After 66,92,535% return in one day, small-cap stock Elcid Investments is in a downtrend; here's why

Shares of Elcid Investments, which recently grabbed headlines for a massive one-day spike, have once again caught the attention of investors following the release of the company’s financial results for the September quarter.

The company reported a 143.5% year-on-year (YoY) jump in its consolidated revenue to ₹56 crore. However, on a sequential basis, revenue declined by 68.53%. Net profit also saw a significant 168.75% YoY increase, reaching ₹43 crore. However, compared to the preceding June quarter, net profit dropped by 68.38% from ₹136 crore.

Investors seem to be disappointed with the company's Q2 performance, as the stock has fallen 14.52% in the five sessions following the results announcement on November 12. This correction has also caused the stock to decline by 28% from its recent peak of ₹3,32,399 per share. 

The company generates the majority of its revenue through investing activities rather than engaging in daily business operations. This business model exposes the company to the risk of fluctuations in asset prices, as its income is largely dependent on the performance of its investments.

Following the company's performance for the September quarter, analysts have remained cautious about the stock due to its low liquidity in the market. This lack of liquidity is one of the factors behind the recent massive spike in its stock value. The company's average trading volume on both the BSE and NSE is around 1,000 shares.

Recent developments

On October 29, the stock saw an unprecedented surge of 66,92,535% after it was relisted on the exchanges. The relisting was part of a BSE initiative designed to facilitate price discovery for select investment holding companies using a special call auction mechanism.

Elcid Investments operates as a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI) in the category of investment company. According to its recent FY24 annual report, Elcid's investments, including both debt and equity, are worth over ₹12,450 crore.

Holding companies generally hold a range of investments, including shares in other listed firms, but they don’t engage in daily business operations.

As a result, these companies often trade at a significant discount to their book value due to low trading volumes and limited liquidity. Before the special call auction, Elcid Investments had a book value of around ₹4 lakh. Even after the recent price discovery, its stock remains below this book value.

Investor interest in holding companies surged after SEBI proposed in July to use special call auctions without price bands, aiming to narrow the gap between the current market price and the book value of these companies.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.