From ₹3 to ₹2.36 lakh: This penny stock became the most expensive stock overnight; here’s how

Investing in penny stocks is a very high risk proposition but it is one of the most loved investment options of retail traders amid hope that it would become a multibagger one day and generate massive returns. Elcid Investments, a little-known smallcap company listed on the BSE, has made its shareholders wealthier overnight by delivering an unrealistic return of nearly 67,000 times per share in just one single session. This unprecedented development sounds unbelievable but it is true!

The share price of Elcid Investments, which had been frozen at ₹3.53 apiece since June 21, 2024, with hardly any buying on the counter, skyrocketed to ₹2.36 lakh in a single day on October 29, creating an unbreakable record on Dalal Street. In a single trading session, the penny stock became India's most expensive stock, surpassing tyre major MRF, whose share cost around ₹1.22 lakh apiece as of October 29.

The market value of Elcid Investments stood at ₹4,725 crore as of October 30, which is less than 10% of MRF’s ₹51,850 crore. However, the earnings per share (EPS) for the trailing twelve months (TTM) of Elcid is much higher at ₹6,892 compared to ₹4,768 of that of the tyre major.

How Elcid shares surged 67,000x in a single day?

The sudden spike in the share price of Elcid was not triggered by any news or turnaround in financial performance. The stock price soared only after the exchange conducted a special call auction session for a fair price discovery of select investment holding companies (holdcos) on October 28, including Elcid Investments, TVS Holdings, and Maharashtra Scooters, Pilani Investments, Kalyani Investments, and others.

This was done after the capital market regulator SEBI issued the new framework for select investment holdcos to be eligible for the special call auction for price discovery in June this year. This norm was issued to address the gap between the current market value and the book value of holding companies. Generally, these holdocs trade at a high discount compared to the book value.

Following a special call auction session, Elcid Investment shares were relisted at ₹2,25,000 per share on the BSE on October 29. The stock surged another 5% during the session to hit a high of ₹2,36,250 mark during the day.

Analyst at SAMCO Securities says that Elcid’s book value per share stood at ₹5,85,225 despite a very low share price for a long time. Elcid is one of the “promoter” entity in Asian Paints, holding a 2.83% stake in the company, which is valued at almost ₹8,500 crore on recent market prices. The value of Elcid’s stake in Asian Paints makes the stock so richly priced in the stock market.

“To address this undervaluation, the exchanges organised a special auction session for holding companies with deep discounts compared to their book value. This session led to a fair value discovery of its price,” said Raj Gaikar, research analyst, SAMCO Securities.  

Elcid, a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI) in the category of investment company, has an equity base of only 200,000 shares, of which 75% or 150,000 shares are owned by promoters. The promoters of Elcid Investments had voluntarily made an offer for its delisting for a base price of ₹1,61,023 per share. A special resolution was proposed for delisting, but it failed to receive approval from a majority of public shareholders.