Stock exchanges will hold a special call auction for select investment holding companies (holdcos) on October 28, as part of a new framework introduced by the Securities and Exchange Board of India (SEBI) to improve price discovery. SEBI had issued this new framework in June, outlining the requirements for holdcos to participate in this special auction window.
The auction will involve nine holdcos, including Pilani Investments, Kalyani Investments, TVS Holdings, and Maharashtra Scooters. The list of companies eligible for the special window may be updated in the future, according to the exchanges.
Holding companies do not conduct business themselves but hold stakes in other assets, like shares in other listed companies. Most of these holdcos invest in their own group companies. SEBI’s new framework aims to address the significant gap between the market prices at which these holdcos trade and the actual value of their investments. Typically, holdcos trade at a high discount compared to their intrinsic value.
In a circular issued on October 16, the exchanges clarified that the auction will be considered successful if orders from at least five unique buyers and five unique sellers, each identified by a permanent account number (PAN), are received. If this minimum requirement is not met, meaning there is no successful price discovery, all outstanding orders will be cancelled at the end of the session, including any matchable orders.
The special call auction will not have any price bands, allowing for better price discovery. According to SEBI’s directive, if the price is not determined on the first day of the auction, the process will continue the next day until a price is found.
Update
According to the exchange notice on the special call auction for price discovery of Investment Holding Company shares, the price of Elcid Investments was set at ₹2,25,000, making it the highest-priced stock in the Indian capital market. It is currently locked at an upper circuit of ₹2,36,250.
