SEBI Introduces Special Call Auction for Price Discovery in Investment Holding Companies

In June this year, SEBI issued a circular that aims to ensure better price discovery for infrequently traded stocks of Investment Companies (ICs) and Investment Holding Companies (IHCs), protecting investors and improving the market’s fairness by conducting a “special call auction” without any price limits for better pricing of certain stocks. The first special auction will be held on October 28th, 2024, and future auctions will follow after the companies release their annual reports.

Here’s a simplified summary:


What do Investment Companies (ICs) and Investment Holding Companies (IHCs) do?

These entities primarily manage investments across various asset classes, such as stocks, bonds, real estate, and intellectual property, including shares of other listed companies. They generate income from these investments rather than by selling products or services. Their core function is the strategic allocation of capital. These companies generally have no day-to-day operations and hold investments in different asset classes including in scrips of other listed companies.


Context:

Few of the listed ICs and IHCs are being traded infrequently and at a price that is significantly lower than the book value disclosed by these companies in their latest audited financial statements. Their market prices are much lower than their actual value (as per their financial statements) and this difference between the market price and the actual value is causing low trading activity and affecting liquidity, fair price discovery, and the overall interest of investors in scrips of such companies.

Keeping in view the above factors, SEBI has decided to introduce a “special call auction” without price limits to help find a fair price for these stocks.


Eligibility criteria:

To qualify for this auction:

  • The company must have been listed for at least a year.

  • At least 50% of its assets should be invested in other listed companies.

  • The 6-month Volume Weighted Average Price (VWAP) of the scrip shall be less than 50% of the book value per share of such company based on the present value of their investments in shares of other listed companies. In case the scrips of such ICs or IHCs are not traded during the previous 6- months, the 6-month VWAP of the scrip shall be taken as zero.

Example:

Auction Process:

  • Stock exchanges will announce the auction 14 days in advance. You can check NSE’s announcement here

  • For the auction to be valid, it needs at least 5 buyers and sellers.

  • If successful on one exchange, that price will be used across all exchanges.

  • The auction can be repeated daily until a price is determined, but only once a year.

The first special auction will be held in October 2024, and future auctions will follow after the companies release their annual reports.

List of Investment Companies (ICs) and Investment Holding Companies (IHCs) eligible for special call-auction mechanism

BSE

Source: https://nsearchives.nseindia.com/content/circulars/CML64544.zip

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20241014-48

4 Likes

Why ELCID didn’t get traded today inspite of auction?

I don’t understand, why will someone pay more in auction when they can get cheaper in market where it is supposedly trading at lower than book value?

Are circuits the problem, are they even hitting upper circuits?

elcid is not in the list of stocks picked by SEBI for the special call auction

I feel Sebi chose wrong set of stock for this session. It should have been stocks like elcid that should have been part of the session instead of stocks listed in the circular.

I have Maharashtra Scooters but not allowed to sell it. I don’t understand why such restriction. I have through zerodha and angel but both not allowing me sell. Whereas Nalwa Sons is actively traded now in market. I don’t understand why is this happening. Both broker’s call centre don’t have any answers.

1 Like

It’s not listed on NSE. It’s on bse list

Same. Zerodha isn’t allowing me to place orders during price discovery @Meher_Smaran

May be you get Diwali gift post diwali. Best Wishes

@Meher_Smaran Any idea why people weren’t allowed to place orders during the Special Call Auction?

This is addressed around 9.40 AM on the same day.

Please note that this was specific to very few ELCIDIN orders, and not all instruments were affected. If you encounter any issues with other instruments, kindly create a ticket with more details so we can assist you further.

How can we identify such stocks? Or where we can get the list of stocks which will be there in special call auction