SEBI has developed special call auction methodImage credit source: Freepik
Alcid Investment… For two days, the actions of this company have shocked stock market investors. The reason for this is also clear – the shares of this company, priced around Rs 3.53, reached over Rs 2.36 lakh in a single day. Along with this, it has also achieved the status of the most expensive stock in the country, surpassing MRF. But do you know that this has happened through the ‘Special Auction’ of shares? So what is this method of buying and selling stocks?
First of all, let us tell you that Alcid Investment is a company of the Asian Paints promoter group. This company owns a 1.28 per cent stake in Asian Paints, which is worth around Rs 4,000 crore. It is a non-banking financial company (NBFC) and the promoters of Asian Paints hold 75 per cent of its shares, and only 241 of its shares were traded during the ‘Special Auction’.
What is the special call auction?
In the Indian stock market there are many listed companies, whose promoter group companies are also listed in the stock market, but their shares are not traded. Market regulator SEBI has developed a new trading method to determine the correct value of shares of such investment companies or investment holding companies and determine their correct market capitalization. This is called a “Special Call Auction.”
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Typically, these companies are NBFC companies registered with the Reserve Bank of India. The holding company of Tata Group companies in India is ‘Tata Sons’. It has investments in all Tata Group companies and around 66 per cent of this company is owned by ‘Tata Trusts’, owned by members of the Tata family. For a long time, RBI is in the process of listing this company in the stock market, in order to unlock the real value of Tata Group and its family. Similar work is done by Alcid Investment, the only difference is that it is already a listed company.
What are the terms of the special call auction?
In India, listed companies have to release 25 per cent of their shares for public holdings. Company promoters can only own 75 per cent of the shares of any listed company. In such a situation, the “Special Auction” system that has been created for the trading of shares of investment companies must follow certain conditions.
- There is no fixed price band for the shares of these companies, as a company decides during an initial public offering. Because of this, the real value of these companies’ shares is determined by the bids made by investors. This means that limited shares of these companies can be bought or sold at any price.
- If the auction of shares of these companies is not successful on the first day, bidding can be held for several days until the company’s investors get the right price.
- The number of buyers and sellers for the auction of said shares is fixed. Only a limited number of people can bid on it.
- If the discovery price of shares of such a company is fixed on one stock exchange, then the same value can be used for trading on another exchange.
- Typically, the auction of shares of such companies is also limited and often takes place only once a year. This means that the shares of these companies are traded only one day a year.
What happened to Alcide Investment shares?
Alcid Investment’s stake remained around Rs 3 since 2011. Based on its stake in Asian Paints, the value of its shares was believed to be Rs 5.85 lakh, but that was not its fair market price. The company’s shareholders did not want to sell it at a low price. But then SEBI ordered the company to find out the true value of its shares through a special auction.
BSE and NSE invited bids for Alcide shares in a special auction session. After this, the value of its shares was fixed at around Rs 2.36 lakh. Thus, the company’s share price rose by 67,00,000% in a single day.
