Engineers India Q2 net profit jumps 21% to Rs 94 cr

State-owned Engineers India Ltd today reported a 21 percent jump in September quarter net profit and declared a 1:1 bonus share.

Net profit in July-September rose to Rs 93.75 crore as compared to Rs 77.21 crore in the same period a year before, the company said in a regulatory filing.

Turnover, however, decreased to Rs 394.98 crore for the quarter ended September 30, from Rs 510.32 crore in Q2 of last fiscal.

EIL said its board at its meeting today recommended the issue of bonus shares in the proportion of one new equity share of Rs 5 each for every one existing equity shares of Rs 5 each fully paid up of the company.

A bonus issue, also known as a scrip issue or a capitalisation issue, is an offer of free additional shares to existing shareholders. A company often distribute such shares as an alternative to increase the dividend payout.

EIL had last issued a 2:1 bonus share in March 2010. A similar ratio bonus share was issued in December 1999 and August 1999.

The government had asked profit making public sector units to issue bonus share, do share split or pay special dividend to help capitalise its holding.

Companies low on cash may issue bonus shares rather than cash dividends as a method of providing income to shareholders. Issuing bonus shares increases the issued share capital of the company to give a perception of being bigger than it really is, making it more attractive to investors.

Also, increasing the number of outstanding shares decreases the stock price, making the stock more affordable for retail investors.

The government holds 59.37 percent stake in EIL.