This stock quotes at Rs 6 on BSE, pays Rs 15 dividend every year, but does not trade. There are buyers ready to pay 15,000 times its current price, but no sellers. A headache not just for investors, but also for stock exchanges!
Elcid Investments is a microcap company, but it is one of the promoter entities of bluechip firm Asian PaintsNSE -0.30 %, an index stock that traded at Rs 1,522 on Thursday. The company has two subsidiaries: Murahar Investments & Trading Company and Suptaswar Investments & Trading company. Both these subsidiaries are registered with the RBI as NBFCs.
Elcid Investments owns over 2.83 crore shares of Asian Paints, roughly 2.95 per cent stake. At prevailing market price of the Asian Paints stock, that holding is worth over Rs 4,200 crore. But Elcid Investments has a paid-up capital of just Rs 0.20 crore and a market capitalisation just over Rs 0.12 crore.
There has been no trade on the counter in last eight months.
The stock was last traded on August 9, 2018, when it hit the 5 per cent upper circuit at Rs 5.89. It has been traded only 18 times since 2011. But it has been giving dividends at Rs 15 per share every year.
Investors on Dalal Street are willing to invest in the stock, but no one is keen on selling it due the huge disparity between real and actual market price.
“No investor will be willing to sell a stock worth Rs 80,000 for just Rs 6. There is a possibility of a once-in-a-bluemoon trade only when mistaken selling happens,” says Ashish Chugh, Director, Hidden Gems Advisory.
Actual worth of stock
Arun Mukherjee, Co-Founder of Sebi-registered firm SA Investment Advisers, pegs the value of the stock at over Rs 1 lakh per share.
“If someone sells, only then can someone else buy it. That is how a transaction takes place. In the case of Elcid, it is worth over Rs 1 lakh. No one will sell it for just Rs 6 or so. Thus, there is no transaction and no volume on the counter,” Mukherjee said.
Quest for value discovery
Various stakeholder groups have approached Bombay High Court to intervene in the matter and issue directives to markets regulator Sebi and BSE. Many shareholders have been advocating a ‘call auction’ to discover fair price in Elcid Investments.
Promoters of Elcid Investments announced an offer-for-sale (OFS) in 2013 for a price of Rs 5,000 and the investors who purchased those shares are stuck at Rs 5.89. In 2013, the promoters announced a delisting offer to public shareholders at Rs 11.455 per share, but the offer was rejected.
Chugh says the laws should be made in line in the interest of minority shareholders. Regulators and exchanges should treat their interest as prime. Many gullible investors may fall for an offer made by the promoters and tender their shares at very less price than their actual value.
What shall investors do?
But neither BSE nor Sebi has taken the investors’ appeals seriously. “The real value of the stock shall be over Rs 80,000, if the exchange allows price discovery. However, there is no such law, it is at the discretion of the exchange,” Chugh said.
He said the exchanges should be pro-active in addressing investor concerns. “They should safeguard the interest of small and retail investors,” he said.
The Delhi-based value investor said a huge gap between traded value and the actual value of the stock is very clear. Exchanges must allow price discovery in such extraordinary cases.
Often, exchanges suspend such stocks for non-compliance of listing guidelines. It is the easiest way out for them. “But if such stocks are suspended from trading, thousands of retail and small investors will suffer as it will make the scrip illiquid. However, there are no such repercussions on the promoters.”
Mukherjee, known for spotting little-known multibaggers, said there are buyers in the market for such shares. “There would be a lot of brokers who are willing to buy the stock at a price around Rs 1 lakh. If anyone is inclined to sell this stock, they can approach these brokers,” he said.
In India, there is no law, particularly relating to holding companies. “Nothing can be done, until and unless Asian Paints and promoters of Elcid decide to do something in this matter,” Mukherjee said.