Market regulator Sebi introduces framework for holdco price discovery

First special call auction to be conducted in October

Market regulator Sebi on Thursday announced a framework for special call auctions with no price bands for price discovery of investment holding companies.

Holding companies, or holdcos, do not have operations of their own but hold stakes in other assets including shares of other listed companies. These firms mostly hold investments in their own group companies. There are nearly 70 listed holdcos in the Indian market. These typically trade at a higher discount than the intrinsic value of their holdings. Sebi’s new framework tries to address this gap.

For eligible holdcos, stock exchanges will initiate the special call auction with a 14-day advance notice. The notice will have details of the overall book value of the company, book value based on investments in listed companies and the latest buy-back price. The special call auction will be provided only once a year for each holdco. The first such session will be conducted in October.

The session will be considered successful if the price discovery is based on orders from at least five unique buyers and sellers. If it is not successful, then it will be extended for another day until the price discovery. The market regulator has also specified criteria for such holdcos which will be eligible for the special session.