Elcid Investments? Have you heard of this listed company?
Well, on the face of it, it looks like a dud penny stock – it is quoted today at new high of Rs.13.38 (FV of Rs.10), hit on 20thOct after which it has not been traded. The two-week average trading quantity is at a mere 13 shares.
Its market cap is Rs.27 lakh. It ended Q2FY21 with a consolidated net profit of R.24 crore on a total revenue of Rs.32 crore of which Rs.25 crore came via net gain on fair value and Rs.7 crore on dividend income.
In the ‘other incomprehensible income (OCI)” the company had net gain of Rs.1214 crore on equity instruments through OCI.
Its EPS is at a staggering Rs.1221 (not annualized) – yes, that is on a face value of Rs.10, and equity capital is a mere Rs.20 lakh. And yet it is valued on the stock exchange at less than Rs.15?
If you are enticed enough to own this share, try buying it? You won’t be able to as it is very thinly traded. Promoters own 74.88% stake or 1.50 lakh shares while the shares in the public domain is just 50,250 shares, owned by 215 shareholders.
Elcid is no ordinary stock- it is the holding company of Arvind Vakil and his family, one of the four founders of Asian Paints. Elcid alone owns 2.95% stake in Asian Paints, which is valued today at Rs.6300 crore; another 1.28% stake in held by Elcid’s wholly owned subsidiaries. So, Elcid’s stake in Asian Paints alone is worth over Rs.9000 crore.
This stake in Asian Paints apart, it also holds stakes, small ones, in over 100 listed companies like Reliance Inds, SBI, ITC, Indian Hotels, etc. Apart from mutual funds, it also holds some 1200-odd shares in the holding company in PayTM, One97 Communications.
Those in the market say that if you want to buy this share, you can do so only in off-market transactions and there the price is in the range of Rs.35,000 to Rs.40,000 per share!
This huge disparity between the intrinsic value of the stock and the listed price has made this stock extremely illiquid. If we take a book value of the investments at Rs.325 crore, the fair value still comes to around Rs.16,200.
3a Capital Services which holds 5.5% stake in the company had approached Bombay High Court to get fair value price discovery but got no response from SEBI. 3a Capital had suggested using the call auction method – the same method used for IPO listings through which price is discovered. But no resolution to this strange problem has been arrived at.
A holding company is promoters' way to get more value, so the onus lay on the promoter to resolve this in the interest of the minority shareholders. Either delist the holding company, giving public shareholder an exit route or merge it with the parent company – these are the only two ways out, as of now.