Introduction
On 20 June 2024, SEBI (Securities and Exchange Board of India) introduced a special call auction mechanism for price discovery of scrips of listed Investment Companies (ICs) and listed Investment Holding Companies (IHCs). ICs and IHCs mainly oversee investments in a range of asset classes, including equities, bonds, real estate, and intellectual property, including stock in other publicly traded corporations. Instead of making money from the sale of goods or services, they make money from these investments. Allocating cash strategically is their primary responsibility. Usually not involved in daily operations, these companies own investments in many asset types, such as stock in other publicly traded corporations. SEBI had to take this step to bridge the valuation gaps because scrips of a few listed ICs and IHCs were being traded infrequently and at a price lower than the book value disclosed by these companies in their latest audited financial statements.
How it Works
The following procedure is followed for the implementation of special call auction mechanism-
- Initially, a 14 days’ advance notice is given by stock exchanges to the market to start the process of special call auction for eligible ICs and IHCs.
- Then, stock exchanges announce the above on their official websites to communicate it to the investors.
- If price discovery is based on orders from at least 5 Permanent Account Number (PAN) based unique buyers and sellers, only then the special call auction session will be considered successful.
- If success is not gained on day 1 itself, then it will continue on the next day and till such time the price is discovered
Features
- There will be no price band on trading of securities, i.e the price of a security will be purely based on market demand and supply as there is no upper or lower limit to it.
- The special call auction mechanism will be conducted only once a year. This year it took place on 28 October 2024.
- The auction is initiated to bring transparency in the stock market and boost investor’s belief in fair trading practices.
- To limit companies from participating in this mechanism, SEBI has given eligibility criteria for the company:
- Have been listed for at least a year
- Have at least 50% of its assets in listed company scrips
- Have volume-weighted average price less than 50% of its book value
- Stock exchanges will have sufficient risk management and surveillance mechanisms before conducting such sessions to avoid order spoofing and manipulative activities.

List of Investment Companies (ICs) and Investment Holding Companies (IHCs) eligible for special call-auction mechanism
Alternate Methods for Price Discovery
- Continuous Auction- When the market is open, traders can trade at any time in a continuous trading market. Orders are continuously placed by buyers and sellers, and they are matched continuously. The majority of markets we observe today are continuous trading markets, such as stock exchanges, derivatives exchanges, and the forex market.
- Bid-Ask Spread- The difference between the ask and bid prices for a market asset is known as the bid-ask spread. In essence, the bid-ask spread is the difference between the lowest price a seller is ready to accept and the highest price a buyer is willing to pay for an item. This difference is used as the indicator of market value of a security.
About Elcid Investments:
Elcid Investments is a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI) under the category of Investment Company. A 2.83% interest in Asian Paints, which is worth approximately ₹8,500 crore, is one of its main assets. Despite not operating any businesses, Elcid makes money by investing in a number of different firms. Murahar Investments & Trading Company Limited and Suptaswar Investments & Trading Company Limited are the company’s two subsidiaries. Additionally, both of these subsidiaries are listed as non-banking finance companies with the Reserve Bank of India. It recently came into the limelight for its sharp value surge becoming the most expensive stock in India surpassing MRF and creating history on Dalal Street. But now the question arises how did it happen? The answer is Special Call Auction. The graph shows Elcid investment’s share price rose from just Rs. 3.53 to Rs. 2,00,000 in just four months.
The company’s stock was being traded at just Rs. 3.53 as on 21st June 2024 but on 28th October 2024 i.e when first special call auction took place, the company’s stock rose to Rs. 2,00,000. This shows valuation gaps in the stock market which needs to be addressed and special auction is the apt way to deal with this issue.
If an investor had owned only 1000 shares in the company, their initial investment of just Rs. 3,500 would have ballooned to a whopping Rs. 33,04,73,300. The story of Elcid Investments highlights the success of special call auction to assess the true value of investment holding companies and investment companies.
Some of the stocks that are expected to show growth similar to Elcid Investments are Gold Rock Investment Ltd, Royal Cushion Vinyl Products, VLS Finance Ltd and Taparia Tools Ltd.
Peer Comparison:
The Bottom Line
The case of Elcid Investments is a perfect testimony that special call auction is an apt solution for the fair price discovery of scrips to ensure transparency in the stock market and bridge the valuation gaps. Adoption of such practices will increase the confidence of investors and encourage them to participate more in trading which will lead to greater market impact. Ensuring risk management and surveillance mechanisms makes it an even more efficient measure for the price discovery of securities. As a result, investors will be on the lookout for investment opportunities, just like Elcid Investments to achieve attractive returns— after all who wouldn’t want their small piece of candy to turn into a luxurious trip to Dubai? On the other hand, the frequency of conducting special call auctions should be increased in order to cope with the dynamic market. Also, the scope of special call auction mechanism is narrow as it is mainly designed for ICs and IHCs and fails to improve the overall market efficiency. There is no guarantee as well whether the auction will help realise the true value of scrip and this can lead to overvaluation or undervaluation.
References
- Angel One. (n.d.). What is the special auction that made Elcid Investments India’s priciest stock? Retrieved January 26, 2025, from https://www.angelone.in/blog/
special-auction-made-elcid- investments-india-priciest- stock - Business Standard. (2024, October 17). Exchanges to hold special trading session for holdcos on October 28. Retrieved January 26, 2025, from https://www.business-standard.
com/markets/news/exchanges-to- hold-special-trading-session- for-holdcos-on-october-28- 124101701362_1.html - Investopedia. (n.d.). Bid and ask: Definition, how prices are determined, and example. Retrieved January 26, 2025, from https://www.investopedia.com/
terms/b/bid-and-ask.asp - SEBI. (2024, June). Introduction of a special call auction mechanism for price discovery of scrips of listed Investment Companies (ICs) and listed Investment Holding Companies (IHCs). Retrieved January 26, 2025, from https://www.sebi.gov.in/legal/
circulars/jun-2024/ introduction-of-a-special- call-auction-mechanism-for- price-discovery-of-scrips-of- listed-investment-companies- ics-and-listed-investment- holding-companies-ihcs-_84319. html - Screener. (n.d.). Elcid Investments Ltd. Retrieved January 26, 2025, from https://www.screener.in/
company/503681/consolidated/