If you believe MRF Ltd. is the highest-priced share in the Indian stock market, then you must be proved wrong. As of Tuesday, the Rs 1.2 lakh tyre maker’s stock is dwarfed by a microcap player with nearly double its price. Interestingly, this stock was just a penny worth Rs 3.21 in July.
Elcid Investments overtook MRF on October 29 to become India’s most expensive stock. Thanks to the BSE auction for price discovery of holding companies, each share of Elcid was valued at Rs 2.25 lakh. The small-cap stock created history on Dalal Street as its share price soared from Rs 3.53 to an astounding Rs 2,36,250 in one day, a jump of a mind-boggling 66,92,535%. Meanwhile, on October 29, MRF shares on BSE closed 0.61% lower at Rs 1.22 lakh apiece.
The highest traded value of Elcid was Rs 4.58 lakh, but the price discovered was Rs 2.25 lakh. BSE conducted an auction on October 28 for the price discovery of holding companies. A Rs 1 lakh investment in this stock would have generated returns to the tune of a whopping Rs 670 crore in the span of a few months.
A BSE circular dated October 21 mentioned the relisting of select investment holding companies (IHCs) through a special call auction mechanism for price discovery on Monday. The effective rates were settled on Tuesday, October 29, after the particular provision.
Elcid Investments was one of them. Other companies included Nalwa Sons Investments, TVS Holdings, Kalyani Investment Company, SIL Investments, Maharashtra Scooters, GFL, Haryana Capfin, and Pilani Investment and Industries Corporation.
The promoters of Elcid Investments voluntarily offered its delisting at a base price of Rs 1,61,023 per share. A special resolution was proposed for the same. However, the resolution failed due to the non-receipt of the requisite majority of public shareholders.
Elcid Investments, with 2,00,000 share capital, holds 2,83,13,860 equity shares or a 2.95 percent stake in Asian Paints Ltd, which was worth nearly Rs 8,500 crore as of its previous close. This is the only reason this stock is so richly priced in the stock markets. There is still a catch.
Hitesh Dharawat of Mumbai-based Dharawat Securities said that Elcid Investment has remained a buzzword on Dalal Street due to its holding in Asian Paints. The stock has zoomed straight to Rs 2.35 lakh from Rs 3-4 a day ago. However, the book value remains higher than the current stock price, but it commands the holding company discount.
Despite trading at Rs 2.36 lakh per share, the stock is still trading at a nearly 45 percent discount to its intrinsic share price value of Rs 4.25 lakh per share, based on its holding in Asian Paints. Before Tuesday’s 190-share trade worth Rs 4.33 crore, the stock had barely seen any exchange of hands in the last few years.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said that such companies have a business of holding stocks of other companies, which direct the stock prices for investors. Putting money in such companies is purely based on individuals’ risk appetite, but one should note that these companies may have liquidity risks.
“Investors should look at cash flows and the nature of the company’s business before investing. If it suits their risk profile, it only makes sense to put in their money. Such companies may carry some value, but investors should know a way to exit such counters to ensure liquidity for them,” he cautioned.