In a remarkable story of wealth creation, shares of a BSE-listed investment company skyrocketed, delivering an extraordinary 55,751-fold return in just six months. This stock, which now boasts a market capitalization of Rs 3,804 crore, has transformed the fortunes of a small group of investors, turning an initial investment of Rs 1.77 lakh into a staggering Rs 984 crore.
The Stock That Made Crorepatis by Penny Stock in 2024
The company in question is Elcid Investments Ltd, an illiquid yet well-known stock in the market. Despite its relatively low profile, Elcid Investments has achieved something that few stocks can claim. By the end of the September quarter, the company had just 322 public shareholders. Including six promoters, the total shareholder count stood at 328. What makes this even more interesting is the fact that public shareholders hold only 50,000 shares, accounting for a mere 25% stake in the company.
Out of these public shareholders, 284 retail investors, each holding shares worth up to Rs 2 lakh, controlled 7.43% of the company’s equity. Remarkably, the number of retail shareholders has remained relatively stable over the past few quarters.
The Explosive Growth
At its June 2024 low of Rs 3.53 per share, the shares held by these 322 public shareholders were valued at just Rs 1.77 lakh. Fast forward to December, and the value of these shares has skyrocketed to an unbelievable Rs 984 crore. This exponential rise in value has turned this penny stock into a wealth-generating juggernaut.
Why Was Elcid Investments So Illiquid?
Despite its incredible potential, Elcid Investments remained an illiquid stock for years. In fact, it saw its first trade of 2024 on June 21, after having traded on just two days in 2023 and nine days in 2021. The reason for this lies in its unique business structure and assets.
Elcid Investments has been a promoter entity of Asian Paints Ltd since at least 2006, holding a 2.95% stake in the paint giant as of September 30, 2024. This translates to 2,83,13,860 shares of Asian Paints, which alone are worth Rs 6,490 crore at current market levels. In addition, Elcid’s subsidiaries—Murahar Investments & Trading Co Ltd and Suptaswar Investments & Trading Co Ltd—held stakes of 0.60% and 0.68%, respectively, in Asian Paints during Q2. These stakes add another Rs 2,818 crore to Elcid Investments’ asset value.
The Lack of Price Discovery
Despite these substantial holdings, Elcid Investments’ stock remained undervalued for years. While it traded at Rs 2-3.50 per share in recent years, there were often buyers but no sellers. This lack of price discovery stemmed from the stock’s illiquid nature and the absence of proper trading mechanisms.
Sebi Steps In
Recognizing the anomaly, the Securities and Exchange Board of India (Sebi) took action. In June 2024, Sebi announced a framework for “special call auctions with no price bands” to address the issues faced by listed investment companies (ICs) and investment holding companies (IHCs). Sebi noted that many of these companies had no day-to-day operations and held investments in various asset classes, including shares of other listed companies.
The market prices of these ICs and IHCs often deviated significantly from their book values, as disclosed in their latest audited financial statements. This variance adversely affected liquidity, fair price discovery, and investor interest in such stocks. To rectify this, Sebi’s new framework aimed to ensure effective price discovery for these undervalued scrips.
The Turning Point by Penny Stock in 2024
Following Sebi’s intervention, Elcid Investments saw an unprecedented surge in its stock price. On October 29, 2024, the stock jumped nearly 67,000%, reaching a high of Rs 2,36,250. By November 8, it climbed further to Rs 3,32,399.95 before undergoing some correction. This dramatic rise underscored the impact of Sebi’s measures on illiquid stocks like Elcid Investments.
The Unparalleled Wealth Creation
The transformation of Elcid Investments from an undervalued penny stock to a multibagger highlights the potential of such investment opportunities. For the 322 public shareholders, this journey has been nothing short of extraordinary. From an initial investment of Rs 1.77 lakh, their holdings are now worth nearly Rs 984 crore—a testament to the wealth-generating power of the stock market.
Lessons for Investors
The story of Elcid Investments offers valuable lessons for investors. First, it underscores the importance of looking beyond trading volumes and liquidity when evaluating stocks. While illiquid stocks carry higher risks, they can also offer immense rewards if backed by strong fundamentals.
Second, the case highlights the need for regulatory interventions to ensure fair price discovery and protect investor interests. Sebi’s proactive measures have not only unlocked value for Elcid’s shareholders but also set a precedent for other undervalued ICs and IHCs in the market.
Finally, the story serves as a reminder that patience and a long-term perspective are critical in investing. The shareholders of Elcid Investments who held onto their shares despite years of illiquidity are now reaping the rewards of their perseverance.
Conclusion
Elcid Investments’ meteoric rise in 2024 is a story of wealth creation that will go down in market history. From being an obscure, undervalued stock to becoming a multibagger, its journey underscores the transformative power of the stock market. While the stock’s rise may not be easily replicable, its story offers inspiration and valuable insights for investors navigating the complexities of the financial world.