In a jaw-dropping turn of events, Elcid Investments Ltd, an obscure Indian investment company, has skyrocketed to become India’s most expensive stock. On Tuesday, October 29, 2024, Elcid’s shares were relisted on the Bombay Stock Exchange (BSE) at an astonishing price of ₹2,36,250 apiece, surpassing the previous record-holder, MRF, by a wide margin.
Just a few months ago in July, Elcid was a mere penny stock trading at ₹3.21. The company’s fortunes changed dramatically when the BSE conducted a special call auction on October 28 for price discovery of holding companies. This auction, held with no price bands, allowed Elcid’s stock to soar from ₹3.53 to ₹2,36,250 in a single day – a mind-boggling jump of 66,92,535%.
SEBI’s Special Call Auction Mechanism
The catalyst for Elcid’s meteoric rise was a June 2024 circular by the Securities and Exchange Board of India (SEBI) that proposed a new mechanism to improve price discovery for Investment Companies (ICs) and Investment Holding Companies (IHCs). SEBI had noticed that many such companies were trading significantly below their book value.
To address this issue and enhance liquidity, SEBI introduced a framework for “special call auction with no price bands” for these stocks. The auction was open to ICs and IHCs that had been listed for at least one year, were not suspended from trading, and had at least 50% of their assets invested in other listed companies.
Elcid’s Massive Discount and Promoter’s Delisting Offer
Despite the astronomical surge in its stock price, Elcid Investments is still trading at a significant discount to its intrinsic value. Raj Gaikar, Research Analyst at SAMCO Securities, noted that even at ₹2.3 lakh per share, Elcid trades at a price-to-book multiple of just 0.38.
The company’s promoters had voluntarily made an offer for delisting at a base price of ₹1,61,023 per share. However, the resolution failed due to non-receipt of the requisite majority from public shareholders.
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Elcid’s Investment Holdings and Earnings
Elcid Investments’ primary asset is its 2.95% stake in Asian Paints Ltd, valued at nearly ₹8,500 crore. The company’s net profit for the June 2024 quarter stood at ₹135.95 crore, a 39.57% increase from the previous year. Net sales also grew by 38.28% to ₹177.53 crore.
Market Reactions and Expert Opinions
Hitesh Dharawat of Dharawat Securities highlighted the buzz surrounding Elcid’s holding in Asian Paints as a key factor in its stock price surge. However, he cautioned that the stock still trades at a discount to its book value.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, advised investors to consider cash flows and the nature of a company’s business before investing. He emphasized the importance of liquidity and cautioned that holding companies may carry liquidity risks.
What Next6?
Elcid Investments’ journey from a penny stock to India’s most expensive share has captured the attention of market participants and experts alike. While the company’s substantial holding in Asian Paints and its undervalued stock price present an intriguing investment opportunity, investors must carefully consider the associated risks and liquidity concerns before making any decisions.
As the market continues to digest this unprecedented event, it remains to be seen how Elcid Investments will perform in the long run. Will it maintain its position as India’s priciest stock, or will market forces bring about a correction? Only time will tell, but one thing is certain – Elcid Investments has etched its name in the annals of Indian stock market history.
