The board decision late on Wednesday evening will double the more than Rs 60,000 crore-turnover mega corporation's equity capital of Rs 389.34 crore to Rs 778.68 crore, increasing the ``liquidity'' of the company. The company has Rs 11,880 crore of reserves.

Indian Oil plans to call an extraordinary general meeting shortly to ratify the proposal. The bonus issue will prove a boon to the Centre's disinvestment plans, spurring the oil giant's market capitalisation subsequently. The cabinet decision to divest 10 per cent of the Government shareholding in the company has been deferred more than once in the past, but discussions have started afresh now.

The Indian Oil scrip opened at Rs 355 on the Bombay Stock Exchange, higher than its previous close of Rs 352. The opening quote was also the intra-day low for IOC whichrallied to touch an intra-day high of Rs 375. The counter finally closed at Rs 369.30, up Rs 17.30 from Tuesday's close. Over 52,500 shares changed hands at the IOC counter on BSE.

The board also decided to go it alone with their petrochemical plant at Panipat for the time being, hoping to rope in a joint venture partner at a later date. The company plans to commission the Rs 4,228 crore project in 42 months.

The petrochemical plant will produce 5.25 lakh tonne of purified terephthalic acid (PTA) through the paraxylene route. So long Indian Oil had been negotiating with the Oil and Natural Gas Corporation (ONGC), the Malaysian national oil company Petronas and Indian Petrochemicals Company Limited (IPCL) as prospective partners in the project.

At its marathon three-hour meeting, the Indian Oil board also decided to appoint a distributor for its ``Servo'' brand of lubricants in Bangladesh. The oil refining and marketing giant, which has roughly 50 per cent of the Indian market in its grip, has beenspreading its wings to other parts of the continent of late.

The 1:1 bonus issue was approved in principle by the Government in 1996, but will require a formal nod now. Since the equity swap of 10 per cent government stock between Indian Oil and ONGC, the Centre's shareholding in Indianoil has come down to 82 per cent.

Employees own 5 per cent of the company, the ONGC's stake is a little more than 9 per cent and banks and financial institutions have a shareholding of roughly 4 per cent in the company. At the moment, therefore, very little of Indian stock is traded at the bourses.

It will more than anything else increase the stock on offer for disinvestment. The disinvestment of government stock in Indian Oil is expected to be a mix of a domestic issue and a global depository receipts (GDR) issue.

The bonus issue will prove a boon for both. A final decision on the nature of the disinvestment is expected to be taken in the coming two months.