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In the past, one company that elicited interest was Elcid Investments, which boasts of a 66,92,535% single-day turnover. This small-cap Share linking from ₹ 3.53 to ₹ 2,36,250 out-rightly amazed the market and pointed out the consequences of the low number of free-float stocks in the evaluation norms. Here are the facts regarding this record breaking event.
Overview of Elcid Investments’ Structure
Elcid Investments consists of a diversified set of shares in various companies but with references to several popular ones; the biggest investment to note is the 3.88% share in Asian Paints Ltd. This holding is of the order of ₹1,300 crore, establishing its relevance in the overall market even though Elcid might not be a very popular name, underscoring Elcid’s market significance despite being lesser known. Even a small equity stake at Asian Paints – India’s largest paint maker with a market capitalisation of over ₹3.45 lakh crore – is a blank cheque. This substantial interest enhances the value of Elcid but, unfortunately, has extremely low trading volumes due to promoter domination.
Promoter Holdings and Low Free Float
One of the most significant causes of the new high price is the 75% promoter holding owned by Elcid which translate to only 25% of the firm’s stocks available for public float. Due to the low float, the company experiences high price volatility and virtually no added turnover. Say, for perspective, for each cycle the stock trades so sparingly that any one purchase can send the price swirling. Such structure makes the valuation of Elcid very volatile and can experience a huge increase and decrease following an on or random trades.
Financial Strength and Metrics
Another proof of Elcid’s high valuation is in the financial position recommended for the company. The operating profit margin is over 97% while the total liabilities to total assets ratio is near zero the firm’s financial basis is therefore very sound. It has increased its net profit continuously and now it has total assets of more than ₹ 12,000 crore. Another index showing ‘growth’ in the firm is the EPS (Earnings Per Share) which has climbed to recent figures above ₹6,000 indicating sound profitability with little or no turnover.
Comparison to MRF’s Stock Price Record
Once, MRF was perhaps the costliest stock on the Indian market which ranges around Rs.11000 / - to Rs.1, 00,000/- each depending upon the availability of stocks. Yet, in the recent past, Elcid went much higher than MRF to touch fresh peaks in India’s stock price history. Although MRF stock commands a high P/E compared to an average company because of high demand and low supply of fixed quantity Elcid has a different story altogether due to high-value float and low float in stock which make the stock price very sensitive.
The Broader Market Impact
The chart of Elcid shows just how vulnerable and susceptible stocks with low free float and massive holdings can be. While the financials are good, the low liquidity also has potential problems with investors, such as price fluctuations from a single trade. This event has reminded us about the transmission of knowledge about company structure, ownership concentration and ‘extreme’ price fluctuations of other small-cap stocks.
Thank you.
Regards,
Kautilya, IBS Mumbai.
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