Shares of Elcid Investments, an investment company, rose a staggering 6.7 million per cent on Tuesday to ₹2,36,250 apiece, surpassing MRF as the highest-priced stock in India in absolute terms.
This was after a special call auction “with no price bands” was held for the stock that last traded at ₹3.5 per share, and has a book value of more than ₹4 lakh per share.
“This massive discount left existing shareholders unwilling to sell. To address this undervaluation, the exchanges organised a special auction session for holding companies with deep discounts compared to their book value. This session led to a fair value discovery of its price,” said Raj Gaikar, Research Analyst, SAMCO Securities.
Elcid Investments holds a 1.28 per cent stake in Asian Paints, with a stake value of ₹3,616 crore, according to Gaikar. Even at ₹2.3 lakh per share, Elcid trades at a price-to-book multiple of just 0.38, he said.
SEBI circular
A 2024 SEBI circular had proposed a new mechanism to improve the price discovery of investment companies (ICs) and investment holding companies (IHCs).
ICs primarily invest in stocks, mutual funds and debentures, while IHCs hold most of their assets in group companies. Both ICs and IHCs have no other active line of operation. Investments are their primary assets and also their source of income.
“SEBI noticed that many ICs and IHCs are trading significantly below their book value. To help improve liquidity, fair price discovery and the overall investor interest in the stocks of such companies, SEBI introduced a framework for ‘special call auction with no price bands’ for these stocks,” said a note by Zerodha.
For this auction to be held, the ICs and IHCs should be listed on an exchange for at least one year and not suspended from trading, with at least 50 per cent of its assets as investments in other listed companies. The six-month Volume Weighted Average Price (VWAP) of the scrip has be less than 50 per cent of its book value per share based on the value of the listed stocks it holds.
