Elcid Investments Becomes India’s Most Expensive Stock Following Special Call Auction

Elcid Investments, once a penny stock, has now surpassed MRF to become India’s most expensive stock. Recently, Elcid’s share price surged to around ₹2.3 lakh, nearly doubling MRF’s price of approximately ₹1.2 lakh. This dramatic rise is attributed to Elcid’s participation in a SEBI-led special call auction mechanism designed to improve price discovery for Investment Companies (ICs) and Investment Holding Companies (IHCs).

Elcid Investments: India’s Most Expensive Stock

Elcid Investments and Its Business Model

Elcid Investments operates as an Investment Company, focusing on investments in stocks, mutual funds, and debentures. For ICs and IHCs, investments form their primary assets and revenue source, with no other active operational business line. IHCs, particularly, hold most of their assets within their group companies.

SEBI’s Mechanism for Investment Companies and IHCs

In June 2024, SEBI issued a circular introducing a new mechanism aimed at enhancing the price discovery process for ICs and IHCs. The regulatory body observed that many ICs and IHCs were trading far below their book value, impacting fair valuation and investor interest. To address these issues, SEBI introduced a framework that allows these stocks to participate in a “special call auction with no price bands.”

Key Criteria for Participation in Special Call Auction

To qualify for SEBI’s special call auction, Investment Companies and Investment Holding Companies must meet specific requirements:

1. Listing Duration: The company must have been listed on a recognized exchange for at least one year.
2. Asset Composition: At least 50% of the company’s assets must consist of investments in other listed stocks.
3. Valuation Gap: The six-month Volume Weighted Average Price (VWAP) should be less than 50% of the book value, calculated based on the value of listed stocks it holds.

Elcid Investments met these criteria, which made it eligible for the auction. The stock, which last traded at ₹3.5 per share in June 2024, has a book value exceeding ₹4 lakh per share, resulting in a substantial gap between market price and intrinsic value.

The Impact of SEBI’s Auction Mechanism

SEBI’s decision to eliminate price bands for eligible ICs and IHCs allows stocks like Elcid Investments to trade freely without hitting the upper circuit limit during the auction process. On October 28, the first-ever special call auction for Elcid Investments was held, leading to a trading price of around ₹2.3-2.4 lakh per share by October 29, still well below its book value.

How the Special Call Auction Works

The special call auction process follows a structured approach to ensure successful price discovery. The steps include:

1. Advance Notice: The exchange announces a 14-day notice before the auction date.
2. Participation Requirement: The auction requires participation from at least five unique buyers and sellers to ensure a fair price discovery.
3. Continued Auctions: If the price discovery does not succeed on the first day, the auction continues on subsequent days until a successful outcome is achieved.

Elcid Investments has now emerged as India’s highest-priced stock following SEBI’s special call auction mechanism, with its share price reaching ₹2.3 lakh. While this remains under 50% of its book value, the special auction enabled a significant valuation adjustment, reflecting Elcid’s intrinsic asset value more accurately in the market.

Tags: Elcid Investments, MRF stock, SEBI special auction, Indian stock market, Investment Companies, most expensive stock, price discovery, India stocks, Elcid share price, Investment Holding Companies