{"id":47211,"date":"2024-10-30T12:26:50","date_gmt":"2024-10-30T06:56:50","guid":{"rendered":"https:\/\/www.equentis.com\/blog\/?p=47211"},"modified":"2025-03-27T19:16:29","modified_gmt":"2025-03-27T13:46:29","slug":"a-smallcap-overtook-mrf-elcid-investments-66-lakh-percent-rise","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/a-smallcap-overtook-mrf-elcid-investments-66-lakh-percent-rise\/","title":{"rendered":"How a Smallcap Stock Overtook MRF \u2013 Elcid Investments\u2019 66 Lakh Percent Rise to \u20b92,36,250"},"content":{"rendered":"
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Have you ever heard of a stock soaring by millions of percent in a single day? For Elcid Investments<\/a>, this astonishing surge in value from \u20b93.53 to \u20b92,36,250 per share has rewritten Dalal Street’s history. <\/p>\n\n\n\n

This stock, now India\u2019s most highly-priced, has overtaken the previous record-holder, MRF, which was priced at around \u20b91.2 lakh. However, unlike the frantic buying typical of a stock boom, Elcid\u2019s meteoric rise stemmed from a special auction session<\/strong> designed to discover its fair value.<\/p>\n\n\n\n

Let\u2019s examine the factors behind this record-setting increase and the nuances of the valuation process that led to it.<\/p>\n\n\n\n

Understanding Elcid\u2019s Market and Book Value Gap<\/strong><\/h2>\n\n\n\n

Founded as an investment holding company, Elcid Investments has been largely unnoticed on the Bombay Stock Exchange (BSE<\/a>) for years. Despite being traded at just \u20b93 per share since 2011, the stock’s book value stood at an impressive \u20b95,85,225 per share. <\/p>\n\n\n\n

The reason for this disparity lay in Elcid\u2019s main asset: a 1.28% stake in Asian Paints, a stake currently valued at around \u20b93,616 crore and accounting for 80% of Elcid\u2019s market cap. This significant asset left Elcid\u2019s stock undervalued in trading, as its market price remained low despite its high intrinsic value.<\/p>\n\n\n\n

This steep discount to the book value left many investors unwilling to sell their shares, leading to negligible trading volumes. Due to the lack of liquidity, no trades have been executed since 2011. Regulatory authorities and exchanges intervened to bridge this valuation gap, conducting a particular auction to reflect the stock\u2019s intrinsic worth better.<\/p>\n\n\n\n

The Role of Special Call Auctions<\/strong><\/h2>\n\n\n\n

The extraordinary rise in Elcid\u2019s stock price<\/a> can be traced to a call auction session conducted by BSE and NSE<\/a> on October 28. This auction aimed to address deep valuation gaps in investment holding companies, many of which were trading far below their book values despite holding valuable assets.<\/p>\n\n\n\n

In Elcid\u2019s case, the auction allowed the market to establish a price based on a consolidated pool of buyers and sellers, ultimately discovering a fair market value of \u20b92.25 lakh per share. The highest traded value during the session reached \u20b94.58 lakh, but Elcid was allowed to start selling at \u20b92.25 lakh the following day, October 29.
Source: <\/em><\/strong>Economic Times<\/em><\/strong><\/a><\/p>\n\n\n\n

What is this Special Call Auction<\/strong><\/h2>\n\n\n\n

Stock exchanges like BSE and NSE periodically conduct a particular call auction for price discovery to help determine the fair market value of shares in highly illiquid companies, especially in the investment holding sector. These auctions help establish a reasonable price range for stocks that may otherwise see infrequent trading, addressing price discrepancies and encouraging more fair-value transactions.<\/p>\n\n\n\n

Purpose and Timing of Special Call Auctions<\/strong><\/h3>\n\n\n\n

Stock exchanges conduct these special call auctions quarterly, though they may schedule them based on trading volume or demand for certain illiquid stocks. The primary reasons for holding these auctions are:<\/p>\n\n\n\n

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  1. Price Discovery<\/strong>: For illiquid stocks\u2014like many investment holding companies\u2014regular market trading is often insufficient to reflect the true market demand and supply, leading to price volatility. Special call auctions help set a clearer, more accurate stock price<\/a> through concentrated buyer-seller interactions.<\/li>\n\n\n\n
  2. Enhanced Liquidity<\/strong>: Since illiquid stocks can have erratic trading patterns, call auctions provide a platform for concentrated trading, thus helping establish a fair and more stable price. This setup attracts more interest in stocks that typically lack trading volume.<\/li>\n\n\n\n
  3. Investor Protection<\/strong>: The bid-ask spreads can be significant with highly illiquid stocks, leading to volatility. The call auction allows buyers and sellers to arrive at a more consensus-based price, reducing extreme price fluctuations and helping protect smaller investors from unfair valuations.<\/li>\n<\/ol>\n\n\n\n

    How It Works<\/strong><\/h3>\n\n\n\n

    During these call auctions, the exchange pools buy and sell orders over a fixed time frame and match them at a single clearing price that maximizes trading volume. This method centralizes liquidity and aids in setting a price based on consolidated demand and supply rather than isolated trades.<\/p>\n\n\n\n

    Pros and Cons of Special Call Auctions<\/strong><\/h3>\n\n\n\n

    Pros:<\/strong><\/h3>\n\n\n\n