In a trading event that left investors stunned, Elcid Investments, a little-known small-cap stock, saw an extraordinary 66,92,535% surge in its share price in a single session. With this unprecedented increase, Elcid now holds the title of India’s most highly-priced stock, surpassing the likes of MRF, whose shares trade around Rs 1.2 lakh. The unexpected rise has sparked curiosity among investors as they look to understand the factors driving this price explosion.
A Historic Surge in Elcid’s Stock Price
On June 21, 2024, only 500 shares of Elcid Investments changed hands at a modest Rs 3.53 per share. However, by October 29, 2024, the stock had witnessed an exponential jump, trading at a mind-boggling Rs 2,36,250 per share with a trading volume of just 241 shares. This one-day spike amounted to a whopping 66,92,535% increase, setting a record in Dalal Street’s history.
SEBI’s Role in Price Discovery and Fair Value Assessment
The remarkable price surge in Elcid Investments followed a unique price discovery session initiated by the Securities and Exchange Board of India (SEBI). This price discovery session was part of SEBI’s strategy to assess Elcid’s true fair market value. Due to the low volume and infrequent trading in the stock, SEBI aimed to highlight the disparity between the stock’s book value and its underlying assets. This initiative led to the significant price adjustment seen in Elcid, providing a clearer reflection of its actual value.
Elcid’s Price-to-Book Ratio and Hidden Value
Even at Rs 2.36 lakh per share, Elcid’s valuation appears understated. The company, a Mumbai-based non-banking financial corporation (NBFC), is primarily owned by the promoters of Asian Paints, who hold a 75% stake. Other stakeholders include Hydra Trading with a 9.04% holding and 3A Capital Services with 3.34%. Interestingly, Elcid holds a 1.28% ownership in Asian Paints, currently valued around Rs 3,600 crore. This alone constitutes nearly 80% of Elcid’s total market cap, pegged at approximately Rs 4,725 crore. At its new per-share price, Elcid trades at a price-to-book multiple of only 0.38, suggesting a significant hidden value.
Why Did Elcid’s Share Price Surge So Drastically?
In regular trading environments, stocks are subject to daily upper and lower circuit limits that help control extreme volatility. However, in Elcid’s case, SEBI’s special price discovery session temporarily lifted these restrictions, allowing the stock to rise freely to a level closer to its intrinsic value. This price jump, though extraordinary, underscores how asset-rich yet thinly traded stocks can be undervalued, only to correct themselves rapidly when their true worth is uncovered.
Impact and Implications for Investors
For investors, Elcid’s unprecedented surge highlights a crucial lesson: stock prices, particularly in the case of small-cap or under-traded stocks, may not always reflect their real asset value. The Elcid example serves as a reminder to assess the fundamentals of a stock beyond its trading frequency or past prices. Additionally, this event also emphasizes SEBI’s role in protecting investors by ensuring fair valuations through unique interventions.
What’s Next for Elcid Investments?
With Elcid now firmly in the spotlight as India’s most expensive stock, investor interest in similar under-traded, asset-rich companies is likely to grow. For now, Elcid’s price discovery serves as a case study of how small-cap stocks with limited trading can hold significant unrealized value.
The surge in Elcid Investments’ stock price not only defied the common belief that “trees don’t grow to the sky” but also reaffirmed the value of SEBI’s proactive approach to transparent market assessments. As investors watch for similar trends in under-traded stocks, Elcid’s journey will remain a notable milestone in India’s stock market history.
Elcid’s phenomenal surge also raises questions about the valuation strategies for small-cap stocks and the potential of similar cases in India’s equity markets. Analysts now speculate that more stocks may undergo SEBI-directed price discovery sessions to correct mispriced assets, especially those with substantial yet hidden intrinsic value. The event also suggests the importance of revisiting the valuation of stocks with sizable asset holdings, which often remain unrecognized due to limited trading.