An effort to de-list Elcid Investments Ltd (EIL), which holds a 4.3 per cent stake in Asian Paints valued at around ₹12,000 crore, has been thwarted by public shareholders overvaluation concerns. EIL is owned by the Arvind Vakil family, one of the three promoter families of Asian Paints.

The Vakil family had offered ₹1.61 lakh per share as the floor price for the delisting offer of EIL. But EIL shareholders told BusinessLine that the price offered was just 25 per cent of the book value of EIL, which stood at around ₹6.5 lakh per share.

Stock exchange filings show that a 75 per cent stake in EIL is held by the promoters and the company was last traded at ₹17 per share on the BSE in September 2021. But shareholders say that EIL’s true value, which is derived from its holding of Asian Paints is not reflected in its share price on the stock exchanges due to the archaic circuit filter norms of exchanges.

EIL shares are not actively traded since nobody is a seller and the BSE has imposed a 5 per cent circuit filter on the stock, due to which it does not move. Even though the value of EIL’s holding in Asian Paints is around ₹12,000 crore, the company has a market capitilisation of a measly ₹34 lakh on the BSE.

The fact that the delisting offer of the Vaikl family was rejected by the shareholders has been disclosed by EIL to the stock exchanges in a recent filing.

“EIL has a book value of ₹6.5 lakh but the promoters of the company are ready to offer only 25 per cent of this book value to the shareholders for delisting on the reasoning that the shares of the company are thinly traded on the stock exchanges. Where is the logic in this,” says Dhiraj Mittal, one of EIL’s shareholders and a chartered accountant.

‘Mindless circuit filter norms’

Mittal says that even though he was willing to ₹2 lakh per share of EIL but cannot buy due to mindless circuit filter norms. “We have made a written submission to the BSE to relax the circuit filter just for a day so that the share can discover its fair value,” Mittal said. A case has also been filed in the High Court regarding the same.

The Vakil family’s logic behind their offer price has been that EIL was an investment holding company and the price/book value multiple based on comparable listed holding companies was used to arrive at the fair value of its equity shares.

“Accordingly, a price/book value multiple of 0.2518 times was applied to the book value of EIL as on September 30, 2021 to arrive at the price per equity shares of ₹1,61,023 per equity share,” merchant bankers of the Vakil family told the shareholders.

“If the Vakil family wishes to take EIL private, it can better do so by paying a premium and not just the intrinsic value. The recent delisting offer was just 25 per cent of EIL’s intrinsic value and an attempt to shortchange the minority shareholders who have not got any exit opportunity in the counter due to silly norms. Small investors deserve better for their patience in investment from one of the promoters who have enjoyed a clean image,” Mittal said.

Another investor of EIL, 3A Capital and Rajan Shah in 2018 filed a writ petition in Mumbai high court against BSE and market regulator SEBI for not allowing a fair price discovery in EIL. The matter is pending before the regulator and court.