dividends to provide shareholders income.

“Because issuing bonus shares increases the issued share capital of the company, the company is perceived as being bigger than it really is, making it more attractive to investors. In addition, increasing the number of outstanding shares decreases the stock price, making the stock more affordable for retail investors,” according to Investopedia.

At 12:36 IST, shares of the company were trading percent 2.4 higher at Rs 145 on the BSE.

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Recent developments

State-owned exploration giant ONGC recently signed gas sale agreements with GAIL India and Assam Gas Company Ltd to monetise natural gas at its upcoming gas well at Khubal under Panisagar of North Tripura. Under the agreement, GAIL and Assam Gas Company will receive 50,000 standard cubic metres of gas each from the Khubal Gas Gathering Station, as per reports.

Motilal Oswal Financial Services expects GAIL transmission business to grow at 8-10 percent compounded annually over the next three years.

Analysts believe this would be driven by high demand from city gas distributors, refineries and fertiliser plants.

“Regulatory push bodes well for volume growth for GAIL’s gas transmission/marketing business and should mean decent earnings visibility,” domestic brokerage firm Sharekhan said in a research report dated May 30.

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