Elcid Investments, once a penny stock, is now trading at around ₹2,36,250. It was trading at around Rs. 3.5 in June 2024 and now 67,49,900% Gain! So, how did Elcid Investments become the most expensive stock in the market, and what does the company actually do?
Elcid is an Investment Company (IC), specializing in investing in stocks, mutual funds, debentures, and similar assets. Elcid Investments has just 328 shareholders (6 promoters and 322 public) and total number of shares at only 2,00,000. The company holds 2,83,13,860 equity shares or nearly 3% stake in Asian Paints, which is worth nearly Rs 9,000 crores.
Recently, a June 2024 SEBI circular introduced a new mechanism aimed at improving price discovery for such ICs. SEBI observed that many such ICs were trading well below their book value, which led to the introduction of a new framework - “special call auction with NO price bands”. This framework aims to boost liquidity, encourage fair price discovery, and stimulate investor interest in these stocks.
Now to be eligible for a special call auction, a company must:
- Be recognized as an Investment Company by the exchange(s)
- Be listed on an exchange(s) for at least one year without suspension from trading
- Hold at least 50% of its assets in investments in other listed companies
- Have a 6-month Volume Weighted Average Price (VWAP) of less than 50% of its book value based on its investment holdings
Elcid Investments met all these criteria. In June 2024, it was trading at just ₹3.5 per share, while its book value was more than ₹4,00,000 per share. Due to this massive gap, eliminating price bands for Elcid Investments made sense, as the stock was repeatedly hitting the upper circuit, delaying the true price discovery. (Personally even I used to place an AMO at UC in the hope of getting shares! )
As a result, Elcid Investments participated in the first-ever special call auction held on October 28, and by October 29, it was trading at ₹2,30,000 per share (well below its book value).
How does the special call auction work?
- Each scrip is allowed a special call auction window only once a year.
- Exchanges must provide at least 14 days’ notice for the eligible stocks.
- A successful auction requires the participation of at least five unique buyers and sellers.
- If the price discovery isn’t successful on the first day, the auction can continue for consecutive days until a price is reached.